Last week's revelation by Equifax should be a wake-up call to the entire credit industry. It's truly a comedy of errors and the weak response does not instill any confidence. Our only hope is that the information on your business or personal profile is probably wrong and won't harm you. Aside from leaking personal financial data all over the internet, Equifax and their peers such as Dun and Bradstreet are fundamentally broken and have outlived their usefulness.
Data Scalability-Data Integrity
The amount of data managed by these business information bureaus is enormous and is often wrong. Equifax, Dun and Bradstreet et al collect data from multiple public and private sources, associate it with an individual's credit record or a company profile then make a proprietary assessment regarding the credit worthiness of these companies and individuals based on their software. The size and rate of change of this information makes it almost impossible for them to verify and update in real-time. Furthermore, it's nearly impossible for individuals and companies to correct errors. They trust centralized sources of information (government, public utilities, banks etc.) and completely discount the decentralized sources of information (peers, current customer, current vendors etc). It's an exponential problem and they're trying to solve it with linear tools!
Aside from accuracy, their biggest challenges regarding this data are the sample frequency and correlation. Is the information actionable and is it timely enough? The majority of the data points they monitor are event based and located solidly in the past. By design, financial statements communicate information about people and companies in the past: last month, last quarter, last year. It's simply not good enough to evaluate the past to predict the future.
Imagine if Equifax decided to compete with Waze (www.waze.com) and tell you where the speed traps are located right now. Equifax would analyze all of the tickets written over the past 10 years and try to predict where the police are currently located. Waze polls the drivers in real-time. Waze knows where the police are RIGHT NOW by polling active traffic versus old stale information.
In a rapidly changing business environment, this is simply not valuable.
Ripe for Disruption
The credit industry is Kodak and we need Instagram! In the same way Kodak relied upon cameras, chemicals, film, developers and photo albums, credit bureaus rely on paper reports, fax machines and phone conversations. Manual, bulky and slow.
At Trust Exchange we're disrupting this industry by unleashing the crowd to get more accurate and timely data (think waze), providing customizable decentralized data sources and making it actionable by displaying it real time.
If you'd like to learn more contact us HERE.