There are plenty of reasons to call MovenBank Corp. Ltd. a bank of the future. It hasn't opened its doors yet, for one. And it plans to be a mobile bank for the smartphone age when it launches later this year.
Perhaps more intriguing still, it will use social media information to inform its credit decisions and to determine aspects of its relationship with customers, including pricing.
"We look at a bunch of elements, and one is your ability to act as a referrer, or influencer, who can drive acquisition as a basis for connections," says Brett King, founder and chairman of MovenBank, and the author of Bank 2.0.
So far, banks have limited their social media exploits to marketing and customer service experiments on Twitter and Facebook. But financial institutions and their product vendors are aware their own customers' data has potential implications for credit decisions, relationship pricing, even collections.
Some are tinkering now, others think the information could be important in the near future. And most wonder how it can be used given the way the regulations limit data collection and sharing, such as the Fair Credit Reporting Act.
"Banks have infrastructures that allow [them] to provide treatment that is as equal as possible to all customers," says Cindy Balser, senior vice president of consumer product management at KeyCorp of Cleveland.
"When you are using social media for credit decisions, I just don't think you can get the kind of information to be able to treat everyone equally," Balser says.
But King disagrees. MovenBank plans to use information from Twitter, Facebook and other social networking sites not just for underwriting, but to price the entire relationship. It has developed a scoring product it calls CRED, which is a combination of traditional scoring elements and a consumer's social media "street credibility."
Among the things the score will examine are a customer's timeliness in paying bills and tendency to have negative balances, as well as standing in social networks, and the ability to sign up friends for the bank.
"If you introduced 20 friends, we might add 25 basis points to a saving account, or offer free p-to-p transfers," King says.
While MovenBank is certainly in the vanguard, the credit bureau and scoring agencies have used alternative data for years, and it's safe to say social media data is at least on their radar screens.
It has to be.
Since the beginning of the financial crisis in 2006, the creditworthiness of the U.S. population has suffered and the population of those with no credit files, or thin files, has swelled to 65 million by most estimates.
"Credit access is more constrained than it was," says Rachel Schneider, vice president of innovation and research for the Center for Financial Services Innovation of New York.
Certainly the credit reporting agencies already use their own alternative data sets to help lenders make decisions.
Experian Information Solutions Inc. of Costa Mesa, Calif., offers information on renters' propensity to make timely rent payments through its RentBureau product.
For consumers with minimal lending history, Fair Isaac Corp. of Minneapolis offers something it calls the Expansion score in partnership with MicroBilt Corp. of Kennesaw, Ga.
It factors in such information as purchase plan payments, property ownership records, and demand deposit information, which could include the propensity to overdraw accounts. It also looks at the timeliness of utility bill payments and even more obscure items such as payment of gym membership and phone bills.