How Visa can predict divorce
If you ever doubted the power of the credit card companies, consider this: Visa, the world’s largest credit card network, can predict how likely you are to get a divorce. There’s no consumer-protection legislation for that.
Why would Visa care that your marriage is on the rocks? Yale Law School Professor Ian Ayres, who included the Visa example in his book Super Crunchers, says “credit card companies don’t really care about divorce in and of itself—they care whether you’re going to pay your card off.” And because people who are going through a divorce are more likely to miss payments, your domestic troubles are of great interest to a company that thrives on risk management. Exactly how the credit industry does it—through sophisticated data-mining techniques—is a closely guarded secret. (Visa responded that it “does not track or monitor cardholder martial status, nor does it offer any service or product that predicts a potential divorce.”)
Credit card companies have also used predictive modeling to answer questions such as, has this cardholder recently moved? “There’s a whole market out there that has tried to predict whether someone has just moved, and to be first with offers,” says Bob Grossman, director of the Laboratory for Advanced Computing at the University of Illinois at Chicago. “Those kinds of things tend to be pretty high value.” If a credit card issuer can quickly determine that a cardholder has moved, then the issuer’s marketing partners—a home refurb business, for instance—can be the first to swoop in.
Last year, American Express began offering select cardholders $300 simply to close their accounts and walk away—individuals who the company clearly felt were too much of a risk to keep on its books. And the factors that go into such a calculation have become considerably more sophisticated than the simple matter of whether cardholders have paid their bills on time.