I want you to imagine a situation with me, a friend sends you a text message on a late Friday evening. He has been arrested and needs 5000 shillings urgently to pay a police fine and get out of spending the night in a dingy, crowded and smelly cell. He promises to refund the money by Monday morning. More than you care to admit, a lot goes through your mind as you think about whether to give the friend the requested loan or not.
You make an informal assessment of the person’s ability to pay in a split second of thought. This involves you trying to remember if they paid the last loan you gave them, you also consider whether they have a steady job or income, you also consider the strength of your relationship and the social network in which you exist. How did you meet? What is their character? To the best of your knowledge, do they pay other loans given to other people within your social network? Of course, most importantly you consider if you have the money that is being requested.
What you do in a few minutes of thinking is what whole departments in Banks exist for; determining the creditworthiness of a would-be Customer. However, you have one thing that Banks do not have; Social Network Data (specifically in messaging data). The social interactions and conversations you have with your friend, your understanding of your friend in a social context give you a greater capacity to understand the creditworthiness of your friend. It makes your assessment in most times more accurate than a Banker flipping pages on a loan application form who has never met the borrower in person or knows what he does on Friday evenings.
While the Banker knows the Customer on paper, you know them in real life, you understand their excessive love for booze and living beyond their means. You know that they have a social reputation of borrowing without repaying. You have the benefit of social information which is the currency by which Social Capital is measured. Information acquired through conversations and interactions spread over a large period. For a long time, this has been the preserve of one on one lending, but with the growth of digital communication, there is only another person(more accurately, people) who knows these small and minute details about a person’s life; your What’s app, Facebook, Instagram and Twitter.
This could be why Banks the world over are introducing products under the title of WhatsApp Banking. In 2019, HF Group was the first Kenyan financial institution to leverage the social media instrument to offer personalized services to their customers through What’s app Banking. On 11th August 2021, Absa also introduced a similar product for its customers. Across the seas in India, the Bank of Baroda alongside other top Indian Banks have in the course of the past few years introduced What’s App Banking alongside a retinue of other digital banking products. Of course, at the moment Whatsapp Banking only involves the basic elements of banking like sending money and other minute transactions but to gain an understanding of what the Banks are up to it is important to understand the actions in a global financial context.
Where Data Meets Banking
In 2016, Facebook (The Parent Company that owns What’s App) secured an e-money licence in Ireland. The license allows Facebook to make payments and perform elementary financial services in the Country. It is the first practical license issued to Facebook as it attempts to move beyond being a social media platform to engaging in banking and commerce. Although elementary, it portends for a situation where social network data acquired from monitoring social interactions of Facebook users (And by extension What’s App) is used to grant customers a credit score.
In some sense, it is an upscaling of the technology used by Shivani Siroya in starting Tala, one of the biggest Digital Lending infrastructures in the developing world. However, What’s app banking has the added benefits that come with data sharing across social media and banking infrastructures which allows Facebook to partner with banks like ABSA in a situation where they can potentially exchange data for banking infrastructure. The Banks offer Facebook financial architecture while Facebook offers the Banks your data. In simpler terms, it is likely the birth of a new world where Banks give Facebook your wallet and Facebook gives them your messages.
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