When bankers of the future decide whether to make a loan, they may look to see if potential customers use only capital letters when filling out forms, or at the amount of time they spend online reading terms and conditions — Yet the technology is so new that the potential is unproved. As a result regulators are waiting to see how the new technology performs.
Yet the technology is so new that the potential is unproved. Also, applying the modern techniques of data science to consumer lending raises questions, especially for regulators who enforce anti-discrimination laws. None of the new start-ups are consumer banks in the full-service sense of taking deposits. Instead, they are focused on transforming the economics of underwriting and the experience of consumer borrowing — and hope to make more loans available at lower cost for millions of Americans. Earnest uses the new tools to make personal loans. Affirm, another start-up, offers alternatives to credit cards for online purchases. And another, ZestFinance, has focused on the relative niche market of payday loans.