Grocery purchase data can accurately predict credit risk for individuals without traditional credit scores, potentially broadening the pool of qualified loan applicants. Photo via Unsplash

Millions of consumers who apply for a loan to buy a house or car or start a business can’t qualify — even if they’re likely to pay it back. That’s because many lack a key piece of financial information: a credit score.

The problem isn’t just isolated to emerging economies. Exclusion from the financial system is a major issue in the United States, too, where some 45 million adults may be denied access to loans because they don’t have a credit history and are “credit invisible.”

To improve access to loans and peoples’ economic mobility, lenders have started looking into alternative data sources to assess a loan applicant’s risk of defaulting. These include bank account transactions and on-time rental, utility and mobile phone payments.

A new article by Rice Business assistant professor of marketing Jung Youn Lee and colleagues from Notre Dame and Northwestern identifies an even more widespread data source that could broaden the pool of qualified applicants: grocery store receipts.

As metrics for predicting credit risk, the researchers found that the types of food, drinks and other products consumers buy, and how they buy them, are just as good as a traditional credit score.

“There could be privacy concerns when you think about it in practice,” Lee says, “so the consumer should really have the option and be empowered to do it.” One approach could be to let consumers opt in to a lender looking at their grocery data as a second chance at approval rather than automatically enrolling them and offering an opt-out.

To arrive at their findings, the researchers analyzed grocery transaction data from a multinational conglomerate headquartered in a Middle Eastern country that owns a credit card issuer and a large-scale supermarket chain. Many people in the country are unbanked. They merged the supermarket’s loyalty card data and issuer’s credit card spending and payment history numbers, resulting in data on 30,089 consumers from January 2017 to June 2019. About half had a credit score, 81% always paid their credit card bills on time, 12% missed payments periodically, and 7% defaulted.

The researchers first created a model to establish a connection between grocery purchasing behavior and credit risk. They found that people who bought healthy foods like fresh milk, yogurt and fruits and vegetables were more likely to pay their bills on time, while shoppers who purchased cigarettes, energy drinks and canned meat tended to miss payments. This held true for “observationally equivalent” individuals — those with similar income, occupation, employment status and number of dependents. In other words, when two people look demographically identical, the study still finds that they have different credit risks.

People’s grocery-buying behaviors play a factor in their likelihood to pay their bills on time, too. For example, cardholders who consistently paid their credit card bill on time were more likely to shop on the same day of the week, spend similar amounts across months and buy the same brands and product categories.

The researchers then built two credit-scoring predictive algorithms to simulate a lender’s decision of whether or not to approve a credit card applicant. One excludes grocery data inputs, and the other includes them (in addition to standard data). Incorporating grocery data into their decision-making process improved risk assessment of an applicant by a factor of 3.11% to 7.66%.

Furthermore, the lender in the simulation experienced a 1.46% profit increase when the researchers implemented a two-stage decision-making process — first, screening applicants using only standard data, then adding grocery data as an additional layer.

One caveat to these findings, Lee and her colleagues warn, is that the benefit of grocery data falls sharply as traditional credit scores or relationship-specific credit histories become available. This suggests the data could be most helpful for consumers new to credit.

Overall, however, this could be a win-win scenario for both consumers and lenders. “People excluded from the traditional credit system gain access to loans,” Lee says, “and lenders become more profitable by approving more creditworthy people.”

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This article originally ran on Rice Business Wisdom based on research by Rice University's Jung Youn Lee, Joonhyuk Yang (Notre Dame) and Eric Anderson (Northwestern). “Using Grocery Data for Credit Decisions.” Forthcoming in Management Science. 2024: https://doi.org/10.1287/mnsc.2022.02364.


Attention small business owners: it's time for a financial wellness exam. And Hello Alice has just the tool for you to use. Photo by Hero Images

Houston fintech company launches new tool for startups and small businesses

wellness check

Much like the humans that run them, businesses need the occasional wellness exam. A fintech company founded in Houston has created a tool for conducting that health check.

Hello Alice announced that its new tool Business Health Score has launched today. The assessment tool can be used by startups and small businesses to navigate their financial and business health. The tool is the first product rolling out from the Equitable Access Program, a new initiative from Hello Alice and the Global Entrepreneurship Network with support from Wells Fargo, JPMorgan Chase, Mastercard, and the Kauffman Foundation.

Hello Alice was co-founded by Elizabeth Gore and Carolyn Rodz and has worked with over one million small businesses to help them access capital. The idea of the Score is to give business owners "a comprehensive overview of a business's financial health," according to the news release from Hello Alice. This information is critical for decision making and works hand-in-hand with all of Hello Alice's existing resources.

Operating as a self-assessment questionnaire, the Score will provide entrepreneurs with a composite number by evaluating three business aspects: financial and business management practices, financial performance and position, and credit history.

“Over the last two years, Americans have applied to start 10.5 million new businesses, leading to a surge in the small business economy and more entrepreneurs who need support to properly grow their businesses," say Gore and Rodz in the release. "We recognized data was missing from the market that would give enterprise partners and financial institutions a clearer picture of the potential that small business owners possess for massive growth and investment."

The Score will help Hello Alice and its partners, which includes financial institutions, navigate the business's unique needs and provide the appropriate financial services and resources.

“We are providing unparalleled visibility through the Business Health Score that will empower small business owners to make more strategic decisions and optimize their growth while giving partners and institutions the insight to best help them through personalized service and product recommendations," the co-founders continue. "The Score and the larger Equitable Access Program we have launched with GEN are a huge step forward in opening up more growth opportunities for small businesses and ecosystem partners.”

Hello Alice and GEN are on a mission of democratizing access to capital so that entrepreneurs from all communities have the ability to grow their businesses sustainably. Last year, Hello Alice launched an entrepreneur-focused credit card that helped businesses more easily set up a line of credit.

“Entrepreneurs are well-equipped to deal with disruption and changing dynamics, but while talent is plentiful, opportunity is not,” says Jonathan Ortmans, founder and president of the Global Entrepreneurship Network, in the release. “The Equitable Access Program and Business Health Score will open doors for small business owners to better manage and grow their businesses, which will lead to more strategic partnership and funding opportunities.”

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Texas university to lead new FAA tech center focused on drones

taking flight

The Texas A&M University System will run the Federal Aviation Administration’s new Center for Advanced Aviation Technologies, which will focus on innovations like commercial drones.

“Texas is the perfect place for our new Center for Advanced Aviation Technologies,” U.S. Transportation Secretary Sean Duffy said in a release. “From drones delivering your packages to powered lift technologies like air taxis, we are at the cusp of an aviation revolution. The [center] will ensure we make that dream a reality and unleash American innovation safely.”

U.S. Sen. Ted Cruz, a Texas Republican, included creation of the center in the FAA Reauthorization Act of 2024. The center will consist of an airspace laboratory, flight demonstration zones, and testing corridors.

Texas A&M University-Corpus Christi will lead the initiative, testing unstaffed aircraft systems and other advanced technologies. The Corpus Christi campus houses the Autonomy Research Institute, an FAA-designated test site. The new center will be at Texas A&M University-Fort Worth.

The College Station-based Texas A&M system says the center will “bring together” its 19 institutions, along with partners such as the University of North Texas in Denton and Southern Methodist University in University Park.

According to a Department of Transportation news release, the center will play “a pivotal role” in ensuring the safe operation of advanced aviation technologies in public airspace.

The Department of Transportation says it chose the Texas A&M system to manage the new center because of its:

  • Proximity to major international airports and the FAA’s regional headquarters in Fort Worth
  • Existing infrastructure for testing of advanced aviation technologies
  • Strong academic programs and industry partnerships

“I’m confident this new research and testing center will help the private sector create thousands of high-paying jobs and grow the Texas economy through billions in new investments,” Cruz said.

“This is a significant win for Texas that will impact communities across our state,” the senator added, “and I will continue to pursue policies that create new jobs, and ensure the Lone Star State continues to lead the way in innovation and the manufacturing of emerging aviation technologies.”

Texas Republicans are pushing to move NASA headquarters to Houston

space city

Two federal lawmakers from Texas are spearheading a campaign to relocate NASA’s headquarters from Washington, D.C., to the Johnson Space Center in Houston’s Clear Lake area. Houston faces competition on this front, though, as lawmakers from two other states are also vying for this NASA prize.

With NASA’s headquarters lease in D.C. set to end in 2028, U.S. Sen. Ted Cruz, a Texas Republican, and U.S. Rep. Brian Babin, a Republican whose congressional district includes the Johnson Space Center, recently wrote a letter to President Trump touting the Houston area as a prime location for NASA’s headquarters.

“A central location among NASA’s centers and the geographical center of the United States, Houston offers the ideal location for NASA to return to its core mission of space exploration and to do so at a substantially lower operating cost than in Washington, D.C.,” the letter states.

Cruz is chairman of the Senate Committee on Commerce, Science, and Transportation; and Babin is chairman of the House Committee on Science, Space, and Technology. Both committees deal with NASA matters. Twenty-five other federal lawmakers from Texas, all Republicans, signed the letter.

In the letter, legislators maintain that shifting NASA’s headquarters to the Houston area makes sense because “a seismic disconnect between NASA’s headquarters and its missions has opened the door to bureaucratic micromanagement and an erosion of [NASA] centers’ interdependence.”

Founded in 1961, the $1.5 billion, 1,620-acre Johnson Space Center hosts NASA’s mission control and astronaut training operations. More than 12,000 employees work at the 100-building complex.

According to the state comptroller, the center generates an annual economic impact of $4.7 billion for Texas, and directly and indirectly supports more than 52,000 public and private jobs.

In pitching the Johnson Space Center for NASA’s HQ, the letter points out that Texas is home to more than 2,000 aerospace, aviation, and defense-related companies. Among them are Elon Musk’s SpaceX, based in the newly established South Texas town of Starbase; Axiom Space and Intuitive Machines, both based in Houston; and Firefly Aerospace, based in the Austin suburb of Cedar Park.

The letter also notes the recent creation of the Texas Space Commission, which promotes innovation in the space and commercial aerospace sectors.

Furthermore, the letter cites Houston-area assets for NASA such as:

  • A strong business environment.
  • A low level of state government regulation.
  • A cost of living that’s half of what it is in the D.C. area.

“Moving the NASA headquarters to Texas will create more jobs, save taxpayer dollars, and reinvigorate America’s space agency,” the letter says.

Last November, NASA said it was hunting for about 375,000 to 525,000 square feet of office space in the D.C. area to house the agency’s headquarters workforce. About 2,500 people work at the agency’s main offices. NASA’s announcement set off a scramble among three states to lure the agency’s headquarters.

Aside from officials in Texas, politicians in Florida and Ohio are pressing NASA to move its headquarters to their states. Florida and Ohio both host major NASA facilities.

NASA might take a different approach, however. “NASA is weighing closing its headquarters and scattering responsibilities among the states, a move that has the potential to dilute its coordination and influence in Washington,” Politico reported in March.

Meanwhile, Congressional Delegate Eleanor Holmes Norton, a Democrat who represents D.C., introduced legislation in March that would prohibit relocating a federal agency’s headquarters (including NASA’s) away from the D.C. area without permission from Congress.

“Moving federal agencies is not about saving taxpayer money and will degrade the vital services provided to all Americans across the country,” Norton said in a news release. “In the 1990s, the Bureau of Land Management moved its wildfire staff out West, only to move them back when Congress demanded briefings on new wildfires.”

Houston research breakthrough could pave way for next-gen superconductors

Quantum Breakthrough

A study from researchers at Rice University, published in Nature Communications, could lead to future advances in superconductors with the potential to transform energy use.

The study revealed that electrons in strange metals, which exhibit unusual resistance to electricity and behave strangely at low temperatures, become more entangled at a specific tipping point, shedding new light on these materials.

A team led by Rice’s Qimiao Si, the Harry C. and Olga K. Wiess Professor of Physics and Astronomy, used quantum Fisher information (QFI), a concept from quantum metrology, to measure how electron interactions evolve under extreme conditions. The research team also included Rice’s Yuan Fang, Yiming Wang, Mounica Mahankali and Lei Chen along with Haoyu Hu of the Donostia International Physics Center and Silke Paschen of the Vienna University of Technology. Their work showed that the quantum phenomenon of electron entanglement peaks at a quantum critical point, which is the transition between two states of matter.

“Our findings reveal that strange metals exhibit a unique entanglement pattern, which offers a new lens to understand their exotic behavior,” Si said in a news release. “By leveraging quantum information theory, we are uncovering deep quantum correlations that were previously inaccessible.”

The researchers examined a theoretical framework known as the Kondo lattice, which explains how magnetic moments interact with surrounding electrons. At a critical transition point, these interactions intensify to the extent that the quasiparticles—key to understanding electrical behavior—disappear. Using QFI, the team traced this loss of quasiparticles to the growing entanglement of electron spins, which peaks precisely at the quantum critical point.

In terms of future use, the materials share a close connection with high-temperature superconductors, which have the potential to transmit electricity without energy loss, according to the researchers. By unblocking their properties, researchers believe this could revolutionize power grids and make energy transmission more efficient.

The team also found that quantum information tools can be applied to other “exotic materials” and quantum technologies.

“By integrating quantum information science with condensed matter physics, we are pivoting in a new direction in materials research,” Si said in the release.

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This article originally appeared on our sister site, EnergyCapitalHTX.com.