SOLO’s New Credit Bureau Concept Enables Lenders to Rely on In-House Data for Loans
In the world of financial services, credit bureaus play a crucial role in assessing an individual’s creditworthiness. However, traditional methods of relying on third-party data have significant limitations. According to Georgina Merhom, co-founder of SOLO, a first-party data collection and reporting engine, "The credit bureaus are super relevant, but when it’s used to identify that a person didn’t pay one bill on time, it’s a punishment." Merhom highlights the importance of considering multiple factors beyond just financial transactions to get a comprehensive understanding of an individual’s financial behavior.
The Problem with Traditional Credit Bureaus
Traditional credit bureaus rely heavily on third-party data, which may not always be accurate or up-to-date. This can lead to missed opportunities and poor decision-making by lenders. Merhom emphasizes the need for a more holistic approach, incorporating user-permissioned data sources that provide a richer understanding of an individual’s financial behavior.
SOLO: A New Kind of Credit Bureau
SOLO aims to revolutionize the way credit bureaus operate by integrating user-permissioned data sources, including financial transactions, online records, and digital footprints. This approach allows lenders to gain a more complete picture of an individual’s financial behavior, enabling them to make more informed decisions.
The Benefits of User-Permissioned Data
User-permissioned data sources come from various places, such as bank accounts (via Plaid, Teller, TrueLayer), commerce and payment gateways (Amazon, Shopify, Square, Stripe, PayPal), invoicing/billing systems (QuickBooks, Bill.com), and customer relationship management platforms. By replacing the self-reporting process with user-permissioned data, SOLO can identify opportunities that might have otherwise been overlooked by lenders.
Merhom’s Background and Inspiration
Georgina Merhom has an impressive background in data science, having worked in the cybersecurity industry to develop and train algorithms for detecting illicit activity on the dark web. Her experience taught her the importance of considering a wide variety of data and context in painting a more comprehensive picture.
The Genesis of SOLO
Merhom’s idea for SOLO was born out of her experiences working with freelancers without bank accounts at Zivmi, a cross-border payments app she co-founded. By verifying a person’s experience level, client ratings, and work history using platforms like GitHub and Upwork, Merhol realized the need to create a new kind of credit bureau.
The SOLO Platform
SOLO is designed to help lenders measure metrics such as decreasing application processing time from up to two months to minutes, reducing costs by up to 70%, and increasing value per customer. By leveraging user-permissioned data sources, SOLO aims to create a more efficient and effective credit bureau.
The Market for Alternative Credit Bureaus
While SOLO is not the first attempt at creating an alternative credit bureau, it joins a growing list of companies trying to address this need. Other notable players in this space include Altrois (recurring payments), LemFi (remittances), and Clearwater (investment management platform).
The Future of Credit Bureaus
As the financial services landscape continues to evolve, traditional credit bureaus will need to adapt to remain relevant. SOLO’s innovative approach to incorporating user-permissioned data sources offers a glimpse into what the future may hold for this industry.
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