Equifax Introduces Cloud-Based Merchant Data Network to Support U.S. Small Business Lending

Rhea-AI Summary

Equifax (NYSE: EFX) has launched the Merchant Data Network, a cloud-based solution aimed at enhancing visibility into U.S. small business financial profiles. This network combines Equifax's Commercial Financial Network data with aggregated credit card transaction data from providers like Fiserv, covering 5.5 million businesses and over 50 billion annual transactions.

The network aims to improve traditional commercial scoring by more than 8%, offering up to 60 months of aggregate transaction history. This data helps verify merchant income, establish payment ability, and provide insights for businesses with credit information. The solution supports faster, more informed lending decisions, potentially increasing access to capital for small businesses.

Positive

• Launch of Merchant Data Network to enhance small business financial visibility
• Potential to improve traditional commercial scoring by over 8%
• Coverage of 5.5 million businesses and over 50 billion annual transactions
• Provision of up to 60 months of aggregate credit card transaction history
• Partnership with major data providers like Fiserv to enhance data quality

Negative

• None.

Insights

Financial Analyst

Equifax's new Merchant Data Network represents a significant advancement in small business lending. By combining their Commercial Financial Network with aggregated credit card transaction data, they're offering a more comprehensive view of small business finances. This could potentially increase lending opportunities for small businesses, which are often underserved in traditional credit markets.

The reported 8% improvement in commercial scoring is substantial. This enhanced accuracy could lead to more efficient capital allocation and potentially lower default rates for lenders. For investors, this could translate to improved risk management and potentially higher returns in Equifax's commercial segment.

However, investors should monitor adoption rates among lenders and any potential regulatory scrutiny regarding data privacy. The success of this product will likely depend on its ability to demonstrably improve lending outcomes over time.

Data Privacy Expert

While the Merchant Data Network offers valuable insights, it raises important data privacy considerations. The aggregation of credit card transaction data from multiple providers creates a rich dataset that could potentially be used to identify individual businesses or consumers if not properly anonymized and secured.

Equifax will need to ensure robust data protection measures are in place, particularly given their history with data breaches. Investors should look for transparency regarding data handling practices and any partnerships with third-party data providers.

Regulatory compliance, especially with evolving privacy laws, will be crucial. Any missteps could lead to significant financial and reputational risks. However, if managed well, this network could position Equifax as a leader in responsible data utilization for financial services.

Small Business Economics Expert

The Merchant Data Network could be a game-changer for small business financing. Traditional credit scoring often falls short for small businesses, especially those with credit history. By incorporating point-of-sale transaction data, Equifax is providing a more dynamic and current view of business performance.

This could potentially unlock capital for businesses that were previously considered too risky, fostering economic growth and job creation. The ability to analyze up to 60 months of transaction history allows for better trend analysis and seasonality adjustments, which are important for understanding small business dynamics.

However, the effectiveness of this tool will depend on widespread adoption by lenders and the accuracy of its predictive power over time. It's also important to consider potential unintended consequences, such as over-reliance on transaction data at the expense of other important business factors.

Collaborative Network Leverages Equifax Commercial Data and Credit Card Transaction Data from Leading Data Providers to Create More Complete Financial Picture of Small Businesses

ATLANTA, Sept. 18, 2024 /PRNewswire/ -- Equifax® (NYSE: EFX) has launched a new Merchant Data Network, an Equifax Cloud™-based data network to help provide greater visibility into the financial profiles of U.S small businesses. Designed to give lenders and service providers the increased confidence they need to extend capital in a rapidly changing economic environment, Equifax research shows that the Merchant Data Network can improve traditional commercial scoring by more than eight percent by providing valuable insights into the revenue small businesses generate from aggregated credit card transactions at the point of sale. The collaborative network combines the power of the Equifax Commercial Financial Network with aggregated credit card transaction data from Fiserv and other leading data providers to bring new visibility to more than 5.5 million businesses from more than 50 billion credit card transactions per year.

"Small businesses in the U.S. employ nearly half of the country's workforce – making their financial health paramount to the health of our economy," said Sal Hazday, Senior Vice President and General Manager of the Equifax U.S. Information Solutions (USIS) Commercial Business. "Opening up new credit opportunities for small businesses is increasingly important, but making responsible lending decisions requires a strong understanding of true revenue and cash flow. With the Merchant Data Network, we're partnering with organizations like Fiserv to make the most complete financial picture of a business available to lenders and service providers. Our shared goal is to advance the credit opportunities that small businesses need to thrive."

The Merchant Data Network helps lenders make faster and more informed decisions by providing up to 60 months of aggregate credit card transaction history, providing critical sales insights into organizations that may have limited traditional credit information. The aggregated credit card transaction data provided through the network is valuable because it helps to verify merchant income and establish a business' ability to pay. This information can be used alongside other business data, such as firmographics, credit history and more, to:

• Help verify a business, as well as simplify and shorten the underwriting process;
• Increase lift in scoring merchants with no trades or firmographic-only data;
• Identify leading indicators of business fraud and failure; and
• Provide greater confidence in business sustainability and assessing commercial risk.

"Access to capital, especially for small businesses, has never been more critical than it is today," said Prasanna Dhore, Chief Data Officer and President of Data Commerce Solutions, Fiserv. "By contributing low-latency payment data to business credit reports, we are helping Equifax deliver deeper insights into the financial health of small businesses, which will enable lenders to make smarter loan decisions and improve access to credit for businesses with limited credit histories."

Equifax plans to expand the small business revenue insights provided through the Merchant Data Network through additional contributors in the future. The launch of the network expands on the Equifax commitment to furthering access to credit for small businesses, joining innovative Commercial solutions, including: the Business Verification Solution and OneScore for Commercial. Learn more about the Merchant Data Network and Equifax USIS Commercial solutions here.

ABOUT EQUIFAX INC.
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics, and technology company, we play an essential role in the global economy by helping financial institutions, companies, employers, and government agencies make critical decisions with greater confidence. Our unique blend of differentiated data, analytics, and cloud technology drives insights to power decisions to move people forward. Headquartered in Atlanta and supported by nearly 15,000 employees worldwide, Equifax operates or has investments in 24 countries in North America, Central and South America, Europe, and the Asia Pacific region. For more information, visit Equifax.com.

FOR MORE INFORMATION:
Tiffany Smith for Equifax
mediainquiries@equifax.com

 

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SOURCE Equifax Inc.

FAQ

What is the Equifax Merchant Data Network and when was it launched?

The Equifax Merchant Data Network is a cloud-based data network launched on September 18, 2024, designed to provide greater visibility into the financial profiles of U.S. small businesses by combining Equifax's Commercial Financial Network data with aggregated credit card transaction data.

How much can the Equifax (EFX) Merchant Data Network improve traditional commercial scoring?

According to Equifax research, the Merchant Data Network can improve traditional commercial scoring by more than 8% by providing insights into small business revenue from aggregated credit card transactions at the point of sale.

How many businesses and transactions does the Equifax (EFX) Merchant Data Network cover?

The Equifax Merchant Data Network covers more than 5.5 million businesses and includes data from over 50 billion credit card transactions per year.

What type of data does the Equifax (EFX) Merchant Data Network provide to lenders?

The Equifax Merchant Data Network provides up to 60 months of aggregate credit card transaction history, offering critical sales insights into organizations that may have traditional credit information.