Credit scoring with an eye to the future

Posted Posted in Marketplace Lending, Research

Much has been written about the death of the FICO credit score.  See Wall Street Journal’s “Silicon Valley: We Don’t Trust FICO Scores” and American Banker’s “Will Fintechs Kill the FICO Score?” for recent (Summer 2016) articles.  The narrative invariably revolves around how the score is backward looking…considers limited individual past behavior…and can occasionally misfire […]

Mass Customizing Loan Pricing

Posted Posted in Research

Is a loan to a baker in Hampden County, MA as risky as a loan to a baker in Orange County, CA?  Is a loan to a plumber in AZ as risky as a loan to a dentist in AZ?  Intuitively, the answer is no.  The point of Localizing Risk is that the intuition can be […]

Localizing Risk

Posted Posted in Research

A firm’s financial health determines its ability to repay debts.  The promise of big data is to incorporate an ever increasing pool of information about a firm’s financial behavior to make better predictions.  And by blending in qualitative factors such as social media chatter, big data seeks to make a quantum leap in assessing business credit […]

Industry Default Correlations

Posted Posted in Research

One of the biggest challenges confronting small business lenders is the absence of data.  And ultimately that hurts small businesses via higher interest rates.  This is acutely evident in the burgeoning online lending industry.  At WAIN Street, we want to change that.