For some time now, I have been tracking start-ups using social data to determine creditworthiness. In the past week, I first saw this guest post. Shortly after, a popular Silicon Valley tech news site picked it up and carried it farther here.
The author seems to see only upside. For example,
By analyzing years of social data that is difficult to fake, we can more intelligently combat ever-more-sophisticated cybercriminals. Simply put, online identity is becoming the new and improved credit score.
That it is hard to fake a social record I do not dispute. I end up creating many of our test financial reports for our developers and oh boy is it hard to fake even that. Income statement maybe but balance sheet that reasonably relates?
Putting aside the question of whether you can count on the relevance and veracity of social data, the concern I have is that most of the efforts to glean signal out of considerable noise are taking place in a black box. It’s an important matter for consumers but in commercial credit, there is the added impact of opaque use of personal data on the owner/CEO in addition to entity data.
Assuming it’s possible to accurately predict risk using big data plus black box scoring, the method still virtually eliminates the opportunity for self-insight. Nowhere is such self-insight more important than to a business owner who hopes to not only provide a great product or service to customers but also be a trusted member of his/her community.
Let me know what you think.
–LaVonne
descant labs 
Awesome post.