The Future of Credit Bureaus is Real-Time | Tilores

There was big news in the credit bureau and Buy Now Pay Later (BNPL) worlds recently, as Apple BNPL announced that they will start sharing credit data globally with Experian.

This is important because BNPL (in the US) is disproportionately used by financially fragile households. BNPL is firstly a very convenient option for most modern consumers but it is also an attractive option for those who would otherwise struggle to access credit.

However, until now, the lack of BNPL data reporting has meant there is a risk that this unreported debt leads to the financially vulnerable becoming over-indebted. If BNPL providers were to share their data with credit bureaus, as traditional finance providers already do, this should help to prevent consumers falling into over-indebtedness by providing BNPL providers with the necessary data to allow them to make responsible, informed lending decisions.

Nevertheless, there is a flaw in this data-sharing plan.

In the UK, where 50% of consumers have used BNPL, Experian has proudly shared that they are now including BNPL data in their UK credit data.

The problem? The frequency with which Experian’s BNPL data is updated: .

The average repayment period of BNPL loans is approximately 90 days. Indeed one of the attractions with BNPL is how easily and quickly, normally at the point of purchase, a consumer can be approved for credit.

Therefore it is pretty easy to rack up excess BNPL debt in a very short period of time if one uses multiple different BNPL providers.

Given the ease and speed with which consumers can rack up BNPL debt, it seems ludicrous that the system that is meant to be there to protect them runs with such a massive time delay.

If the world of finance is now providing credit in real-time, why can’t the credit bureaus update their data in real-time?

The truth is that they don’t do it because it is technically very challenging. Especially for the incumbents that are slow to invest in new technology.

The data that comes from retailers and BNPL providers is often inconsistent and “messy”, meaning that matching all relevant BNPL data to a single person is difficult. Especially in real-time.

I know this because we built a real-time data ingestion and matching system for the German consumer credit bureau, Regis24, before spinning the technology out into a separate company — Tilores. It took us years to develop and in the end the technology was so advanced that we decided to file a patent. It was not straightforward to build.

The reality is that Regis24 is possibly the only credit bureau in the world that could today act as a real-time credit bureau for BNPL data with little effort as that technology we developed is still the core data infrastructure for the company.

I think this is going to change pretty soon. Monthly updating of credit bureau data is not fit for the modern finance world. If I can access hundreds or thousands of dollars of credit in seconds, there is no good reason why my credit profile should not be updated seconds ( or ~300ms later if you use Tilores) later.

In Germany, Regis24 could do this, if the BNPL providers had the appetite to share data. Ironically, BNPL is such an old model in Germany (so-called “Kauf auf Rechnung” — literally “purchase by invoice”) that it is much more accepted and hence I feel there is less political pressure for the BNPL providers to submit their data.

In the UK and US that is not the case. The pressure is on the BNPL providers to share their data to protect consumers.

We are working with one stealth company to build a real-time credit reporting system for BNPL providers in the US, so the appetite is clearly there. They have a number of US BNPL companies interested in their proposition.

Meanwhile in the UK, perhaps challenger credit bureau providers like ClearScore or Infact Systems (actually founded by ex-Experian techies) could be the future of credit reporting. InFact certainly highlights their real-time capabilities, but they need BNPL companies to be willing to share data with them.

The historical blocker to starting a challenger credit bureau has always been access to data — but if these challengers have technology similar to Tilores that allows high-scale, real-time data ingestion and updating of credit profiles, then BNPL could be just the niche the new credit bureaus need to open up a new market and finally disrupt the incumbents.

Originally published at https://tilores.io.