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New banks assess unusual data to grant loans

People arranging a loan

Some trailblazing start-ups are creating new models of lending, using sophisticated software that can scan thousands of pieces of data to pick up behavioural signals. No individual signal is definitive, but each is regarded as a piece in a mosaic compiled by collecting an array of information from diverse sources, including household buying habits, bill paying records and social network connections. Louis Beryl, chief executive of Earnest, one of the new lenders, says: 'We're building the consumer bank of the future.' Earnest uses the new analytical tools to make personal loans; Affirm offers alternatives to credit cards for online purchases; and ZestFinance has focused on the relative niche market of payday loans. They all envisage consumer finance being fuelled by abundant information and clever software – the tools of data science – as opposed to the traditional maths of creditworthiness which rely mainly on a person's credit history.

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