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Can Blockchain Help Alleviate Poverty? Part 2.
Acknowledging Technology’s Vulnerabilities
How do we challenge false information generated from someone else’s algorithm?
In 2018, Amazon’s facial recognition program, Recognition, incorrectly identified 28 members of Congress as criminals. Regardless of how you feel about Congress, the facial matches were remarkably incorrect.
Among the misidentified members of Congress included civil rights legend John Lewis, who is one of my personal heroes. This error demonstrates how people of color are more likely to be erroneously identified by facial recognition technology just as they are more likely to be denied credit.
We know that AI is not absolutely exact. It merely provides a statistical confidence level, which means that there will be false positives.
Yet it is the algorithm which determines the outcome of real people’s livelihoods including:
- How people are denied credit using traditional scores.
- How people are denied credit using alternative methods.
- If people are able to rise out of poverty or are sentenced to a lifetime of it.
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During congressional testimony over the use of alternative data for credit, Kristin Johnson, the Associate Dean of the Tulane Law School presented evidence that the use of alternative data for credit scores could in fact hurt the poor.
She explained that poor people did not just have a more difficult time paying bills, they often had less time and motivation to dispute bill errors.
It would be devastating and destructive if the very technology we are hoping can help alleviate poverty instead locks people sturdier into its cycle.
Although technology has the potential to create alternative credit scores - we cannot assume that alternative data alone will make it easier for all people to establish credit. We must be aware of the fact that alternative data also has the potential to make it more difficult to get credit.
Let’s round it out with the issue of privacy
There are also privacy issues to consider.
One of the main benefits of blockchain is its “radical transparency” feature – anyone with access to the blockchain will see the data. However, this benefit becomes a privacy issue since decentralized blockchains ensure that all transactions are permanently visible.
Financial data is considered private data subject to CCPA, GDPR and other privacy protection regimes, therefore all individuals have the option to grant permission or deny access.
However, can people freely consent to this access if the alternative is to have no credit? To some, this seems like coercion to give up data for those least able to resist.
On the other hand, centralized systems have proven to be irresistible to hackers. If I put my data into Experian, which suffered a massive data breach impacting millions in the United States and South Africa, why should I believe my data is safe there - or anywhere else?
Despite the process and privacy concerns, I strongly urge that we continue down this path of creating alternative credit systems.
Creating the solution with alternative credit scores
Using Blockchain to form alternative credit systems is an attainable next step to the body of work that we are already immersed in.
There is evidence that given access to money, low income citizens will do what is necessary to get out of poverty. Poverty could be alleviated by allowing more people to access financial resources, which are currently unattainable to many due to outdated credit scoring methods.
As we have seen recently, black swan events such as COVID-19 and the Great Recession have the ability to wreak financial havoc on everyone, including those with impeccable credit histories. People who consider themselves to be financially secure can lose their financial security suddenly due to forces beyond their control.
Considering this, it is my hope that people can also determine that poverty is not a result of personal moral failings, but occurs due to environmental failures.
Therefore, I urge that we as entrepreneurs and technologists resolve to change the environment.
A call to action for entrepreneurs and technologists
I suggest a call to action to make alternative credit scores practical.
As we continue to build the technology and processes to establish these scores, let us resolve the following questions:
- How can data collection for alternative credit scores be validated as a bona fide indication of creditworthiness?
- How can we provide transparency to AI algorithms determining credit scores while also providing a simple way to challenge false positives?
- If a microloan can’t support a mortgage and homeownership is key to long term alleviation of poverty, how can we extend credit scores beyond microfinance?
- Beyond credit scores, how can we make use of these techniques to improve job qualification and education opportunities for those struggling with poverty?
- What needs to happen in order for these techniques to become mainstream, not because they help alleviate poverty, but because in fact, they are best practices for all?
As with all posts, I welcome your thoughts and comments:
- Do you see alternative credit ratings as a plus or a minus?
- Do you see it as a potential for contributing to alleviating poverty?
- Are there other open issues that you think should have been added to the list of questions to consider while forming this solution?
I look forward to the discussion.
And as always, thank you for reading!
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