Credit Check in e-commerce

Credit Check in e-commerce

Scoring influences the credit, trade and everyday life of consumers. From the order on the bill in the onlineshop via cell phone contracts and loans, many everyday business is dependent on a scoring. How does scoring work today and how could it look against the background of Big Data in some years? What are the advantages and disadvantages for retailers as well as for consumers?


Credit Check in e-commerce

In e-commerce scoring is probably not as important in any other country as in Germany. This is due to the fact that the most popular online payment methods are charged for direct debit and purchase. Therefore, online buyers pay so much by direct debit and invoice, because they receive their order quickly and at the same time have a certain security: a debit note can be booked back by the customer, and he does not pay the invoice if the goods are in deficient condition or not at all Is supplied.

To determine a scoring value, use is made of classical credit bureaus such as Schufa, Bürgel or Creditreform as well as various publicly accessible directories.

This is practical for buyers but for dealers, there is a risk of payment default. In order to protect themselves against black sheep, shop operators can therefore carry out a credit check. In particular, traders whose goods can easily be resold, such as suppliers of electronic products or small furniture, bear a high risk of default.

Credit rating in seconds

If, for example, the operator of an electronic on-line shop decides to minimize his risk in the payment methods direct debit and purchase by scoring, how is the ability to pay for a shopper who would like to order an LCD TV device worth several hundred euros?
To this end, it has to be said at the outset that it is a strictly guarded secret of scoring service providers how the process works in detail.

So much is certain, however: the buyer does not even know that in the background of his order a classification of his creditworthiness takes place, the scoring happens within seconds. If it is positive, the buyer has the choice between the whole range of payment methods, including direct debit and invoice purchase.

If, however, the analysis shows a high probability that the customer will not pay the invoice - whether intentionally or not, he will only be offered payment methods which are secure from the retailer 's point of view. This includes, for example, credit card payment or transfer: in both cases the money is collected by the dealer before sending the goods.

Information from several sources

In order to determine a scoring value for an online customer, a corresponding service provider uses several sources. These include classic credit bureaus such as the Schufa, Bürgel or Creditreform as well as various publicly accessible directories. For instance, insolvency courts must announce the opening of company insolvency proceedings as well as private insolvency proceedings, and public courts make an entry in the list of debtors if a debtor has to make an affidavit of his assets after an unsuccessful attempt to seize the court.

However, classic credit bureaus and public directories alone do not yet provide a meaningful scoring value: on the one hand, it takes a certain amount of time for current information to be entered, and on the other hand the entries are either deleted by themselves or the person concerned can delete them upon request leave.

Therefore, scoring service providers also use databases from companies to assess the creditworthiness of online customers. In the HWD database, for example, stationary and online merchant account numbers as well as bank sort codes of EC cards with which back-office invoices were issued.
A further example is the EOS Group, a subsidiary of the Otto Group, which is also a shareholder of the Buergel information agency: EOS has access to all Otto customer databases and thus offers one of the largest sources of information on the payment morale of consumers in Germany.

What the residential realm tells about the moral of payment

In addition, another puzzling piece contributes to the scoring value: sociodemographic data. Behind this, data are primarily conceived about the purchaser's residential area. Does it reside in a high-quality rental area where a relatively large number of high-priced brands are registered?

Whoever can afford to live here has a high probability of being able to pay. It is only with a high probability that the inhabitants of a particular area rarely form a completely homogenous demographic group, not to mention the fact that the customer does not necessarily state his own address when ordering, but possibly his parents, partner or friend.

On the whole, however, scoring service providers develop their procedures on the basis of all the data sources mentioned: classic credit bureaus, public directories, company databases and sociodemography. The result is a value that indicates the probability that a customer will pay his order. Depending on which minimum value the dealer has previously defined, the customer then automatically receives the payment types direct debit and invoice - or not.