Disrupting B2B Information: Free the Data

As discussed in our earlier post about B2B Credit Middlemen, a powerful aspect of doing business on the Internet is the elimination of sales and distribution layers between the producer and consumer. In a typical non-Internet value chain there are many “value-added” steps in the process between the producer and consumer. Each step increases costs and reduces profit. 

Internet distribution models eliminate many of these steps by scaling distribution and eliminating sales complexity (e.g. Amazon, iTunes and Zappos). In this post, we will attempt to illustrate the value chain for the B2B credit industry and point out the false value provided by the credit industry middlemen: the credit bureaus.

Credit Bureaus

Credit bureaus estimate a company’s viability by aggregating data from other businesses for them to use in making new credit application decisions. Unlike banks and financial institutions, they DON’T ISSUE CREDIT. Businesses issue credit to each other and should be the real arbiters of worthiness.

Furthermore, this data is created by businesses, provided to the credit bureaus (for a fee of course), and then resold to other businesses. The never-ending fees keep people from using the service and in turn make the data less accurate, less timely and pretty useless. Who is a better judge of a company’s viability: a random call center operator or the people at companies who interact with each other?

Free the Data

The prevalent business model among these bureaus is to charge companies to ”establish” their profile, charge to view other companies’ profiles and charge to submit data regarding the quality of interactions they have with other companies. Charging to submit data is a disincentive to accuracy and keeps the largest population of companies (small businesses) from participating. If companies could freely exchange THEIR data, then there would be a more timely and probably more accurate way to determine creditworthiness.

The value of the data increases as the number of active users in the network increases. A sort of Metcalfe’s Law for social networks in practice. The data should be free!

At Trust Exchange we've creating a community of businesses who disclose information with each other to build trust.  We believe that with increase trust, business happens faster and more effectively. We've helped many companies in several industries.  If you're interested in learning more you can either request a DEMO.  

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Peer to Peer Risk Assessment

The value and scale of Peer to Peer (P2P) networks is well known. There are several examples of very successful uses of this framework including Skype, Kazaa, Napster etc. The emergence of “social” software and web 2.0 infrastructures is largely based upon the core analogy of P2P. At TrustExchange, we are building the first P2P Risk Assessment Platform which will leverage this model to enable businesses to obtain a more accurate view of risk inside their operating ecosystem (customers, vendors and partners).  Our goal is to be the "waze" of business information.  

To gain a better view of what we’re up to, it may be helpful to first discuss the core idea behind P2P networks and then expand on how it applies to risk analysis.  First, the definition, from Wikipedia, of Peer to Peer networks:

“Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the application. They are said to form a peer-to-peer network of nodes.”

Note the part about peers being “equally privileged, equipotent participants,” and you’ll understand the core idea behind TrustExchange's approach. We’ve noted previously how the existing b2b credit granting and credit management process is broken. And we believe these processes can be greatly improved by creating a P2P, open and transparent risk analysis platform where the data is created and maintained by the peers participating in the network.

Currently, the data used to assess the credit worthiness or viability of a given company is maintained and controlled by the large credit bureaus such as Experian and Dun and Bradstreet. These bureaus are fundamentally middle men with limited value since they don’t grant or issue credit. Businesses make the credit decisions themselves and need a better tool that is more accurate, timely and correlated to viability.

Wouldn’t it be better when analyzing the risk of a given company, if you could not only look at their payment history, but examine how they perform in all aspects of their business? A global risk assessment which takes into account how they perform as a customer, vendor and partner?

Wouldn’t it be valuable to not only look at a single company but view an entire portfolio of customer risk, vendor risk and partner risk?

This is what we are creating at TrustExchange. If you think this is valuable and have strong opinions on the issue sign up now and participate in the discussion and give your input into the development process.