Credit bureaus relying on outdated third-party data are only getting a small piece of the puzzle, says Georgina Merhom.
“Credit bureaus are extremely relevant, but when it’s used to determine that a person hasn’t paid a bill on time, it’s punitive. If you only follow the money, you can miss a lot of signals,” Merhom told TechCrunch.
Merhom wants to shake up the status quo SOLO, a first-party data collection and reporting engine, that integrates user-licensed data sources including financial transactions, electronic records and digital footprints to tell a more complete story about one’s financial behavior. Sources of user-licensed data that consumers provide with their permission come from a variety of sources. That includes bank accounts (via Plaid, Teller, TrueLayer), merchant and payment gateways (Amazon, Shopify Square, Stripe, PayPal), billing/invoicing systems (Quickbooks, Bill.com) and customer relationship management platforms, Merhom said.
Additionally, user-licensed data sources replace the self-reporting process, broker trust between the institution and the consumer, and identify opportunities the bank might otherwise have overlooked, Merhom said.
Originally a data scientist in the cybersecurity industry, Merhom developed and trained algorithms on the dark web to detect illegal activity. This project taught her that a wider variety of data, as well as the context in which the data appears, can provide a much fuller picture. Merhom used that intelligence to launch Zivmi, a cross-border payment app in Egypt that it ended up selling to the National Bank of Egypt.
He got the idea for SOLO when he was at Zivmi and working with unbanked freelancers. Using other platforms like GitHub and Upwork, Zivmi was able to verify a person’s experience level, customer reviews, and overall work history.
As the business of working with the unbanked grew, Zivmi began to take on its customers and developed the technology to do so. Merhom said that’s when she recognized the need to create a new kind of credit bureau.
Building a better credit bureau or finding new ways to verify data from people without great credit isn’t a new idea. Altro does this through recurring payments, Kredivo created a neobank to help build credit, Bloom.io helps businesses create financial products and report consumer credit behavior, and Masa Finance is building a decentralized credit bureau.
Merhom and full stack developer Luis Troni have been building SOLO for two years and recently debuted it to a group of hundreds of financial institutions. They are now looking to secure 100 pilot banks in the US this year and will eventually seek some venture capital. Merhom said there are already some deals in the works but could not divulge further.
They aim to measure metrics including reducing application processing time from up to two months to minutes, reducing costs by up to 70% and increasing value per customer.
“It costs banks $29 billion a year to process applications, and that’s not even including the money they pay to the credit bureaus,” Merhom said. “If we can show that we have reduced costs, banks no longer have to have a loan officer refer the bank statement to accounting and try to recalculate. And if our clients can identify opportunities in their portfolio and sell more to them, then we’ve succeeded in what we’re doing.”
