Granting credit through psychometric testing

Credit bureau Compuscan has partnered with UK-based Coremetrix to bring a personality-based credit assessment to South Africa. This new credit assessment method will be used in conjunction with traditional scoring techniques, but will also include consumers who were previously excluded from accessing credit due to a lack of information.

Compuscan explained that by incorporating image based testing, they are able to add an additional layer of information about an applicant, taking into account their personality, motivations and likely behaviours. This information, combined with existing data or on its own, provides credit providers, financial service providers, insurance companies and risk managers with an alternative indication of a person’s creditworthiness and suitability for financial products where little formal credit history is available.

Remo Lenisa, founder and CEO of Compuscan, said: “Compuscan is dedicated to continuously enhancing its ability to improve credit decision-making, which is why the implementation of psychometric scoring is a massive advancement for the South African credit industry. While Compuscan has long offered comprehensive data and outstanding analytics and scoring solutions, this innovative approach will no doubt complement Compuscan’s current offering to provide our clients with world-class decision-making tools and, in turn, will improve financial inclusion for entrepreneurs and individuals with limited or no credit history.”

The psychometric test

The test is specifically designed to look at key psychometric traits and not mental conditions. Compuscan explained: “The test measures key psychometric traits such as openness and conscientiousness and the focus is on determining potential repayment behaviour and not diagnosing mental conditions – detailed test results are not displayed as it only tells the risk manager what level of risk is associated with that individual.”

Consumers can choose whether or not they wish to take the psychometric test. Compuscan revealed that this will normally take place after the standard risk assessment (affordability test) is completed.

“The test is usually offered in the case where a consumer was declared high risk according to the credit provider’s affordability test – he or she would have been denied credit based on the traditional scoring method. However, the psychometric tests will allow a credit provider to conduct a second test to determine the psychometric score. This would then give the lender a second chance to review the customer, making it possible to re-evaluate whether to accept or decline their loan application,” said Compuscan.

What will the new testing mean?

According to Compuscan, the psychometric testing could improve acceptance rates for credit products. In addition, it could also potentially reduce default rates. “This partnership will thus result in increased sustainable lending, lower delinquencies and fairer outcomes for consumers, which will ultimately benefit the economy.”

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