Alternative Data as Racial Justice? Tamara K. Nopper, PhD

Invisible and Unscoreable Consumer Financial Protection Bureau Credit invisibles: Those without an NCRA record 26 million Credit unscoreables: Those with NCRA credit records with insufficient credit histories to generate a credit score 19 million

Fintech and Risk Assessment Fintech: Financial technology Marketplace lenders: Lending decisions made online Soft information: Information that is “hard to quantify, verify, and communicate through the normal transmission channels of a banking organization” (Berger and Udell, 2002) Network-based credit scoring

Social Media and Soft Information Sasha Orloff, co-founder and chief executive, LendUp: “It's one of the tools we use to do underwriting. Do you have 4,000 friends but none are that close, or do you have 30 people but they're very close? There are ways to measure how engaged and how strong your community ties are.” Victoria Treyger, chief marketing officer, Kabbage: "We look at whether you get a lot of 'likes,' are you responding to customers.” Laurent Schuller, spokesman, Kreditech: "Is someone using an expensive mobile phone like an iPhone or logging in from a Web cafe? Is their network on Facebook just drinking buddies from a bar?” Alex Sion, president of Moven: "The data we have on customers via social networks says more about them than their FICO. You can make credit decisions based not on a faceless score, but on who you know."

FICO Score as “non-discriminatory” The FICO® Score changed the lending landscape for good. In the days before credit scoring, people were often denied credit because there was no unbiased structure for evaluating them objectively. The system was not fair, fact-based or consistent. Enter the FICO® Score. The FICO® Score replaced hunches with calculations, and took prejudice out of the equation, literally. The score’s criteria for evaluating potential borrowers are focused solely on factors related to a person’s ability to repay a loan, rather than one’s ZIP code or social status.

Problems and proposed solutions Credit reporting for profit Lack of transparency Monopoly Types of data Proposed Solutions Transparency and accuracy Alternative data Credit reporting public versus for profit Algorithms transparent and non-racist

questions How does alternative data broaden the socioeconomic data that can be used against you? What does transparency solve? Does non-racist economic data? Can we imagine and build an economy where the need for a credit score is obsolete?