Categorization

What are FACTS?

A major step in the evaluation of payment accounts is the assignment of categories to an incoming or outgoing payment, i.e. "rent payment", "salary", "groceries" or "cash withdrawal". Tink Germany developed a unique, systematic and comprehensive approach to categorize account turnovers, which is called "FACTS": Financial Account Categorisation and Tagging Standard.

FACTS comprises more than 230 categories and its full documentation is a 50 page booklet, but the basic ideas behind FACTS can be summarized as follows:

• A standard description should be found which, in practice, does justice to a large number of payment accounts of different banks.

• Formulating a clear, consistent understanding within these definitions was a stated aim. Practical questions such as “Is car insurance classed under insurance or vehicle costs?” should be clarified unequivocally.

• The classification system should form a taxonomy in a scientific sense.

• In principle, it should be possible to apply the classification systematics across different countries, independent of language.

As we designed FACTS we mainly wanted a system suitable for credit risk assessment but from day one we were aware of other applications as well such as marketing purposes, KYC and other compliance related applications as well as automated fraud and money laundering detection.

We are aware that not all objectives are always compatible with each individual case. We have tried to resolve the resulting issues to the best of our ability. A key problem in defining a category system is the granularity of the model. Is it necessary to split internet services into further private (costs for dating sites) and business (e.g. professional network platforms) purposes? Or do you just get along with one main category? The more general the categories are, the smaller the measured error will be. But this would result in a loss of information value. We have tried to subdivide the categories where this distinction would be relevant for our customers and to leave it in a rough form until another subdivision is perhaps required for the future use of the system.