The USs middle classes are drenched in debt and demand is slowing. So how do banks build profits? By bending the rules.
Two of the top credit-analytics companies are exploring new ways of assessing consumers ability to handle loans, turning away from traditional sources of data such as credit cards and car loans to scour phone and utility bills, change-of-address records, and information drawn from DVD clubs and suppliers of rent-to-own furniture.
The efforts could open up new classes of customer for the big US banks, and come as lenders struggle to generate steady profits in an environment of tightened regulation and ultra-low interest rates. In third-quarter results this week, the USs three biggest banks - Wells Fargo, Bank of America and JPMorgan Chase - have reported year-on-year declines in quarterly revenue.
One of the companies, Fico, has been working on a pilot project with a dozen US credit card companies, and now claims to have developed reliable ways to price loans to millions of people who have historically been off the grid.
Will Lansing, chief executive of the San Jose, California-based company, said Fico was increasingly looking at data on a spectrum: with credit card repayment history at one end - the most reliable guide to creditworthiness - and at the other, information volunteered on social media platforms such as Facebook.
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If you look at how many times a person says wasted in their profile, it has some value in predicting whether theyre going to repay their debt, he said. Its not much, but its more than zero.
Credit cards and car loans are likely to be among the bright spots in the US banks third-quarter figures, with much of the growth driven by segments considered subprime. But mortgages and personal loans should be patchier, suggesting that many consumers across the US have borrowed about as much as they can.