Infographic: How Technology is Shaping the Future of Consumer Credit
Connect with us

Technology

How Technology is Shaping the Future of Consumer Credit

Published

on

Consumer credit has been constantly evolving for more than 5,000 years, but the reality is that the most drastic changes to the industry came fairly recently.

Modern credit systems are now powered by sophisticated algorithmic credit scoring, the use of trended and alternative data, and innovative fintech applications. While these developments are all interesting in their own right, together they serve as a technological foundation for a much more profound shift in consumer credit in the coming years.

The Future of Consumer Credit

In today’s infographic from Equifax, we look at the cutting edge of consumer credit, including the new technologies and global trends that are shaping the future of how consumers around the world will access credit.

It’s the final piece of our three-part series covering the past, present, and future of credit.

Part 1: The History of Consumer CreditPart 2: Modern CreditPart 3: Future
How Technology is Shaping the Future of Consumer Credit
Part 1: The History of Consumer CreditPart 2: Modern CreditPart 3: Future

The biggest problem that creditors have always faced is well-documented. There is more to a borrower than just their credit score. Yet creditors do not always have a 360 degree view of a consumer’s creditworthiness in order to better assess their overall score.

Called “information asymmetry”, this gap has gotten smaller over the years thanks to advancements in technology and business practices. However, it still persists in particular situations, like when a college student has no credit history, or when a rural farmer in India wants to take out a loan to buy seeds for crops.

But thanks to growing amounts of data – as well as the technology to make use of that data – high levels of information asymmetry may soon be a thing of the past.

Forces Shaping Credit’s Future

Here are some of the major forces that will drive the future of consumer credit, addressing the information asymmetry problem and making a wide variety of credit products available to the public:

1. Growing Data
90% of the data in all of human history has been created in just the last two years.

2. Changing Regulatory Landscape
New international regulations are putting personal data back in the hands of consumers, who can control the personal data they authorize access to.

3. Game-changing Technologies
Machine learning, deep learning, and neural networks are giving companies a way to garner insights from data.

4. Focus on Identity
Authenticating the identity of consumers will become crucial as credit becomes increasingly digital. Blockchain and biometrics could play a role.

5. The Fintech Boom
The democratization of data and tech is allowing small and niche players to come in and offer new, innovative products to consumers.

The Credit Revolution

No one can predict the future, but the above forces are shaping the credit industry to be a very different experience for consumers and businesses. Here are how things could change.

More Data, New Models

Current credit scoring algorithms use logistical regressions to compute scores, but these really max out at using 30-50 variables. In addition, these models can’t “learn” new things like AI can.

However, with new technologies and an unprecedented explosion in data taking place, it means that this noise can be converted into insights that could help increase trust in the credit marketplace. New algorithms will be multivariate, and they will be able to mine, structure, weight, and use this treasure trove of data.

TechnologyDescription
Artificial intelligenceMachine learning can “learn” from massive data sets, and apply these lessons for better scoring.
BayesianModels can update probabilities as more information is available, helping to better predict creditworthiness.
APIsApplication programming interfaces (APIs) make it easier for developers to use technologies, data, and to build new applications.
Neural networksBrain-inspired AI systems designed to replicate the way that humans learn are used for deep learning. This enables the processing of raw, unstructured, and often abstract data for new insights.

Neural networks will be able to look at a billions of data points to find and make sense of extremely rare patterns. They will also be able to explain why a particular decision was made – and at a time where transparency is crucial, this will be key.

Data Will be in the Hands of Consumers

Today, much of consumers’ financial data – such as loan repayment histories – is held almost exclusively by banks and credit agencies.

However, tomorrow points to a very different paradigm: much of the data will be directly in the hands of consumers. In other words, consumers will be able to decide how their data gets used, and for what. In Europe, changes have already been made to transfer control of personal data to the consumer, such as the PSD2, GDPR, and Open Banking (U.K.) initiatives.

Experts see the trend towards open data growing globally, and eventually reaching the United States. Open data will allow consumers to:

  • Regain control of checking, mortgage, loan, and credit card data
  • Give up more information voluntarily to unlock better deals from creditors
  • Grant access to third parties (fintech, apps, etc.) to use this data in new applications and products
  • Gain access to better rates, new lending models, and more

Identity Will Be Just as Important

As transactions become more digital and remote, how lenders verify the identity of borrowers will be just as important as the lending data itself.

Why? Credit is based around trust – and fraud is the biggest risk for lenders.

But fraud an be prevented by new technologies that help detect anomalies and prove a borrower’s identity:

Blockchain
Distributed, tamper-resistant databases can help secure people’s identities from fraudulent activity

Biometrics
Fingerprints, facial recognition, and other biometric identification schemes could help secure identities as well

New Game, New Players

With the vast expansion in types and volume credit data, new technologies, and standardized data in the hands of consumers, there will be a new era of third-party companies and apps that can provide useful and relevant services for consumers.

Here are just some emerging fields in lending:

Emerging fieldsDescription
P2P LoansDoes a bank need to be an intermediary?
With peer-to-peer loans, you are matched to an appropriate lender/borrower.
MicrolendingLending doesn’t always need to be in big amounts, like for a mortgage or auto loan.
Alternative credit scoringPsychometric testing or the use of other data streams can be used to power this less traditional form of lending.
Niche servicesWith an open playing field, companies will fill every gap imaginable.

In the future, consumers may not have to even request credit – it may be automatically allocated to them based on behavior, age, assets, and needs.

Consumers will have more control, and more options than ever before.

Subscribe to Visual Capitalist
Click for Comments

Technology

Ranked: Big Tech CEO Insider Trading During the First Half of 2021

Big Tech is worth trillions, but what are insiders doing with their stock? We breakdown Big Tech CEO insider trading during the first half of 2021.

Published

on

Big Tech CEO Insider Trading During The First Half of 2021

When CEOs of major companies are selling their shares, investors can’t help but notice.

After all, these decisions have a direct effect on the personal wealth of these insiders, which can say plenty about their convictions with respect to the future direction of the companies they run.

Considering that Big Tech stocks are some of the most popular holdings in today’s portfolios, and are backed by a collective $5.3 trillion in institutional investment, how do the CEOs of these organizations rank by their insider selling?

CEOStockShares Sold H1 2021Value of Shares ($M)
Jeff BezosAmazon (AMZN)2.0 million$6,600
Mark ZuckerbergFacebook (FB)7.1 million$2,200
Satya NadellaMicrosoft (MSFT)278,694
$65
Sundar PichaiGoogle (GOOGL)27,000$62
Tim CookApple (AAPL)0$0

Breaking Down Insider Trading, by CEO

Let’s dive into the insider trading activity of each Big Tech CEO:

Jeff Bezos

During the first half of 2021, Jeff Bezos sold 2 million shares of Amazon worth $6.6 billion.

This activity was spread across 15 different transactions, representing an average of $440 million per transaction. Altogether, this ranks him first by CEO insider selling, by total dollar proceeds. Bezos’s time as CEO of Amazon came to an end shortly after the half way mark for the year.

Mark Zuckerberg

In second place is Mark Zuckerberg, who has been significantly busier selling than the rest.

In the first half of 2021, he unloaded 7.1 million shares of Facebook onto the open market, worth $2.2 billion. What makes these transactions interesting is the sheer quantity of them, as he sold on 136 out of 180 days. On average, that’s $12 million worth of stock sold every day.

Zuckerberg’s record year of selling in 2018 resulted in over $5 billion worth of stock sold, but over 90% of his net worth still remains in the company.

Satya Nadella

Next is Satya Nadella, who sold 278,694 shares of Microsoft, worth $234 million. Despite this, the Microsoft CEO still holds an estimated 1.6 million shares, which is the largest of any insider.

Microsoft’s stock has been on a tear for a number of years now, and belongs to an elite trillion dollar club, which consists of only six public companies.

Sundar Pichai

Fourth on the list is Sundar Pichai who has been at the helm at Google for six years now. Since the start of 2021, he’s sold 27,000 shares through nine separate transactions, worth $62.5 million. However, Pichai still has an estimated 6,407 Class A and 114,861 Class C shares.

Google is closing in on a $2 trillion valuation and is the best performing Big Tech stock, with shares rising 60% year-to-date. Their market share growth from U.S. ad revenues is a large contributing factor.

Tim Cook

Last, is Tim Cook, who just surpassed a decade as Apple CEO.

During this time, shares have rallied over 1,000% and annual sales have gone from $100 billion to $347 billion. That said, Cook has sold 0 shares of Apple during the first half of 2021. That doesn’t mean he hasn’t sold shares elsewhere, though. Cook also sits on the board of directors for Nike, and has sold $6.9 million worth of shares this year.

Measuring Insider Selling

All things equal, it’s desirable for management to have skin in the game, and be invested alongside shareholders. It can also be seen as aligning long-term interests.

A good measure of insider selling activity is in relation to the existing stake in the company. For example, selling $6.6 billion worth of shares may sound like a lot, but when there are 51.7 million Amazon shares remaining for Jeff Bezos, it actually represents a small portion and is probably not cause for panic.

If, however, executives are disclosing large transactions relative to their total stakes, it might be worth digging deeper.

Continue Reading

Technology

The World’s Most Used Apps, by Downstream Traffic

Of the millions of apps available around the world, just a small handful of the most used apps dominate global internet traffic.

Published

on

The World’s Most Used Apps by Downstream Traffic Share

The World’s Most Used Apps, by Downstream Traffic

Of the millions of apps available around the world, just a small handful of the most used apps dominate global internet traffic.

Everything connected to the internet takes bandwidth to view. When you look at something on your smartphone—whether it’s a new message on Instagram or the next few seconds of a YouTube video—your device is downloading the data in the background.

And the bigger the files, the more bandwidth is utilized. In this chart, we break down of the most used apps by category, using Sandvine’s global mobile traffic report for 2021 Q1.

Video Drives Global Mobile Internet Traffic

The biggest files use the most data, and video files take the cake.

According to Android Central, streaming video ranges from about 0.7GB per hour of data for a 480p video to 1.5GB per hour for 1080. A 4K stream, the highest resolution currently offered by most providers, uses around 7.2GB per hour.

That’s miles bigger than audio files, where high quality 320kbps music streams use an average of just 0.12GB per hour. Social network messages are usually just a few KB, while the pictures found on them can range from a few hundred KB for a low resolution image to hundreds of MB for high resolution.

Understandably, breaking down mobile downstream traffic by app category shows that video is on top by a long shot:

CategoryDownstream Traffic Share (2021 Q1)
Video Streaming48.9%
Social Networking19.3%
Web13.1%
Messaging6.7%
Gaming4.3%
Marketplace4.1%
File Sharing1.3%
Cloud1.1%
VPN and Security0.9%
Audio0.2%

Video streaming accounts for almost half of mobile downstream traffic worldwide at 49%. Audio streaming, including music and podcasts, accounts for just 0.2%.

Comparatively, social network and web browsing combined make up one third of downstream internet traffic. Games, marketplace apps, and file sharing, despite their large file sizes, only require one-time downloads that don’t put as big of a strain on traffic as video does.

A Handful of Companies Own the Most Used Apps

Though internet traffic data is broken down by category, it’s worth noting that many apps consume multiple types of bandwidth.

For example, messaging and social network apps, like WhatsApp, Instagram, and Snapchat, allow consumers to stream video, social network, and message.

Even marketplace apps like iTunes and Google Play consume bandwidth for video and audio streaming, and together account for 6.3% of total mobile downstream traffic.

But no single app had a bigger footprint than YouTube, which accounts for 20.4% of total global downstream bandwidth.

CategoryTop Apps (Category Traffic)Category Traffic Share
Video StreamingYouTube47.9%
Video StreamingTikTok16.1%
Video StreamingFacebook Video14.6%
Video StreamingInstagram12.1%
Video StreamingNetflix4.3%
Video StreamingOther5.0%
Social NetworkingFacebook50.5%
Social NetworkingInstagram41.9%
Social NetworkingTwitter2.4%
Social NetworkingOdnoklassniki1.9%
Social NetworkingQQ0.7%
Social NetworkingOther2.9%
MessagingWhatsApp31.4%
MessagingSnapchat16.5%
MessagingFacebook VoIP14.3%
MessagingLINE12.1%
MessagingSkype4.1%
MessagingOther21.6%
WebGoogle41.2%
WebOther58.8%

The world’s tech giants had the leading app in the four biggest data streaming categories. Alphabet’s YouTube and Google made up almost half of all video streaming and web browsing traffic, while Facebook’s own app, combined with Instagram and WhatsApp, accounted for 93% of global social networking traffic and 45% of messaging traffic.

Traffic usage by app highlights the data monopoly of tech giants and internet providers. Since just a few companies account for a majority of global smartphone internet traffic, they have a lot more bartering power (and responsibility) when it comes to our general internet consumption.

Continue Reading

Subscribe

Popular