Regulatory hurdles stymie lenders' efforts to use social media to judge creditworthiness
Context & Ripple Effects
This story sits at the start of an arc about lenders hunting for data beyond the traditional credit file. Months earlier, Branch and InVenture were already scoring borrowers on phone usage in developing markets — a signal that alternative-data underwriting was viable wherever regulators weren't looking over lenders' shoulders.
The US hurdle matters because the same platforms lenders wanted to mine kept pushing into finance from the other side: two years later Facebook was pressing banks for access to customer financial data flowing through Messenger. Regulation is shaping which side of that exchange gets the data.
First-order effects
- US lenders must shelve social-media-based credit models or route around them — pushing alternative-data startups like Branch and InVenture toward inputs such as phone metadata that sit outside the compliance gray zone.
Second-order effects
- Platforms with financial ambitions respond by seeking direct bank relationships instead: Facebook's later bid to use customer financial data passing through Messenger shows the data grab migrating from scraping public profiles to negotiating formal access.
Third-order effects
- If the pattern holds, regulators increasingly treat social platforms themselves as financial-system infrastructure — a direction New York's watchdog made explicit when it argued, after the Twitter hack, that these platforms need dedicated oversight as systemically important entities.
- Alternative-data underwriting consolidates around whichever channel regulation has not yet fenced off, meaning credit innovation and regulatory perimeter-setting become a running race rather than a one-time decision.
The trend: Consumer credit scoring is drifting toward whatever data channel regulators have not yet gated, while social platforms and banks negotiate directly over financial data access.