Face value: Could the iphone X facial recognition tech revolutionise credit underwriting?

The launch of the new pricey Apple handset has ushered in a new era of technology, experts believe.

The launch of the new pricey Apple handset has ushered in a new era of technology, experts believe.

The tech community is abuzz with excitement and perhaps a little latent schadenfreude since Apple’s last launch event where it revealed its most sophisticated smart phone yet.

Ahead of the launch of the new iphone X, facts were very thin on the ground, as you’d expect from the tech behemoth, but one key detail was expected: the facial recognition software that enables a whole host of new capabilities. Now it's live, more and more predictions are doing the rounds as to just how revolutionary this new technology could be owing to its place on the iphone platform.

Long the stuff of science fiction, the technology has come on leaps and bounds in recent years with a whole host of breakthroughs and venture capital investment to elevate it beyond simple functionality such as identification.

 A rather chilling claim, for example, recently came from Stanford University’s Michal Kosinski who found that faces contain much more information about sexual orientation “than can be perceived and interpreted by the human brain”. 

“Given a single facial image, a classifier could correctly distinguish between gay and heterosexual men in 81 per cent of cases, and in 74 per cent of cases for women. Human judges achieved much lower accuracy: 61 per cent for men and 54 per cent for women. The accuracy of the algorithm increased to 91 per cent and 83 per cent, respectively, given five facial images per person,” he says in his latest paper on the subject.

Kosinski’s used ‘visual algorithms’ garned by scanning 32,000 images with the big data hardware, with the power to interpret them, to reach this level of predictive power.

The researchers also said that companies and governments are increasingly using computer vision algorithms to detect people’s other intimate traits.

In fact similar studies around the world have found predicative power using facial recognition tech and AI and could determine with a reasonable amount of accuracy whether someone is lying for example.

So could these breakthroughs mean lenders, particularly those with penchant for big data and tech one day - perhaps soon - utilise facial recognition to decide whether that person is credit-worthy? You can already access hundreds of lines of credit through a smartphone by typing in a few details, perhaps in the future this could simply be replaced by a scan of your face.

One of the hardest decisions lenders face with consumers is evaluating the ‘truthfulness’ of a credit application.  Does the person, appear credit worthy whilst hiding debts such as those to a landlord, which might not appear as red flags on their searches.

Or perhaps are they are over-stating their income owing to their self-employment status or perhaps the stated reason for their loan may be different to its actual intended use. Perhaps other causal or factors or correlated assocations may too be predictive. Some of these implications could also tread very easily over ethical criteria.

Alternative lenders, including some of the largest in the P2P and marketplace lending industry already quite explicitly utilise the services of alternative credit bureaus such as AIRE – as well as the normal Experian and Equifax - which raised $5m in a Series A recently and has a partnership with Zopa among others but these do not currently - as far as we are aware - extend to visual algorithms. 

A spokeswoman for Zopa told AltFi that it is currently not exploring the new technology within this usage but also noted  “we’re always exploring new technologies, but aren’t planning to release anything related to facial recognition technology this year.”

Steve Green, Funding Circle's Vice President of Product, also said that the firm had no active projects in this field but also hinted a warning about some of the more grey areas around data privacy.

"As a tech business, we are absolutely looking at ways to make it easier for our customers to transact with us, including face recognition, but only when we feel that it is a safe and secure method as is appropriate for an advanced financial tech business," he said.

If some of this or all of it seems like sci-fi, it is not and whilst these sorts of technologies tend to be overhyped in the short-term, they also tend to be underestimated in the long term. Just look at the iphone, literally.