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Why Equifax is getting into digital identity

Equifax and FIS are the latest companies to put themselves forward as providers of people’s digital identities.

In doing so, Equifax is positioning itself to be “more than just a credit bureau,” according to a spokeswoman, and instead, a data and analytics company in the broader sense — and at a time when the U.S. Consumer Financial Protection Bureau is weighing the benefits and risks of using alternative data (rent payments and mobile phone bills) to evaluate individuals’ creditworthiness.

Equifax would not comment outright on its plans to use alternative data.

“The data that we as users have — the credit data, the transaction data you give to your bank — will always be the core of OnlyID,” said Kenneth Allen, svp of identity and fraud. “On top of that, we’re so data hungry to make sure we’re putting good data to use, so we’re looking at different options of data — including alternative data, because those are part of our business globally today.”

Equifax and FIS have spent the last 18 months co-creating a password-less, biometrically-enabled digital identity solution, called OnlyID, for individuals meant to reduce fraud, improve customer experiences and thereby increase consumer loyalty. The 12,000 banks and 30,000 retailers in their combined network need to opt in to the OnlyID Network but as of now those agreements aren’t in place yet, according to Allen.

Once they opt in, customers will be able to verify that they are who they say they are by using their biometric registered with their OnlyID identity, and it will be the only identifier they need across all the organizations in that network.

Today customers engage with businesses more digitally than they did just two or three years ago. As a result, the disconnect between how they identify themselves online to how their transactions are traced back to their physical lives has become more pronounced and lowered the bar for fraudulent activity.

Traditionally, an identity is created using addresses, names, Social Security numbers — things that are more associated with the physical world. Combining that information around virtual presence, online usage and how people interact with commerce and financial institutions are what will build an accurate digital footprint, said Kim Sutherland, senior director of fraud and identity management at LexisNexis Risk Solutions.

“We’re all striving to build out an ecosystem that has the least amount of friction for consumers and the strongest assurance for organizations trusting these identities,” Sutherland said. “The actual vehicle for asserting identity — whether with a biometric or common credential — will change, but the goal is to have one that is interoperable and secure.”

OnlyID is similar to other identity efforts, like the solution Canadian banks are developing, Capital One’s digital identity API or even the centralized database of identities in India’s Aadhaar initiative — only the identity providers in those cases are the banks and the government. There are almost 200 startups tackling this problem too.

With so many solutions in the market now, how the digital identity ecosystem looks in 10 years is unclear, but it may come down to consumers deciding which entities they trust most with their data.

“We haven’t figured out what’s going to have the most adoption and comfort,” Sutherland said, citing potential solutions by different banks, mobile phone companies, the U.S. Post Office and state motor vehicle departments. “The role of who is providing identity is going to be the organization the consumer feels comfortable with handling their information.”

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‘Credit scoring has to look at behavior over time’: Nav’s innovative approach to credit scoring

Fintech innovations seem to be predicated on unbundling and rebundling, starting from scratch or working with traditional systems. This dichotomy is particularly clear in credit scoring, which has seen fintech pushes for two distinct, opposing tracks of innovation.

On the one hand, some alt lenders and credit scorers are coming up with their own alternative credit scoring algorithms based on big data from monthly rent, electric, or cable bill payments, or even court filings and criminal convictions. For the underbanked and unbanked, these algorithms are what make it possible to get a loan for their small businesses.

On the other hand, many alt lenders still rely primarily on traditional credit scores, and certain fintechs are innovating by trying to simplify the credit scoring process for SMB owners.

One such fintech is Nav, a business credit and lender marketplace company. Nav is fully aware of the alternative credit scoring movement. “The one misconception about scoring and lending is that it’s easy to come up with a better mousetrap,” said Gerri Detweiler, head of market innovation at Nav.

However, when it comes down to it, the company doesn’t believe these new datasets are going to replace traditional credit scoring overnight. “When you go out to look at alternative data sets, it takes time to monitor that data and compare that to the behaviors of the customer sets,” Detweiler explained. “So it’ll take time to determine what’s really predictive and what’s not so useful.”

A 2013 McKinsey report largely supports this approach to alternative credit scoring, noting that “many practitioners are not yet skilled in these [data sets] and are unfamiliar with aggregating diverse and oblique data to derive meaningful insights.”

Instead of trying to invent the wheel, Nav’s online offering is part educational, part matchmaker. The company aims to help the 160,000-plus business owners registered on its platform overcome any credit score fears they may have by making their personal and business credit scores clear to them, and by providing them with tools to improve their credit scores.

Nav isn’t a lender itself. It has over 100 lenders on its platform, with its own MatchFactor technology that predicts the likelihood of a business being able to get financing from a lender. “If [an SMB owner] is more likely to get approved, it’s a better experience for them, and the lender is happier, because they’re not wasting time on someone who’s likely to be approved,” said Detweiler.

However, while financial education may be at the heart of Nav, the company is trying to make this education as unintrusive as possible. “We understand that SMB owners are very busy. And in the end, they don’t need, or necessarily want, to be credit experts,” Detweiler noted.

This is, of course, one reason why SMB owners might turn to one-stop-shop alt lenders with their own credit scoring algorithms. But for SMB owners who are interested in getting started or building an existing business within the existing credit score system, online companies like Nav are trying to make that simple and attainable.