Tariff fears have abated momentarily as the courts have partially rejected Trump’s trade war strategy, earnings reports have been smoking hot, and AI is continuing to drive markets into a tizzy — setting up what is likely to be a warmer-than-expected reception for next week’s five IPOs on deck. Among the outings are two highly anticipated fintech firm debuts: BNPL co Klarna, which pulled its offering earlier this year but is back on track and targeting a $14 billion valuation, and crypto exchange Gemini Space Station, founded by Cameron and Tyler Winklevoss, which is eyeing a $2 billion val.
What could go wrong?
There’s an old adage in markets: Don’t fight the Fed. While jubilance on one side abounds, trouble is afoot elsewhere. As we await final briefs in the Federal Reserve’s independence lawsuit with the Trump administration, ahead of the much-anticipated BLS jobs report out tomorrow, Fintech Nexus is continuing our coverage of the data integrity at the heart of how the Fed sustains its ordinary operations: conducting monetary policy, maintaining financial stability, and providing financial services — as well as data powering the entire system.
The St. Louis Fed, one of the Fed’s 12 regional banks, launched FRED, an economic data aggregator, in 1991 as an electronic bulletin board; it’s now a highly sophisticated system with graphing and mapping capabilities, including data that can be downloaded and used by classrooms and financial institutions alike. The publicly available system has evolved to offer more than 236,000 regional, national, and international economic data series, with the data coming from more than 60 reporting agencies around the world. Especially as data provided by government agencies risks being called into question, we were curious: How does FRED ensure the masses are getting quality information?
“FRED is a data aggregator with multiple layers of checks to ensure the accurate publication of data from trusted sources. Before a release (i.e., dataset) is added to FRED for the first time, a St. Louis Fed data committee, composed of economists, librarians, and information professionals, reviews the source’s methodology, reputation, and how the data are used in the media and academic journals,” Keith Taylor, group vice president at the Federal Reserve Bank of St. Louis, told Fintech Nexus. “The committee also considers factors such as user demand for the dataset, the business cycle, and whether FRED already has similar data. Once the committee grants approval to add the dataset to FRED, stringent quality control processes ensure that the latest data FRED publishes match exactly the source data/data already published by the sources. Each FRED graph includes links back to the source materials, making it easy for FRED users to verify the accuracy of the data and understand the methodology for a specific series.”
Fintechs and FIs have nevertheless diversified their data sources over the years — solving for breadth, depth, and a competitive edge — pulling from bank accounts, payroll data, and other quantitative founts. Just this week, we’ve seen Chase and PayPal tie up with Nova Credit to provide cash-flow underwriting insights for their consumer credit products, which Nova Credit founder and CEO Misha Esipov sees as part of a larger “cash flow underwriting adoption wave… underway.”
But as Kareem Saleh, founder and CEO of Fairplay, tells Fintech Nexus, if trust in public data declines, an increasing reliance on private data to triangulate publicly available statistics can provide larger FIs an even greater advantage over smaller fish in the space.
“Some financial institutions — like the big ones — may already be buying some of this data… but maybe they’re not coming out-of-pocket any more than they already are today, whereas some of these new players are going to struggle with that,” he says.
–The Editors
