Credit cards are very much in the news these days. The Senate has passed new rules for credit card practices that are expected to pass the House and be signed by the President before Memorial Day. At the heart of this debate — sometimes on the surface and sometimes only through inference — are analytics.
The New York Times Sunday Magazine this past week featured a story, “What Does Your Credit Card Company Know About You?” that delves into predictive analytics and their broad use by credit card companies. Many consumers may not have realized that the brand of motor oil they purchase could indicate how likely they are to default on their credit card payments.
I have spent a lot of time learning about how companies use analytics to learn more about their customers, develop new offers, and even pick the most productive baseball players. The motives of the people I’ve met are straightforward, not devious. I’ve seen the benefits of analytics in optimizing pricing, innovating around service, and customizing offers nine millions ways for nine million customers. Yet even I had to pause when I read that my credit card bank might infer that I need to conserve cash and be a higher risk if I begin to use the card to purchase groceries. I have begun to do just that — but on the advice of my depository bank after my debit card was compromised three times in 12 months. Could I be hurt with one bank by following the advice of another? What are the limits of analytics-based inference?
What do you think about stories like this one? Is the practice of analytics being fairly portrayed — or is the press looking for another demon in financial services? What aspects of analytics do you think should get more press?
