I suppose this shouldn’t come as a surprise, but credit card companies are scrutinizing our purchases to profile us in ways we may not have imagined possible, such as predicting card users’ divorces, as reported in the Daily Beast:
By scrutinizing your purchases, credit companies try to figure out if your life is about to change—so they’ll know what to sell you.
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 did not return requests for comment.)
Predicting people’s behavior is becoming big business—and increasingly feasible in an era defined by accessible information. Data crunching by Canadian Tire, for instance, recently enabled the retailer’s credit card business to create psychological profiles of its cardholders that were built upon alarmingly precise correlations. Their findings: Cardholders who purchased carbon-monoxide detectors, premium birdseed, and felt pads for the bottoms of their chair legs rarely missed a payment. On the other hand, those who bought cheap motor oil and visited a Montreal pool bar called “Sharx” were a higher risk. “If you show us what you buy, we can tell you who you are, maybe even better than you know yourself,” a former Canadian Tire exec said.
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…
[continues at the Daily Beast]