Markaaz CEO: Two-Sided Platform Plugs the ‘Data Gap’ on Small Businesses

There’s a data gap that exists for small businesses — a lack of information about them that makes banks shy away from extending credit or spurs FinTechs to “offload” them from their platforms mere months after they’ve been onboarded.

For the businesses and banks that serve these small firms, getting the right info in hand to feel comfortable about doing business is akin to finding a needle in a haystack because so much of that data — from financials to names to addresses and so on — is fragmented or incomplete, even inaccessible, when conducting due diligence.

And so, they say no to most small- to medium-sized businesses (SMBs) that walk through the proverbial doors. Or they put up onerous conditions when they do say yes.

Markaaz CEO Hany Fam said it has been this way for decades — about 40 years.

“Our own company, earlier on, was putting up financial guarantees simply to use a payment instrument — a guaranteed payment instrument,” he told PYMNTS. “We had millions of dollars in the bank, but [lenders] did not know how to think about us, how to measure us or how to monitor us. And so they just said, ‘Put up collateral.’”

No Verification? No Business

Markaaz’s own early-day travails are emblematic of the problems facing SMBs today. The hypothetical company that walks into a bank, excited about expanding into, say, Southeast Asia to embrace new business potential — but needs a line of credit to get there — is immediately asked for guarantees from that lender. Often, they must also put up a personal guarantee that tanks the owner’s credit score. That’s if they get the credit they came for.

A full 30% of businesses go to their financial institutions or FinTechs and get turned away from the get-go, Fam said.

“What happens is that a newly incorporated business, or an informal business — even a business that’s been around for a long time — might not even make it onto anybody’s radar screen,” he said. “… So they turn up to a bank or a FinTech or an insurance company or a retailer that they want to do business with, and people say, ‘Sorry, I can’t verify you. Go away.’”

Those businesses have slipped through the cracks and have not found their way into the repositories of traditional commercial data analytics firms like Dun & Bradstreet, Lexis/Nexis or Moody’s.

“They’re not covered there,” Fam said. Instead, there’s a hodgepodge of “willy-nilly” datasets and a lack of awareness on the part of the firms themselves as to what data is out there about them, and how they might be viewed by the financial services industry.

Markaaz has taken on the task of solving the problems of data fragmentation and data inconsistencies, having created a global business identity platform that gleans information from more than 65,000 sources, de-duplicates that data, scrubs it and, “with some very clever AI and technologies,” creates a complete view of public information of 519 million (active and inactive) businesses — and counting.

Beyond those data sources, the company adds hundreds of its own data elements on compliance, news headlines and potential exposure to geopolitics, he said. It also takes on permissioned non-public data from those firms, spanning bank accounts and balance sheets.

“We’ve built a two-sided platform,” he said, with one side targeted to the enterprises for all the data they need about themselves, and on the other side a “view” of the SMB for the banks and FinTechs.

“Our goal has always been that the two parties” on each side of the platform “get to look at the same data,” Fam said, adding that “if there’s an error or a gap, those two parties can actually ‘populate’ that … it becomes a ‘cleaned up record’ that’s now available to everybody else about that business.”

The positive ripple effects are that the SMBs are more visible, and the would-be partners are more likely to do business with them. For financial institutions, “this translates into a better prospecting of customers” and a capturing of otherwise lost revenues, Fam said. Markaaz “gets typically 30% to 50% more verifications than anybody else in the market because of all our data stewardship and the two-sided nature of the platform.”

As Fam told PYMNTS, with the “golden record of every business for every use case in the world … the more times that people will say ‘yes’ to a business without the need for personal guarantees, the more engagement and intimacy there is between the bank and the business.”

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