- Incorporating online reputation into financial reputation: “why can’t [FIs] hook into LinkedIn and view a person’s Recommendations and process that into their credit score”
- Opening a FI’s APIs to the creativity of their customers and 3rd party developers: “could there ever be a day where an existing financial institution could let people hook into it and meaningfully tailor the infrastructure and product to their own needs?”
I think exploring the links between online reputation and financial reputation is very interesting indeed. I think leveraging public social data is a great way for banks to reduce the risk of payment default on people with less than perfect credit. I’ve talked about this before, particularly in the context of peer-to-peer lending: in the problem with banking innovation…, I explained how a loan where some of the people lending money are family members offers a different and more attractive risk profile than someone’s lending money from people they don’t know (and don’t care) about (especially when you have a huge securitization food chain). I had never thought that such data could eventually actually be part of the FICO score, and that I think that will take A LOT of time. Here is my guess at how things will evolve: I think that Experian-like services computing someone’s overall reputation (see how to compute someone’s whuffie) will develop, and as they become established brands, may end up as an input to FICO scores. Anyway, I do think FIs are fundamentally social intermediaries and can’t afford to ignore the publicly available social data. I think there is a great opportunity, especially at credit intermediaries whose goal is the benefit of the community (credit unions), to re-socialize credit relationships.
Regarding the opening of Banking Web APIs, I think also that this is a great way for FIs to smartsource innovation while ensuring the highest level of security standards. In the problem with banking innovation…, I suggested at the very end that one way to smartsource innovation could be to “do what Apple or Facebook do: expose some of this information via easy-to-use APIs in a way that is more secure than their startup competitors. Then, allocate a VC fund to fund startups using this API (which is equivalent to buy an option to invest more/buy out the most promising ventures later).”
So, I’m glad to see that these highlighted concepts are inline with some of my own ideas and probably with many other people. I really hope I can make it to the next BarCampBank near San Francisco.