The state of B2B credit today can be compared to the cargo cults of the post World War II pacific islanders. Like these cults, the large credit bureaus and financial institutions are trying to predict the future by recreating the circumstances of the past and forcing modern businesses to perform their sad obsolete rituals.
The John Frum Cult, located on the South Pacific island of Vanuatu, is a modern remnant of the “Cargo Cult” phenomenon. These cults sprung up when technologically advanced western cultures exposed themselves to the native islanders. The natives, upon seeing the inexplicable technology and vast amounts of supplies brought in by the militaries of the United States and Japan, attributed these achievements to magic or divine origin.
Once the war ended and the militaries withdrew, the natives began creating rituals that mimicked the behavior of the occupying militaries. They would stage parades, build runways, coconut radios and even airplanes made from palm trees in an attempt to conjure up the fantastic amounts of men, supplies and the miracle of flight. Sadly for them, short of another war, nothing they do will replicate the unique set of circumstances they witnessed in the 1940’s. Even today, the John Frum Cult (“Hello, I’m John from America”) has a ceremony every year on February 15th to celebrate their new god in the hope of his return.
Unfortunately, the business credit industry is enacting similarly obsolete rituals. Here are a few examples.
Check Credit. It costs a lot to check a company’s credit and in most cases the data isn’t accurate, timely or correlated with any company’s long term viability or ability to pay. This is especially true for small and medium businesses. Furthermore, business failure is a process and not an event. In order to understand the true risk of entering into a business relationship you need to monitor viability vs. check credit.
Reporting Credit. It costs a lot of money to report on a company, good or bad. The quality of a report is dependent on collecting ALL of the data on a particular company. These fees are a negative incentive to participation and reduce the quality of the overall data.
Data Integration. It costs a FORTUNE to integrate real time with the large business credit bureaus. This is an additional blockage to free data and skews the existing data toward the outcomes of the larger integrations: telecom, utilities, etc.
Trust. The large credit bureaus don't trust you to update your own information. They also don't track key information beyond the payment information such as certifications. (SOC1, SOC3, ISO, etc.)
At Trust Exchange, we are trying to stamp out the cult by making the data open, free and peer generated. With our service, you can create your own standards, rate companies and monitor all of your key business relationships.