Smartphones can dramatically reduce the cost of lending, experts say, because the apps they run generate huge amounts of data—texts, emails, GPS coordinates, social-media posts, retail receipts, and so on—indicating thousands of subtle patterns of behavior that correlate with repayment or default. This is a game changer in the microlending space, allowing borrowers in emerging markets immediate access to loans at far lower interest rates. As the growing number of smartphone users in those regions rises, so will the access to data and use of such nontraditional data sources to assess risk.