Brett King, CEO of Movenbank, has a radical idea: a “credit score” built — at least in part — on consumers’ social media activity. Sound crazy? Maybe, but the idea has attracted the attention of big league investors who just pumped $2.41 million into King’s startup. 36kr interviewed King about what his innovative “CRED” system to find out how it all works.
TFB: What is the basic concept of the CRED system?
King: CRED is a proprietary financial credibility score using a combination of financial wellness, social media metrics, transactional insight, and feedback loops to provide customers with the ability to understand their day-to-day financial behavior. So basically Movenbank measures your day-to-day financial behavior, gives you real-time feedback as you spend, so that you understand your financial health, and start to exert better control over your savings intent.
TFB: How is a CRED score calculated?
King: We don’t disclose details on weighting or the CRED algorithm itself. The algorithm itself is proprietary and it is evolving as we get more data into the mix, however, I can tell you that we look at consumer transactional behavior, economics of the customer to the brand, referral mechanics and overall risk profile.
TFB: How is a CRED score used to make decisions? Is the CRED score only for the lending side of Movenbank? Or will it impact deposits and other products/perks as well?
King: CRED is used as a transparent ‘relationship’ score — so we share your score in real-time with you and explain how that effects your monthly fees, other processing charges, interest rates on savings, availability to credit facilities and the like. Additionally, there will be other rewards and incentives — for example, those of our alpha team with the highest CRED scores will likely be first in line for an account when we open the doors (metaphorically speaking).
TFB: Does the CRED system use the same basic “scale” as other credit scoring systems — i.e., is an 800 CRED score strong?
King: I do want to make the distinction that CRED is not a credit scoring system, nor is it intended to replace a credit score. It’s all about financial health, so the score scale is somewhat different to a FICO/Experian score, and unlike other scores where there are ‘ranges’ of good and bad scores, the primary thing to watch with CRED is whether your score is going up or down. This is what will tell you whether your financial health is improving.
One of the weaknesses in the current system is that most consumers have no idea what their credit score is, and they have very little control over managing the score. Generally speaking if your score takes a hit, it can take months or even years to correct. CRED is completely different because the feedback you get is real-time, everyday.
We will disclose more on CRED scores and how it relates to fees, pricing, rates, etc when Movenbank launches so that customers know how the score effects their relationship with Movenbank. Right now we’re trying to capture as much data as we can so we can refine those parameters accurately.
TFB: What social media platforms are integrated into the CRED system?
King: At the moment Twitter, Facebook, Google and LinkedIn are the primary social platforms, although we also integrate data from services like Klout and PeerIndex. In the future, we’re also looking at integrating data from peer-to-peer networks and businesses like Kiva, to get understand your charitable side.
TFB: Does Movenbank look at how long a customer has had their social media accounts? How many connections they have? How active a customer is in social channels?
King: There’s two components to the value of your social presence — one is simply your potential influence, reach and network size, but the primary value is pretty simple: how often you successfully refer customers to Movenbank through your social networks. Essentially we’ve built member-get-member mechanisms into the CRED reward ecosystem so that if you recommend us and it results in a new customer, then you get a tangible benefit for that in respect to fees, rates, etc.
TFB: What are the risks with the CRED scoring system? Can someone “game the system” with fake social media accounts or forged connections with good borrowers ?
King: Firstly, the primary inputs into CRED are related to financial behavior — transactional activity, savings, financial health, observed control over your financial behavior, etc. — so it’s those measures that produce the greatest gain/losses with the CRED system. You can’t get a high CRED score just by gaming social networks, you actually have to be using the account everyday and saving money, thus, its not really possible to game the system via your social media presence to get access to credit, for example.
Secondly, the most impact your social network presence can have is through referral. For that to work you have to recommend Movenbank to your friends and they have to open an account and deposit money. It’s a huge amount of work to get access to a line of credit.
In any case, we’re not starting out offering a line of credit from day one, not until we’ve thoroughly tested CRED and worked out the kinks.
TFB: How does Movenbank plan on addressing people’s privacy concerns about social banking?
King: We’re very serious about privacy, and we’re working with some awesome security peeps to ensure that we keep it that way. In respect to social media activities, Movenbank is completely opt-in in respect to this data. You share only what you feel comfortable sharing, and we keep it completely between us and the customer. We never, ever expose that data in anyway. So the data is absolutely safe, and we don’t publish any information that you give us. The only way our customers information would be shared on social networks is if they chose to share it themselves.
Interestingly, some of our existing customers are already sharing their CRED scores with their friends, etc. So we’re observing a general willingness in parts of the Movenbank community to be more open with some of their data and personal information.
Realistically, we live in an environment where increasingly our data is exposed. This is also part of the reason behind CRED — we’re trying to build up a much more robust profile or identity of our customers that extends beyond just simple data points like name, date of birth, social security number, address, etc. We can identify customers heuristically based on behavior, where they spend money, how they spend money, how often they save, etc. We believe this is a much better technique for uniquely identifying a customer and protecting his assets than the old identity methods based on paper application forms and replicable identity documents.
TFB: There’s a lot of talk about “big data” in the financial industry, but not a lot of action. Do you view CRED as the industry’s first real attempt to utilize “big data” in practical ways?
King: I think CRED is probably one of the best examples of using behavioral data to improve the consumer-end of the retail banking business, especially when it comes to the relationship dynamics. There are other efforts more broadly such as PFM, utilizing credit card transaction data for offer matching, etc. But CRED is the first real attempt at changing the way a banking provider works day-to-day with its customers. I hope that when we look back on this in a few years time that CRED will be seen as a real significant shift in the engagement model of retail banks.
TFB: Where are you at with CRED right now?
King: Movenbank has recently completed a $2.41 million initial seed investment round with support from Anthemis, Raptor Ventures, Kevin Plank (founder of UnderArmor) and a Singaporean syndicate. We’re also in discussions about further funding for later in the year when the bank product launches.
Right now we’re building CRED as fast as possible so that we have a strong pool of data and behavioral metrics to base our pricing models on for our first customers. Already more than 5,000 customers have got their first taste of CRED and we’ve got about 50 new customers signing up each day right now. The data we’re getting is fantastic, including demographics on the ‘average’ Movenbank customer.