SAN DIEGO—One company here is piloting technology it says makes for a better FICO score.
Evan Malter, the entrepreneur behind a number of tech start-ups, is building a new scoring model based on an earlier company called ZipCap, a startup that lends to small businesses at low rates, based on their ability to elicit customer commitments to buy. As Inc.com explained, a Main Street company would sign up with ZipCap and then ask its regular customers to join an "inner circle" by pledging to spend $400 there over 12 months. Once at least 100 customers joined, the small business became eligible for a loan worth 50% of that "loyalty capital" from ZipCap, which was backed by accredited investors. ZipCap charged the small businesses either a monthly fee of $99 or a small fraction of customers' transactions, Inc. reported.
In 2014 ZipCap began a pilot in Michigan, with 10 small businesses including a bookstore, a café, and a coffee shop. ZipCap's pilot ran for two years, tracking customer spending across 10,000 transactions, according to Inc.
“The company used that data to determine whether inner-circle members honored their commitments and also to develop predictive models for customer behavior,” according to Inc.
Malter eventually realized ZipCap would not scale, and in response pivoted from a lender to small business into a decision-making tool for lenders to small business. Banks and other credit providers are eager to help these companies but lack sufficient information to assess the risks and opportunities, according to Malter. His startup—now rebranded County Loyalty, will issue reports comprising insights gathered from loyalty programs, also expressed as a loyalty score.
"We will be a better FICO score," Malter told Inc.
According to the company, rather than rely on money-strapped mom-and-pops for revenue, Count Loyalty will sell to banks and online lenders. Currently Malter envisions a model whereby scores are free and the company charges for reports, with prices likely starting at around $19. It will also sell real-time updates on the status of borrowers and customized modeling, Inc. reported.
In addition to getting the service free, small businesses can set up their loyalty-tracking programs by themselves in less than three minutes, using apps that can be downloaded to any IOS or Android device. The business has also opened its APIs to a handful of point-of-sale and loyalty program providers. Small businesses using those products will automatically be tracked and scored by Count Loyalty, Inc. said.