by Angela Guess
Quentin Hardy of the New York Times recently covered a company that is turning to Big Data to fix the payday loan industry. Hardy writes, “ZestCash, founded in 2006, had a winning idea, in principle. It made loans to borrowers with poor credit scores by using complex data analysis to better determine their credit quality. But now it has decided to move out of the business of making loans and instead concentrate on selling its analysis to other lenders serving poorer and marginal borrowers.’“Our mission was to use big data to save the under-banked billions of dollars in high fees,’ said Douglas Merrill, a former senior executive at Google who was a co-founder of ZestCash. ‘We think that will work better if we get our technology into the hands of established providers’.”
Hardy goes on, “Mr. Merrill said his company, which has been renamed ZestFinance, has already licensed its technology to Spotloan, a nationwide subprime lender. ZestFinance is also in discussions with two large credit card companies, and with several nonprofits interested in delivering financial services to the under-banked, he said. Mr. Merrill declined to name these companies and nonprofits. His co-founder, Shawn Budde, was previously with Capital One, where he managed the subprime credit card portfolio. ZestCash’s idea was to serve the millions of working people in America with limited access to good credit. While some are risky bets for a loan, others are poor in data like long-established work records, or a history of paying conventional credit card loans. When they need money fast, a common recourse is the payday lenders often found in strip malls, who give cash but charge triple-digit annual percentage rates.”
