Facebook: the credit card company that could make loans to billions of people
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If Facebook provides you with the ability to pay, starts collecting your transaction data and adds that to your social data that already says a lot about your character—well, then Facebook will have the kind of information it needs to become a stand-alone credit card company.
That would mean Facebook could jettison Visa, MasterCard and FICO scores and directly offer you credit based on everything its machines can learn about you—while charging much lower interest rates and cheaper fees than current cards. It would be free from all the costly infrastructure and middlemen now involved in credit cards.
Credit has always been about reducing you to a score distiled from what you owe, what you’ve paid, how much money you have. That score will then determine if you’ll get the credit or not.
Nobody knows you at your bank. Your personal story is white noise in the software. Your “character” fits into their algorithms about as well as peanut butter fits into the workings of a Swiss watch.
One consequence of [the classical credit] system is that it’s rigged against poor people, unbanked people and young people.
But Facebook could change all this if it were to become a credit card company. You would get credit based on everything they already know about you. They would know you based on your friends and the reputation you have. Based on that they could calculate the risk of you paying back the loan or not.
So let’s say Facebook decided to get into credit, perhaps using Lenddo or Affirm. First of all, there’d be no more “applying” for a credit card. Facebook would have all the data it needs about you. So even if you’ve never borrowed a dime, you could be standing in front of a big-screen TV in a store and instantly find out if you could get credit to pay for it through Messenger. Credit would be more of a fluid part of life rather than a fixed account with a credit limit.
Online, Facebook could use lending to make its ads more valuable. Since Facebook would be your credit card, it could let you just click on an ad and buy the thing, taking you from ad to purchase with zero friction. It might even give away credit to make more money on ads and commerce. Traditional credit cards couldn’t hope to compete against that.