Markets Magazine
Lender Charging 390% Uses Data to Screen Out Deadbeats
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Douglas Merrill, chief executive officer of ZestFinance Inc., jumps up, stares at the computer monitor on the wall and says, “Holy crap, that can’t be right.”
For five years, Merrill has been harnessing oceans of online data to screen applicants for the small, short-term loans provided by his Los Angeles–based firm. Improvements in default rates have come in fractions of a percentage point. Now, on this 90-degree-Fahrenheit (32-degree-Celsius) July day, his researchers are claiming they can improve the accuracy of their default predictions for one category of borrower by 15 percentage points, Bloomberg Markets magazine will report in its November issue.