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What does your mobile phone usage say about your credit-worthiness?

Posted by Scott Kirsner  January 20, 2012 08:15 AM

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Does the number of text messages you send, or the time of day you make your first phone call, say something important about how credit-worthy you are?

Cignifi, a small Cambridge start-up with roots in the UK, believes it does. The company is out raising $2 million in funding to commercialize its technology this year, after a pilot test in Brazil in 2011.

"There's a vast market of consumers in countries like Brazil, China, India, and the Phillipines who want access to financial services like credit cards, loans, or insurance," says Jonathan Hakim, Cignifi's chief executive. "But while they may have jobs, and some have bank accounts, there really is no credit history for them." One thing they do have? Mobile phones.

Cignifi has developed sophisticated modeling software that can look at usage data from consumers' mobile phones and make predictions about who that person is and how they live. There's no single data point — like making lots of short calls between 2 and 5 a.m. every morning — that suggests that someone is a bad credit risk. But Hakim says, "The way you use your phone is a proxy for your lifestyle. It's not random. So we're looking at things like the length of calls, the time of day, and the location you make them from. Also things like whether you top up [a pre-paid SIM card] regularly. We want to see how stable the patterns are. When you look at that, you can create these behavioral clusters that give you information about users' appetite for new [financial] products, and their ability to repay a debt."

Cignifi plans to pitch the technology to financial services firms in Brazil first, and perhaps Mexico next. (The firms would obviously need to hash out a partnership with mobile operators to get access to usage data.) Last year's test in Brazil ran data for three million cell phone users through Cignifi's software, and produced a behavior-based score that resembles the FICO credit score many U.S. consumers are familiar with, which runs from 300 to 850 points. Then, the company compared its predictions about their credit-worthiness against actual credit card debt information for that same group.

"After that big lab experiment in Brazil, the next phase is to go and commercialize it," Hakim says. He describes the start-up as an "arms merchant," providing software that enables financial services companies to sell products profitably to consumers they couldn't previously reach.

What about privacy? The Cignifi technology looks at account information without needing it to be linked to individuals. And a consumer's identity isn't revealed to the financial services provider until she decides to engage — by requesting a quote for a scooter loan, for instance.

Hakim says Cignifi doesn't have plans to deploy the technology in the U.S. in the near-term. "The business opportunity is so much bigger in Brazil, India, China, and Mexico, where you have around half a billion people in those four markets alone who have a mobile phone but no banking relationship," he says.

In 2011, Cignifi raised about $600,000 from individual investors including John Carlson, the portfolio manager for emerging markets at Fidelity Investments, Alex Goldberg of Canary Ventures, and Larry Rosenberger, the former chief executive of Fair Isaac, the company that developed the FICO score. And last month, the start-up received a $125,000 grant from the World Bank.

The company's roots trace back to the University of Oxford, where Cignifi (then called ARK Mobile Finance) was one of four business plan competition winners in 2008.

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About Scott Kirsner

Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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