Social Network Underwriting Platform for Credit Risk Dispersion
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Solution Overview
Problem
Individuals with elevated risk profiles, such as bad or no credit history, face difficulties in obtaining loans or credit due to the inability of major credit lenders to assess and mitigate risks effectively without personal connections, leading to denied applications or exorbitant interest rates.
Innovation Solution
A social networking platform that allows acquaintances within a user's social network to underwrite financial services, dispersing risk among multiple individuals, thereby reducing the financial burden on the lender and making credit more accessible.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If major credit lenders evaluate borrowers without personal connections, then lending risk is objectively assessed, but borrowers with elevated risk profiles are denied credit or face exorbitant interest rates
Solution Approach 1:
The patent introduces social network acquaintances as intermediary underwriters who provide character references and personal insights about borrowers. These intermediaries bridge the gap between objective credit scoring and subjective risk assessment, allowing lenders to consider both data-driven metrics and human judgment from people who know the borrower personally.
Solution Approach 2:
The patent segments the traditional monolithic underwriting process into multiple components: automated credit scoring, social network verification, acquaintance underwriting, and lender final decision. This segmentation allows each component to address specific aspects of risk assessment independently, improving overall accessibility while maintaining reliability.
2Reliability
If personal loans are made between parties who know each other, then risk of loss is reduced through social norms and reciprocity, but the amount of funds that can be loaned is limited
Solution Approach 1:
The patent merges the advantages of personal lending (social norms, reciprocity, character knowledge) with the capital capacity of institutional lenders. By combining acquaintance underwriting with traditional lending mechanisms, the system enables larger loan amounts while maintaining the risk-mitigating effects of personal connections through multiple social network verifications.
Solution Approach 2:
The patent creates a composite underwriting model that combines multiple types of information: automated credit data, social network analysis, acquaintance testimonials, and traditional financial metrics. This composite approach leverages the strengths of each component to achieve both high reliability and increased funding capacity.
3Reliability
If borrowers have bad or no credit history, then risk assessment by major lenders indicates high risk, but this prevents access to credit despite potential for repayment
Solution Approach 1:
The patent implements preliminary social network verification and acquaintance underwriting before the final lending decision. This preliminary action allows borrowers with poor credit histories to demonstrate their character and repayment willingness through personal references, creating a more complete risk profile before credit decisions are made.
Solution Approach 2:
The patent changes the parameters used in risk evaluation by incorporating non-traditional factors such as social network connections, acquaintance testimonials, and character references. These parameter changes allow borrowers with poor traditional credit metrics to be evaluated on alternative dimensions that may better predict their actual repayment behavior.
Data Source
AI summary
A social networking platform for peer-to-peer underwriting is disclosed. A user's social network acquaintances may be contacted or otherwise polled to determine their agreeability with serving as an underwriter for the user's desired financial services in order to reduce (or eliminate) the financial risk of providing the financial services to the user by the financial services provider. With a plurality of acquaintances willing to underwrite, the financial risk may be substantially dispersed among numerous acquaintances while the user is granted their desired financial services (or a reduced rate for the financial services).