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IMF researchers: digital footprint yields better credit assessment

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Re: IMF researchers: digital footprint yields better credit assessment

#101

Post by dohnuts1919 »

hn_throwaway_99 wrote: post #15

I hope that regulatory agencies start cracking down on these "alternative sources" for credit-worthiness data. Researchers have shown how it's very easy to attribute things like political party, race, sexuality, etc., things that are often illegal to take into consideration when determining credit, to other things like where you live, TV shows you like, apps you have on your phone, etc. And strangely (or not) this bl…

Agreed. I can't remember the details but I was listening to a podcast lately (Sam Harris maybe?) where the guest was talking about an example of an ML-driven system that was being used to determine whether or not to approve mortgage applications, and upon closer inspection it turned out to be latching onto some data that gave clues as to the applicant's race and using that in its decision.

You can guess the outcome: the software re-invented redlining.

Re: IMF researchers: digital footprint yields better credit assessment

#102

Post by NeuNeurosis »

hntrader wrote: post #46
aneemzic wrote: post #40

Earlier quoted context omitted.

No. Credit worthiness should be because of an individuals past actions and not some attribute they may have been born with. Why should a tall individual who's never missed a payment have some invisible penalization applied because some other tall people are worse at re-paying loans. Don't you see the issue here? You're penalizing individuals not based on their own measurable behavioral signals, but simply due to some…

We must disambiguate between political objectives and the practice of credit risk modelling. Credit risk, f(X), is an unknown population function that needs to be estimated using observed data X. If including tallness into X improves our estimate of f(X), then we've gotten a better model. You've asserted that X should only contain an individual's past actions instead of their inherent traits such as tallness. This ma…

Credit risk modelling is a Political Objective. They can't be separated. The only place they are separated is in the figment of someones imagination. The use and investigation of these models does not happen in a vacuum. The real question is, does better modeling help society? And that is through and through a political question.

Re: IMF researchers: digital footprint yields better credit assessment

#103

Post by dredmorbius »

The blog is itself an advertisment for a longer (32 page) report released in August 2020, downloadable PDF available, largely an emerging trends report.

"Financial Intermediation and Technology: What’s Old, What’s New?"

https://www.imf.org/en/Publications/WP/Issues/2020/08/07/Fin...

The prospect of Fintech credit scoring from digital footprints is from "Onthe Rise of FinTechs – Credit Scoring using Digital Footprints", by Tobias Berg, Valentin Burg, Ana Gombović, Manju Puri, July 2018. 51pp.

https://www.fdic.gov/analysis/cfr/2018/wp2018/cfr-wp2018-04....

That was discussed at the time on HN (46 comments, June 22, 2018):

https://news.ycombinator.com/item?id=17377967

Re: IMF researchers: digital footprint yields better credit assessment

#104

Post by bostik »

chii wrote: post #85
aneemzic wrote: post #71

Earlier quoted context omitted.

> This only lasts until someone figures out how they are different and breaks the association right? Would you be OK if banks started charging you 4% more interest because say you have irish heritage? Your behaviour hasn't changed and nobody can explain why it matters that your father was irish, but the models determined it's statistically significant, What if at some point 30 years down the line it's determined it w…

But you're only looking at this from a single perspective, where every single bank starts charging the same 4% simply because of irish heritage. What if, one bank started doing it because they used this model. But another bank doesn't, because they don't believe this model? If you were an irish person, you would just move banks. And if it turns out, indeed, that the first bank was over-charging the 4% (ie., no irish…

> a bank can only charge the most appropriate interest rate for the market to bear.

The market can remain irrational longer than you can stay alive.

Re: IMF researchers: digital footprint yields better credit assessment

#106

Post by alfiedotwtf »

Animats wrote: post #97

Would information about CEO behavior be useful to investors? That's worth considering. Browsing history? Phone call patterns? It's being worked on at the Harvard Business School.[1] "We measure the behavior of 1,114 CEOs in six countries parsing granular CEO diary data through an unsupervised machine learning algorithm. The algorithm uncovers two distinct behavioral types: “leaders” and “managers”. Leaders focus on m…

What will be measured, will be gamed

Re: IMF researchers: digital footprint yields better credit assessment

#107

Post by visarga »

dTal wrote: post #53
pmichaud wrote: post #25

Earlier quoted context omitted.

When I have this conversation with myself, here's what I come up with: Shouldn't we be allowed to everything into account when determining credit worthiness? Even if it's socially uncomfortable? We get locally more accurate pricing / risk assessment that way, but we also create feedback loops that we as a society have decided we want to not contribute to. The cost for this is the pricing inaccuracy which we collectiv…

I think the key is "feedback loops". We're not failing to price in inherent differences, out of some moral ideal - we're trying to fix a larger inefficiency, which is that some groups of people are unable to reach their full potential. It's not a cost - it's an investment . It's regulation to fix a negative externality. [digression into risky territory, here be dragons] ...at least, that's the idea if you believe tha…

You mention racial differences and the sensitive point about biological differences. But I think there is another kind of racial differences that is not biological - the situational differences. The situation is different for every person, and - on average - for every race.

Depending on the situation the same people behave differently. So it's not the skin color in itself but the different context that makes races behave differently. Being poor or uneducated for example is a better prediction of defaulting on payments, but race, wealth and education are correlated.

The affordances of the context influence choices - how many good options vs bad options you have in your situation. For example, people who would behave perfectly OK in normal life might try to cheat the system to get vaccinated sooner. Because they only got bad options, they might pick a bad behavior. "I got no choice!" Equality of opportunity, and not of outcomes, seems to me the best approach.

The reverse of this is also happening - in the more developed and feminist leaning cultures fewer women choose to do scientific research. Why? They got better options, so many great choices to pick from. It's insulting to question people's choices when they are made in an abundance of good options, as if they were children who can't make their own decisions.

Re: IMF researchers: digital footprint yields better credit assessment

#108

Post by wernercd »

8note wrote: post #89
wernercd wrote: post #83

Earlier quoted context omitted.

I think the denial to credit for DDG is less about credit worthyness and more about "deplatforming" based on personal details. Or thats what it'll become.

That's highly unlikely. As the GGP said, using ddg is associated with being wealthy, so it will have the opposite effect over time. If you're a rich white guy, this oppression is unlikely to apply to your choices. Instead, your choices will be used as filters to identify you at the exclusion of others

> if you're a rich white guy

Amazing how skin color is the first thing brought up by those (presumably) fighting racism. Ironic?

And my point is that aside from the pendantry about DDGs affect specifically... the result will be scoring systems based on more than just financial capabilities. IE: "we don't want to lend to those who use DDG because they are rich white guys". Deplatforming based on perceived "facts".

Re: IMF researchers: digital footprint yields better credit assessment

#109

Post by ThrustVectoring »

thegrimmest wrote: post #17
hn_throwaway_99 wrote: post #15

I hope that regulatory agencies start cracking down on these "alternative sources" for credit-worthiness data. Researchers have shown how it's very easy to attribute things like political party, race, sexuality, etc., things that are often illegal to take into consideration when determining credit, to other things like where you live, TV shows you like, apps you have on your phone, etc. And strangely (or not) this bl…

If these sources of data are actually more accurate predictors of creditworthiness, then shouln't we be applauding their use? If it so happens that tall people are less likely to repay loans, why is it wrong to charge tall people higher interest? Otherwise aren't we just socializing the cost imposed by artificially fuzzy criteria?

No. We don't actually want the most economically efficient system here. There are other extremely important characteristics - fairness, due process, legibility, and incentives come to mind here.

Like, presumably you could improve your creditworthiness prediction by cross-referencing against bankruptcy law related searches on Google and in library checkouts. We absolutely should not allow this, though - we care a lot more about having a society where people are free to read and speak about what they want than optimal consumer credit allocation.

Re: IMF researchers: digital footprint yields better credit assessment

#110

Post by lmohseni »

slg wrote: post #26

I'm not a fan of the traditional credit reporting system. It is often a black box that makes it difficult to understand how the actual credit scoring algorithm works. Although one of the important aspects of the current system is that all the inputs are known. We don't know exactly to what degree each input matters, but we know the inputs. A new system needs to keep that aspect or else is going to cause pain for a lo…

Important to consider that credit scores weren’t a thing until 1989
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