Since it was launched in the Philippines in March 2011, consumer lending company Lenddo has increasingly shifted its attention to the tech associated with its loan platform. Lenddo commenced operations with an initial focus on providing modest loans to individuals that typically had difficulty accessing funds from traditional lenders. It was able to do this by developing an algorithm that assessed the credit worthiness of applicants that often lacked sufficient credit history to satisfy banks’ requirements.
By combining community-based microfinance techniques with an assessment of unconventional factors like an individuals’ social media presence and degree of engagement with their online communities, Lenddo was able to measure not only the applicants’ ability to repay the money, but also their propensity to repay. In short, the algorithm crunches your online data to calculate a ‘Lenddo Score’ (a number between 0 – 1000) that is used to assess your credit worthiness and determine whether or not you can be trusted with a loan. No collateral. No guarantor.
It is a simple model that has enabled Lenddo to assist more than 500,000 individual customers since being founded. It has grown to the point where it now has offices in Manila (Philippines), Bogota (Colombia), Mexico City (Mexico) and New York (US).
A New Direction
The beauty of the initial business model was two-fold. Not only was Lenddo able to generate income by charging interest on their loan book, it also received access to a continually growing database of borrower profiles and information on which to refine its social algorithm. Having improved the performance of their credit assessment tool to the point where their default ratio was significantly better than the industry average (< 5%), Lenddo made the decision to focus on the tech side of the business. Realising that their algorithm could be applied to many other industries and offered to businesses as a service, Lenddo sold its existing loan book to BanKO earlier this year and is no longer in the business of lending money. BanKO and other lenders can engage Lenddo to screen applicants for them. Lenddo generates a revenue stream, without incurring any loan risk.
There are a range of additional applications and situations in which Lenddo’s social algorithm can be successfully applied. These include:
- Ecommerce: Can be used to reduce the incidence of online fraud; Lenddo can help provide certainty that both parties to a transaction are authentic.
- Recruitment: In some of the countries in which Lenddo operates, the process of validating the background information of prospective employees can be both slow and expensive; Lenddo provides a quick, cheap alternative.
- Online dating: With the popularity of location-based dating apps like Tinder, Lenddo believes that it can function as an additional level of security to protect users and enable safe meet-ups.
There are undoubtedly numerous other industries that can benefit from the insight provided by Lenddo’s ability to analyse and summarise social data. In a world where people are increasingly spending time online and engaging with friends via social networks, it make sense for businesses to make use of the associated data in a manner that is ultimately beneficial to consumers.
This is a trend that you can expect to see more of in the future.