What if I told you that mobile phone data was the key to reaching and serving more customers? I can’t speak on your behalf, but my best guess is that I’d receive a mixed response: optimism for growth, laced with pessimism linked to data privacy. Regardless of your view, the shift from desktop to mobile clearly gives us new ways to learn more about customers.

To get a better understanding of this I chatted with Michele Tucci, co-founder of Credolab, a company that uses alternative sources of data, namely ‘device’ data and ‘behavioural biometrics’, to make better assessments of credit risk and fraud risk on behalf of businesses in financial services. Intriguingly, Credolab also uses this data to help businesses market their products. More on that later.

Why Mobile Phone Data?

Ecommerce and banking continue to shift from desktop to mobile, and an upshot of this is that our personal and financial data is increasingly linked to our phones. This trend is something Tucci has followed for about a decade, because more data, and more importantly more high quality data, can expand what fintechs and banks are able to offer.

They can do this because the rise of mobile ecommerce has added depth to how a financial institution can understand a customer. Tucci explains it to me in terms of the traditional ‘Five C’s’ framework for risk assessment: character, capacity, capital, collateral and conditions. “Character and capacity were something only credit bureaus were able to help you assess,” he says. These particular two Cs are where CredoIab can really add more value.

How can you Measure Someone’s Character?

While capacity measures whether or not someone is able to pay you back, ‘character’ is a measure of whether or not someone feels inclined to actually do it. “When you’re able to assess both willingness to repay and ability to repay, you’re better off than people who can’t,” Tucci explains.

Capacity can be fairly easy to prove, but character not so much. Two people may have the same credit score, work in similar roles, and have similar circumstances. But are they both as likely to pay?

Well… if we’re trying to assess character, phones become very insightful.

Let’s look at it on a personal level first. As we discussed this topic, Tucci mentioned a film from his native Italy called Perfect Strangers. In the film, a group of friends get together on the night of a total eclipse and put their phones on the table. Following the suggestion of one of the friends, a relationship therapist, they agree to read every text and take every call they receive out loud, leading to increasingly dramatic revelations. As Michele explains:

He may well be correct. 

Assessing this less dramatically and more practically, there are other intriguing behaviours that our phones can reveal. For instance, Tucci mentions a correlation between people taking a high number of selfies and a lower probability of debt repayment. “You tend to be more superficial, and waiting for dopamine,” he says. Your friend who takes selfies is less likely to pay you back. 

He also mentions that our use of apps can be valuable information. In Brazil he’s found, rather predictably, that those who have a high number of gambling apps tend to be worse at making repayments. On the flipside, people with a relatively high number of health and fitness apps tend to be more dependable. “If you’re active and care about your body and health, you’re actually a better repayer. You’re more organised with your deadlines and stick to them.”

Behavioural Psychology and Biometrics

Let’s take this a step further. We know that apps and phone usage can tell us a few things about a customer. However, we’re missing a key part of Credolab’s solution, which is behavioural psychology and biometrics. Put in very simple terms, behavioural biometrics relate to the way that we physically engage with our phone. Scrolling, typing, and other personal habits.

“If you’re an extrovert, you tend to react differently to visuals and words, and calls to action, than a neuroticist would,” Tucci explains.

Once we know how customers use their phones, we’re better able to personalise communications, in terms of style, tone of voice, visuals, and even incentives. If behavioural biometrics can show us what prompts a customer to act, then companies can communicate in a more engaging way.

“It’s something that Cambridge Analytica did for all the wrong reasons 10 years ago, but I believe the technology can be used to communicate better and more efficiently with your customers. It actually improves conversations,” says Tucci. As an aside, this data can also help to identify fraudsters and bots. 

Alternative Data in Marketing

So now we have phone data and behavioural biometrics working in tandem. Understandably, Credolab has turned this into a marketing tool, where marketing scores are assigned to people to predict the probability of them being an ideal customer. 

Tucci mentions a recent example of working with a bank that had spent considerable sums to attract clients. “Some of them convert into opening an account and some never do. We noticed that if customers don’t fund the account within seven days, they basically never do.”

In short, marketing scores and profiles help companies target and incentivise the right people in the right ways. It helps them allocate resources without being wasteful. Michele openly admits that this newer business line has confused some prospective clients due to its divergence from fraud and risk assessments, but there’s clearly good reason to pursue it.

Isn’t This All Really Intrusive?

Let’s not be naive here. The notion of companies prying into your phone is intrusive and ethically dubious, to put it mildly. That said, Tucci offers an explanation for CredoIab’s processes.

“We’re not creeping into your data. We actually don’t know who you are and frankly we don’t care. We only access metadata [which is defined as data about other data]. We depersonalise and anonymise this data, and it’s only user consented data. If you don’t consent for your bank to access data, we don’t even have the permission to access data, so we don’t.” 

Final Points

Credolab’s venture into marketing scores is a great example of data being used creatively. It’s enough to make you wonder how many other companies are sitting on valuable data resources that they’ve yet to identify, or figured out how to harness, especially as our understanding of customers continues to improve. 

My favourite thing about it? Probably that it backed up my cynicism about people who take too many selfies. Besides that, the idea that personalisation might be possible without infringing on privacy.

This article is also a reminder that phone data can be deeply personal, and that it’s increasingly being intertwined with our financial lives. Personalisation and financial inclusion are brilliant value-adds to both customers and financial services, so long as they don’t come at the expense of individual rights.

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