It is just recently, the World went upside down. Fintech becomes a magic wand. Through technology innovation and smart utilization of data, credit underwriting emerges from its dark ages.

Ten years ago, when you go to the bank and apply for a loan, they will judge you based on your 5-Cs. 

Character

The first C is character, reflected from your credit history with other banks. When you have a bad credit history in the past, you're doomed! 

Capacity 

The second C is capacity, seen from your debt-to-income ratio. If you are an aspiring entrepreneur who just got 10x order volume from a client and need a bridging loan, but your current income doesn't justify the ratio, then most likely the bank will usher you to the exit right away. Bye-bye Bob, see you when you get richer!

Capital

The third C is capital, you need to prove that you have enough money already to apply for loan. Read it twice! I recalled back then there was a big bank with an umbrella as a logo--then people start talking that a bank is actually someone who lend you an umbrella during a sunny day and take it back when the rain comes. Shortly after, that bank change the logo into an "arc". You know which bank I am talking about. I was the alumni of that bank :)

Collateral

The next C is collateral. Yes, you must have an asset way much bigger than the loan you applied. You have to be rich before you can borrow money. 

Condition

And the final C is condition, as evidenced by the true intention of you applying for a loan.

With such complexities and paradox, not to mention the super tight regulatory requirement surrounding it, banks will never serve its philosophical purpose as an intermediary, bridging those with excess of liquidity and the one who has shortage of money but aspire to earn more with help of a loan. The dilemma that last for decades and prevent the dreams of shared prosperity and financial inclusion.

It is just recently, the World went upside down. Fintech becomes a magic wand. Through technology innovation and smart utilization of data, credit underwriting emerges from its dark ages. These days, creditworthiness is no longer be judged based on traditional data and 5Cs per se, but also utilising so called alternative data points, in which behavioural analysis of customers become the key. 

From the brand of coffee you choose up to the Google map tracking of where you move during the past three months can indicate your social score, which corresponds to the trustworthiness of you--and eventually linked to your probability of default when you are given a loan.

The future of credit assessment will also be less invasive and less intimidating. You will see no more a credit officer summon you to their office and ask you to bring bundles of docs, before they make an authoritarian decision whether they want to approve or reject your application.

Shortly in our life time, God willing--amen! When you need pocket money and go to an ATM, just right after you identify yourself via face recognition or biometric and waiting for the machine to dispense the money, the bank will prepare a credit line for you on its backend, and in 15 seconds you will be offered loan products fit to your personalised life style. Then a super app will tell you when to do maintenance of your car, along with an alternative of upgrade to a newer car with approved credit line from various options of leasing companies, without you even applying.

All those features comes with a price, whether or not you are willing to share your data. Therefore, it is now more important than ever that everyone of us starts raising awareness about privacy and data protection, understand your rights and the risk of sharing your digital footprint, and make sure that your data is accessed and distributed lawfully. Welcome to the future!