2015-06-11

Banks Lose Their Lunch?

....but similar to lunch, this lending us unlikely to last long or be the staple of the day like breakfast or the celebration of making it to the end of the day like supper.
There is a disturbing trend here; behavioral economics is a relatively new field, and this technology based approach to the arena makes heavy use of it in formulas that are unproven, using data points as key variables that may or may not have anything to do with success or failure.

"Automated lenders threaten to eat banks' lunch" - http://www.reuters.com/article/idUSKBN0OR0BC20150611


Once again, we see a trend away from people doing business with people, and towards those in the middle and lower classes being commoditized in algorithms.  Lending institutions that demand access to very personal and questionably relevant data offer up money at an exorbitant rate (30% APR in the example case) are going to be how willing to work with the borrower other than through some automated phone system?  This is not business:  This sounds a lot like the automated version of the same bait and switch game that led to 2008.  The lending institutions are already securitizing these loans....and the same old bunch is still rating the securitization.  Hmmmm....

What do you want to bet that, should the shit hit the fan in the face of this 'new' lending trend, that the tax payer will yet again be the one to have to bail out the institutions that treat them like nothing but a number in an equation? 
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