3 out of 7 individuals around the world have no credit history, which means billions of people around the planet have no access to financial institutions (banks in particular) and insurance products.
There are about 1.3M bank branches around the globe according to a report by the Global Economy
In addition, there are a significant number of insurance companies in business, in fact in the US alone there are about 6000.
But despite the widespread supply of financial or insurance products, most of these firms are not willing to serve individuals who have no credit history because the level of risk cannot be assessed for criminal activity, fraud or timely repayment.
Beyond the fact that these institutions refrain from servicing nearly half of the world’s population, for the other half, the ones that they are willing to do business with, the service and pricing that the customer receives is based on integrated discrimination, as presented by HH insurance online - and we see that discrimination is not just the practice of every insurance company; discrimination is absolutely critical to the industry.
“Not only is discrimination practiced by every insurance company; discrimination is absolutely critical to the industry”
The question arises: on what basis do these companies decide whether to “green light” an applicant as a customer or not? The parameters by which they decide are mostly within the framework of integrated discrimination, for example, insurers want to know where you live, as their underwriters know which areas are defined as "good", and which are not - leading to questionable practices.
More concretely, in the United States, African American neighborhoods have been marked as “undesirable”, blatantly discriminating against an entire population, (almost 13% of the US census) and further disadvantaging blacks in the economic sphere - it’s no wonder that there is political unrest there now.
Of course, companies are not willing to discriminate based on a person's ethnicity, (or admit to it) but they can do so in a “legally legitimate" way by using the neighborhood in which people live as a criteria, knowing that the residents of those neighborhoods belong to a very specific demographic they can avoid them by avoiding applicants from that area.
And so in this way there can be discrimination without difficult questions about the rejection of, or the higher costs paid by a particular client.
A study from UC Berkley found that:
Black and Latino borrowers pay 5.6 to 8.6 basis points higher interest on purchase loans than Whites or Asians, and 3 basis points more on refinance loans.
For borrowers, these disparities cost them half a billion dollars annually!
Couldn’t there also be good, honest and decent people who deserve an affordable rate in those areas? More so, aren’t there also applicants, who are a good risk, that those firms are overlooking?
This is just one example, as potential clients are also judged by appearance, clothing, language, gender and other parameters, all in order to minimize the risk of losses, but sorting according to these parameters blatantly discriminates, and perpetuates systemic biases, biases which increase economic, social and class gaps.
But one firm’s lost business is another, more enlightened, firm’s gain - In this vacuum created - where people do not receive services from financial and insurance companies, online lending platforms and insurers are blooming - all welcome substitutes for large institutions, substitutes which allow individuals without a credit history to be serviced.
These Fintech and Insurtech innovations are powerful and extremely important, but like the banks and traditional insurers, these companies also have encountered a problem in how to assess whether a borrower will be a good risk or not. Despite utilizing machine learning, and alternative risk assessment methods to their larger rivals, the problem persists in that they, too, cannot accurately predict loss rates because for the non-traditional applicant there is little reliable information, and no existing way to cost-effectively collect it.
As a result, Fintechs are also reticent about these risks, so they deny about 60% -90% of the people who turn to them, and when we analyze the customers who were approved and receive loans, we find that between 10-20% defaulted – which leads to significant capital loss, and means that not only will the lender have fewer funds to lend out to other borrowers that need it, but higher interest rates will have to be levied to all clients to offset these losses
So how do we help the billions of people in the world who cannot get financing and insurance services? How do we help the industry better serve a greater client base, and be more profitable?
Facetrom’s technology has the potential to correct historical discriminatory practices, and help people receive the services and financial development that they deserve, regardless of their religion, race, gender, place of residence, etc by providing an alternative, unbiased, Anit-fraud technology.
This is (not so) simply done through the analysis of a selfie’s metadata, which on the one hand ensures that even the images themselves are not held by Facetrom, and on the other, based on this metadata, and using cutting edge machine learning, Facetrom can estimate a user's risk at 92% confidence, while maintaining 100% privacy and 100% anonymity of the applicants.
Furthermore Facetrom does not collect any personal information about the person. (I.D. number, phone numbers, addresses, etc.)
For the solution that Facetrom has developed, it has received grants and awards such as:
- Has been chosen for the "ScaleUp Brazil" program that included the top 10 innovative companies in Israel by the Israeli & Brazilian governments.
- Startup of the Year by Israeli Fintech association - Fintech Aviv & Lendit (USA) for 2020
- Best International Fintech startup in Brazil on behalf of the CIAB (the government body responsible for the largest Fintech conference in Brazil) 2019,
- The Israeli Air Force Association Startup of the Year 2018,
A substantial grant from the Israeli innovation authority.
And many more...
Let us not ignore and prevent half of the world's population from developing!
There are billions of people who need our help.