Technology for using a credit card is changing fast:
- A wearable credit card is being developed by Barclaycard.
- Mastercard has a card with a sensor for a fingerprint to authorize payment instead of a signature.
- A major maker of chip credit cards is adding a mini-screen to the back so that the three-digit security code can change as often as 72 times a day to prevent fraud.
But behind these ways that consumers use their credit cards on a daily basis are financial technologies they probably won’t see that affect how they use credit. Tech is increasingly affecting how a credit score is computed and obtained, to how loans are approved and making payments on those loans.
Here are three ways financial technology is changing how you deal with your credit:
Called AI for short, artificial intelligence is used with machine learning (which we’ll get to later) to help lenders approve credit-worthy borrowers they might miss otherwise.
Many bank underwriting models reject borrowers with little or no credit history because they’re seen as risky. But by using more of the public data available on borrowers, banks can feel safe making loans to people who don’t have a long credit history but can still be good customers, according to work being done by ZestFinance.
Instead of relying on just 50 data points in traditional credit-score systems to determine creditworthiness, lenders can search thousands of pieces of data to predict a person’s creditworthiness.
For example: Did you put the same phone number on a credit application that you were approved for a few months ago on one today for a car loan? Does your job require a license that you’ve qualified for? Such extra data could benefit your approval for a loan.
The auto financing unit for Ford Motor Co. announced last year that it started working with ZestFinace to “analyze thousands of data points to provide a richer, more accurate understanding of all potential borrowers.”
It cited information from the U.S. Consumer Financial Protection Bureau that 26 million American adults, or about one in 10, have no credit record, making them difficult and often impossible to underwrite using traditional methods.
“Although these consumers may have steady jobs, their creditworthiness is heavily based on their credit history,” Ford wrote in a press release. “This makes it more difficult for companies to provide financing, and they could miss an opportunity for revenue growth.”
A partner of AI is machine learning. The work ZestFinance does is one example of a machine tracking details of your finances and using that information to show creditworthiness.
A company called EarnUp uses machine learning to automate loan payments to get borrowers out of debt faster. Making credit card and other loan payments on time is one of the best ways to improve a credit score, and automation can help get there.
EarnUp automatically withdraws money from your checking account on your paydays to pay your loans — credit cards, student loans, car loan, etc. It breaks your payments into smaller payments so that they’re made on time and you avoid late fees. It also calculates the ideal amount to pay toward your debts so you can pay them off quickly and with as little interest paid as possible.
“We study your loans over time and alert you when we find personalized opportunities for you to save money and ways you can get out of debt faster,” according to the company’s website.
EarnUp also tracks your balances, payment patterns, deposits and other transactions. The program costs $9.95 per month. Users can put as many loans as they want on it.
The government housing agency Freddie Mac allows some customers to use EarnedUp to pay their mortgages on time.
Voice Activated Technology
Apple’s Siri, the Amazon Alexa and Google Home are some of the voice activated technologies used to get the weather, play music and do other tasks from your phone or a home speaker. They can also be used to get your credit score or block access to your credit files.
The credit bureau Experia works with Amazon Alexa devices to allow Experian members to read alerts, check if their credit file is locked, lock their Experian credit file, get their FICO score, know how much credit they’re using, and learn about credit education such as what factors determine a credit score.
American Express allows customers to use Alexa to get account information, review recent charges, make a payment and add promotional offers, all with voice commands.
Another service, called Finie, lives in the cloud and lets users ask questions with their voice or via text about their account balances and spending history. It also offers them insights for future spending, and can analyze market trends to improve their market portfolio.
Spending a lot lately at the grocery store? A trip to the grocery store can be made easier by talking to a voice activated device in your kitchen. Finie offers this example:
You: “I have a large grocery list, can I spend $200 at Whole Foods?”
AI: “Out of what you normally spend in a month on supermarket and groceries, you have about $246 remaining.”
You: “Oops! I have been spending a lot on grocery stores, how about I only spend $100?”
AI: “You will have about $16,000 left in your account if you spend $100 on Whole Foods. In a typical month, you spend about $760 on supermarket and groceries. And you have $446 left based on what you normally spend in a month.”
Watch and listen to the site’s video to hear how robotic the computer sounds in its responses. The voice may not sound too welcoming, but it may be stern enough to convince you to cut back your grocery spending. Or at least shop somewhere other than Whole Foods so often.