Dollar signs on a Chutes and Ladders board.
Illustration: Christopher T. Fong/Protocol

It’s time to change the credit score game

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Monday: rethinking the credit score, grading Congress’ crypto views and Revolut Pay.

Off the chain

It was royally offensive. Mere instants after Queen Elizabeth passed, opportunists were creating memecoins in her name. “The Queen is dead, but grift lives forever,” Tom Carreras wrote for Crypto Briefing. The blockchain is censorship-resistant, of course, and some level of scammy behavior will always be present. But would it be too much to ask for, I don’t know, a little restraint?

— Owen Thomas (email | twitter)

Keep score — or change it?

Credit scoring doesn’t work well for a lot of people. Those with low incomes, people of color and immigrants have been historically sidelined by the current system. Some of the nation’s most successful struggle with low credit scores despite their wealth. And if your fortune comes from crypto, you might as well be invisible to the credit bureaus.

Where some see flaws, startups see opportunity. Finding a way to accurately underwrite those excluded from the existing system could mean unlocking a whole new customer base for lending and investment products.

  • It also entails a lot of risk, as inaccurately assessing borrowers’ ability to repay can result in costly defaults.
  • Credit scoring is broken, but fixing it isn’t easy. FICO “is the dumbest system except for all the other ones,” Bullpen Capital general partner Eric Wiesen told Protocol. “Someone should clearly do this, but I am yet to find anyone successful at it.”

More data might be the answer. Rent or utility payments are not typically integrated into credit scores, for example.

  • Some fintechs argue that doing so could improve many consumers’ scores. “Buy now, pay later” companies are also working to get their on-time payment data integrated into credit reporting.
  • Consumer advocate Rachel Gittleman, financial services outreach manager at the Consumer Federation of America, argues that credit scoring is broken not because it doesn’t factor in enough information, but rather because it factors in too much. Much of the information tracked in a credit report is not predictive, she argues, like medical debt, which is a poor predictor of a consumer’s ability to repay because people do not choose to get sick.

Some think the problem requires new systems for evaluating credit. That could mean coming up with a replacement for the famous FICO score, or even the credit bureau system itself.

  • Zest AI uses credit bureau and LexisNexis data to create its own score, which the company argues has less bias.
  • Trust Science also uses AI to evaluate exponentially more data points than FICO does, but also collects and stores its own data, like a credit bureau.
  • Others tailor their underwriting process for the specific lending products they administer. Line, for example, a company that issues small lines of credit for emergency expenses without a credit check, uses its own proprietary process. “We feel people are better than a number,” Line CEO Akshay Krishnaiah told Protocol.

Regulators have been eyeing cash flow underwriting, a common approach for evaluating those without much traditional credit history, for years. Considering crypto holdings is even trickier. Expect more guardrails to emerge as the industry matures, lest these attempts to fix the credit score cause more problems than they solve.

— Veronica Irwin (email | twitter)

A version of this story first appeared on Read it here.

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On the money

The Treasury Department will sound a warning on crypto in upcoming reports. A series of reports ordered by President Joe Biden are expected to lay out potential risks to consumers if crypto is not properly regulated. The reports will also recommend the U.S. continue working toward a CBDC, but only implement one if further study finds a clear national interest.

Credit card purchases at gun stores will be tracked through separate merchant code. The plan from Visa, Mastercard and American Express to add the new category comes as gun-control advocates have pushed for the financial industry to flag suspicious firearm sales.

JPMorgan Chase struck a deal for payments startup Renovite. The acquisition is part of an effort from the bank, CNBC reports, to offer more merchant services and fend off threats from fintech firms including Stripe and Block.

Revolut has launched one-click payments. Revolut Pay puts the London-based fintech up against PayPal and Apple.

A Pew Research Center survey finds payment apps are ubiquitous — and perhaps still too vulnerable to manipulation. Pew's data offered some good news for peer-to-peer payment apps: 76% of Americans have used at least one of PayPal, Venmo, CashApp or Zelle, with convenience being the top reason. Convenience has its downside, though, as about 1 in 10 users reported falling victim to a scam on a P2P app.

A new crypto lobbying group has a report card for Congress. The Crypto Action Network's grading for crypto-friendly policy gives an “A” to Republican Sens. Cynthia Lummis and Ted Cruz, as well as Democrat Sens. Kirsten Gillibrand and Ron Wyden. Rep. Brad Sherman and Sen. Elizabeth Warren, both Democrats, received an "F."

Inside Apple's deal with the feds for mobile driver's licenses. Documents obtained by Fintech Business Weekly show Apple entered into a research and development agreement with the Transportation Security Administration beginning in March 2019 to launch the digital credentials.


Mark Cuban isn’t too mad about dogecoin co-creator Jackson Palmercalling him a crypto profiteer. "Sounds like the same thing that has been said about every new technology I've been involved in," he told Insider, and adding in an email to Decrypt, “Everyone can say what they want. I’m still a huge fan of crypto.” Palmer is not — after creating dogecoin in 2013 with Billy Markus as a joke, he’s turned into a crypto skeptic.

New SEC Commissioner Mark Uyeda has spoken about crypto. "To the extent that crypto assets raise unique issues not otherwise addressed in the current rulebook, the commission should consider proposing rules," he said at the Practising Law Institute conference. That may reflect a divergence from Chair Gary Gensler’s view that the industry doesn’t need more guidance.

Coming up

Finovate Fall is this Monday through Wednesday in New York City. The fintech event brings founders, investors and media together to network and listen to over 100 expert speakers and over 60 live demos.

SALT New York also returns this week Sept. 12-14. Discussions will center on topics like bitcoin, alternative investments, fintech, sustainability and infrastructure.

Lend360 runs through Wednesday in Chicago. Speakers represent companies like NerdWallet, TransUnion and Trust Science at the fintech lending conference.

Blockworks’ Digital Asset Summit is Tuesday and Wednesday in New York City. The conference is primarily attended by asset managers and financial services professionals working on crypto from an industry perspective.

On Tuesday, the Senate Committee on Banking, Housing and Urban Affairs will hold a hearing on how consumer fintechs are impacting workers. The speakers are Rachel Gittleman of the Consumer Federation of America, Financial Technology Association CEO Penny Lee, law professor Todd Zywicki and David Seligman from Towards Justice, a nonprofit law firm.

The Fintech Talents Nordics Conference is Wednesday. The virtual conference highlights fintech successes from countries in Northern Europe and the North Atlantic.

On Wednesday, Public Citizen is hosting a virtual conversation between CFPB Director Rohit Chopra and Public Citizen president Robert Weissman. The event is open to the public: Just RSVP online to get the Zoom link.

The House Committee on Financial Services is hosting a hearing Wednesday on the impacts of banks leaving the Caribbean. The 10 a.m. Eastern event is available to watch online.

On Thursday, the Senate Agriculture Committee will host a hearing on the Digital Commodities Consumer Protection Act. Representatives from Coinbase, the Crypto Council for Innovation, Citadel Securities, the Stellar Development Foundation and the Center for American Progress will speak.

The Senate Banking Committee will hold an SEC oversight hearing on Thursday. The sole witness will be SEC Chair Gary Gensler.

The Crypto Valley Summit is this Wednesday and Thursday. The event focuses on showcasing the Swiss blockchain ecosystem, with speakers representing CV VC, Bitcoin Suisse and a range of Swiss startups.

Next Monday, Sept. 19, the Protocol Enterprise team will host the online event “Customer Experience in the Enterprise.” The event will cover the tech tools, tricks and real-life strategies for providing a great, end-to-end customer experience in enterprise tech.

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Thanks for reading — see you tomorrow!

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