Unless you are deeply involved in the Buy Now Pay Later or credit reporting worlds, it can be hard to truly appreciate the value of Qlarifi’s real-time BNPL credit reporting platform. 

To help, we have set out a cheat sheet for 5 key concepts which underpin Qlarifi’s raison-d’etre: 

Real-time

“Real-time” in the context of credit reporting means that the live status of a person’s credit exposure can be seen immediately upon enquiry by a user (whether that is a consumer or a lender). At Qlarifi, we believe that credit report refresh frequency should match the usage by consumers, which means whenever a consumer makes a purchase or payment, their report updates to fairly reflect the true balance owing. 

Real-time reporting is crucial for BNPL transactions, as balances tend to be updated at a much more frequent rate than other instalment loans or revolving loans (such as credit cards). Real-time reporting also helps detect first party fraud and can assist lenders in identifying consumer overextension. 

Alternative data

Alternative data is essentially any dataset on a consumer’s spending, borrowing and savings habits which falls outside of the historically tracked credit information that would show up on a credit report. This definition of “alternative data” includes BNPL transaction data, even though BNPL data have become a key indicator of everyday consumer behaviour (in fact, given the prolific nature of BNPL loans, there is significant demand to include BNPL consumer credit data in a consumer’s core credit file).

Our blog post goes into more detail on the value of alternative data here.

Phantom debt

This is a catchy marketing term dreamt up to articulate fears in traditional lenders (held earnestly or not) about the unreported debts accrued by consumers through their BNPL payments. These debts are termed “phantom” because they cannot be seen by lenders other than those responsible for making the loans. Traditional lenders claim that they are spooked by this, hence the evocative, ghostly language.

We have thought about how Qlarifi can solve this.

Metro 2 Format

Metro 2 is the standard electronic data reporting format established by the Consumer Data Industry Association (CDIA) for lenders to report consumer credit information to consumer reporting agencies. The standard format ensures that consumer reporting agencies (who form the CDIA) receive consistent information for ingestion into their bureau. 

Unfortunately, given it was established in 1997 (almost 30 years ago), the format layout is not well-suited to BNPL tradelines. It can be difficult for BNPL lenders to adapt their data to align with the Metro 2 format, and BNPL teams need to find workarounds which can result in imprecise reporting.

Loan stacking

“Loan stacking” describes the risk that a borrower takes out concurrent BNPL loans at different lenders and is unable to repay some or all of them. This risk was highlighted by the CFPB in their 2022 study of the BNPL market as a particular area of concern, one that cannot be solved by individual BNPL lenders due to the lack of visibility into their customers’ spending at other providers. 

The aggregation of real-time BNPL transaction data into a reliable, trustworthy data repository is the only way to solve this problem on an industry-wide basis and address the CFPB’s stated consumer protection concerns.