3rd Annual FinTech Lecture 2021 - Fintech and Fairness – Regulating Algorithmic Credit Scoring
From Iain Mcgee
The 3rd Edinburgh Fintech Law Lecture
Fintech and Fairness – Regulating Algorithmic Credit Scoring
Prof Katja Langenbucher, Chair of Civil Law, Business Law and Banking Law at Goethe-University's House of Finance in Frankfurt
About the lecture
Credit scores have assisted lenders in deciding on a borrower’s creditworthiness for centuries. While banks had historically based their loan decisions on analyses of a mix of quantitative and qualitative information, outfits such as Fair, Isaac and Company were among the first to translate that information into standardized credit scores.
In many ways, modern FinTech companies are repeating this process. Instead of estimating the probability of repayment on the basis of free income (traditional lenders) or past credit history (traditional scoring agencies), these focus mainly on future income when assessing probability of repayment. To that end their novel scoring systems are fed by big data and based on machine learning. “Input” (e.g. education, job history, state of residence, activities on online platforms, but also first name, taste in music) reaches far beyond the approaches traditionally followed by lenders or scoring agencies.
This form of A.I. credit scoring has been hailed as inclusive, extending credit to borrowers whose profile did not match the factors accounted for by traditional scoring models. At the same time, there has been growing concern about data privacy and about the risk of discrimination against certain groups of borrowers.
The lecture will highlight these concerns, compare EU and US approaches and suggest ways forward within the regulation of algorithmic credit scoring.
About the speaker
Prof Langenbucher is Chair of Civil Law, Business Law and Banking Law at Goethe-University's House of Finance in Frankfurt and affiliated at SciencesPo, Paris, and Fordham Law School, NYC. She has held visiting positions at Sorbonne, Paris; Wirtschaftsuniversität Wien, Vienna; London School of Economics, London; Columbia Law School, NYC and Fordham Law School (Edward Mulligan Distinguished Professorship), NYC; a Bok Visiting International Professorship at PennLaw, Phildalphia, is planned for 2021/22 (COVID-19 allowing).
She has published extensively on corporate, banking and securities law. Her book “Economic transplants – on lawmaking for corporations and capital markets” (CUP 2017) offers an interdisciplinary outlook on finance; her latest co-edited book discusses the “Capital Market Union and beyond” (MIT Press 2019).
Her current research projects focus on FinTech, artificial intelligence and corporate governance of banks. She is a member of the German securities market oversight body’s (BaFin) supervisory board and of the German Federal Ministry of Finance’s working group on capital markets law. Katja was a member of the supervisory board of a German bank (2014-18) and of the EU Commission’s High Level Forum on the Capital Market Union.