Tech wants in on the payday loans business.
Silicon Valley firms are aiming to help out Wall Street by lending data to the lending businesses that offer high-interest loans to poor Americans, according to CNBC.com.
About 12 million Americans every year take out payday loans, which carry interest rates of 400 percent on average, the website reported. About $7.4 billion is spent on these loans every year, and there are "profits in the underclass for financial institutions who get it right," according to the website.
ZestFinance is one startup that's digging through data -- which can determine "creditworthiness" -- that it hopes to market on Wall Street. Other Silicon Valley firms aiming to dig into the "sub-prime underwriting" game include LendUp and ThinkFinance, CNBC reported.
Ideally, the proponents say, the data would let a lender know if someone is a good borrower who just happens to be poor. That borrower would then get a better rate.
Others say that "thousands" of data points won't necessarily improve on the current system -- which is downright predatory to begin with, with banks and others severing relationships with payday lenders in the post-financial crisis world.
