Professor Siva Viswanathan at the University of Maryland's Robert H. Smith School of Business says using social media for financial predictive analytics is viable and could catch on. In a report, "Facebook of the future has privacy implications today," Viswanathan, co-director of Smith's Center for Digital Innovation, Technology and Strategy, says the trend also could alter online behavior in social networks. “You have what we call adverse selection," he says. "You might end up getting the wrong crowd that manipulates connections, or people who care about privacy who are creditworthy borrowers who might stay out of the system.”
In a 2013-published study in Management Science, Viswanathan and coauthors, including Smith finance professor Nagpurnanand Prabhala, investigated individual lenders evaluating potential borrower “soft information” — like social contacts — with hard information like credit history.
Focused on social lending platforms Prosper and Kabbage, they found online networks to be as robust and stable as real-world connections. “Online was not perfect, but having the information did allow better (lending) decisions," the authors wrote. "The question remains how much better (factoring in potential behavioral reaction).” Read more about the Viswanathan-Prabhala study here.