“Now we’ll just check your SCHUFA score and then we’ll sign the contract.” What may sound like a threat to the ears of many customers is actually common practice in day-to-day business. Whether changing electricity provider, terminating a mobile phone contract or granting a loan: nothing happens without a credit check.
Credit agencies have specialised in the collection and dissemination of business-relevant data about private individuals and companies to business partners and have been doing so for many decades. Practically every customer and every company will have come into contact with providers such as SCHUFA, Creditreform, CRIF Bürgel or Arvato Infoscore.
- SCHUFA: With creditworthiness data on 67.2 million consumers and 5.3 million companies, Schufa Holding AG is the largest and best-known credit agency in Germany. SCHUFA information is used by 9,000 companies from the trade, banking and telecommunications industries.
- Creditreform: As a provider of corporate credit ratings and debt collection services, Creditreform is the B2B specialist among Germany’s credit agencies. The company is well known for its business information, which includes ratings from 4.8 million companies.
- CRIF Bürgel: The credit agency CRIF Bürgel has a long company history dating back to the 19th century. As a service provider for credit risk management, receivables management and address identification, the Munich-based credit agency primarily works with publicly available data and information from debt collection procedures.
- Arvato Infoscore: The Bertelsmann subsidiary Infoscore offers creditworthiness data and information on the behaviour of 7.8 million consumers in Germany. This data is collected in cooperation with banks, mail-order companies and debt collection companies. They are mainly used by large companies.
The information provided by credit agencies supplies companies with valuable information on the creditworthiness and solvency of customers and business partners. Until now, there has been an unsolved problem: creditworthiness is determined based on historical values, which raises two questions for which there have been no satisfactory answers so far.
Question Number One: How Reliable Are Scoring Models Based on Historical Data?
A customer who has always paid their invoices on time in the past is not automatically a reliable business partner in the future. The reverse is also true: once a customer has a bad SCHUFA report, they are cut off from the capital market – even if their current income situation has changed for the better.
Account Information Service Providers bring a breath of fresh air into the debate about a better model for checking creditworthiness. As a third-party provider within the context of the EU Directive PSD2, Account Information Service Providers can access a customer’s online banking account on behalf of the customer, analyse and categorise account data and, for example, present it to a financial institution to assess creditworthiness.
The assessment of creditworthiness and solvency conducted by credit agencies is based solely on historical data. On the other hand, the Digital Account Check provides companies with a daily assessment based on real-time account information via an Account Information Service Provider. This allows a quick and uncomplicated assessment of whether a customer or business partner is solvent on the basis of their current income situation.
Before you read any further: The Digital Account Check is performed by Account Information Service Providers (AISP), which, on behalf of a customer, analyse information from their online banking account for banks and companies. All questions and answers can be found in this blog post.
Question Number Two: Are Conventional Scoring Services Provided by Credit Agencies About to Become Superfluous?
Not at all! In order to obtain a truly complete financial picture of customers and business partners, looking at the past is just as much part of an accurate credit check as an analysis of current transactions and real-time information from online banking accounts. Cooperation between credit agencies and Account Information Service Providers has resulted in a new scoring model: Credit Scoring 4.0.
The combination of historical data (credit agencies) and current data (Account Information Service Providers) gives banks and companies a complete financial picture of their customers and business partners. Specialised providers such as FinTecSystems aggregate the data of the credit agencies as well as current turnover data from online banking. This data is then analysed and categorised to provide a complete overview of the creditworthiness situation.
While the data collected by credit agencies allow conclusions to be drawn about general payment behaviour, the Digital Account Check provides cash flow information and statements about chargebacks, seizures and budget surplus. On the basis of this complete financial picture, banks and companies can reliably assess the creditworthiness and solvency of their customers and business partners.