Expanding its investment in alternative data, Consumer Edge Research released a front-end application for the credit card transaction dataset it launched in February 2018. The boutique’s growing alt data offerings underscores the importance of alternative data, which is especially critical for analysis of consumer sector stocks.
The cloud-based application, CE-Q, facilitates custom queries of the underlying credit card transaction data. Because Consumer Edge integrates over a dozen demographic variables at the cardholder level, users can compare customer characteristics across different companies or dissect consumer spending within company revenue trends. The software incorporates tools to help predict company financial performance, as well as actual company-reported results and key news events that impact the correlation between transaction data trends and reported metrics.
The credit card transaction data offered by Consumer Edge tracks activity on 15 million active credit and debit cards on a daily basis. The database has mapped brands to 300 public and private parent companies, with plans to expand coverage. There are 3,000 brands covered in the dataset.
In integrating demographic data with the transaction data, Consumer Edge has adopted a differential privacy framework, which is a cryptographic technique used by Apple and others to reduce the risk of reverse engineering personal information. The firm adds additional safeguards such as bucketing cohorts to ensure there are multiple consumers that meet each unique combination and scrambling the final two digits of zip codes.
Consumer Edge also released a new website which integrates user access to its research with the CE-Q application and templates for other data it offers, including US and Chinese consumer confidence data licensed from Prosper Insight and Analytics and restaurant industry metrics from Blackbox Intelligence.
The company has set up a separate unit, CE Insights, for its alternative data offerings comprised of data scientists, engineers and data analysts. It hired a Chief Data Scientist last year and is currently recruiting for a Quantitative Software Engineer and a Machine Learning Researcher on its website. According to Consumer Edge founder Bill Pecoriello, the CE Insights unit has 12 staff currently out of 35 total staff for the company.
Consumer Edge was founded in 2009 after Pecoriello left Morgan Stanley, having been a top ranked beverage analyst by Institutional Investor for 11 years and holding the #1 position from 2003-2008.
Consumer Edge’s aggressive expansion into alternative data reflects the firm’s longstanding data orientation. David Decker, who now oversees market research for UBS Evidence Lab, headed the CE Insights unit for three years before moving to UBS.
More broadly, the boutique’s investment in alternative data reflects the integral importance of alternative data to consumer sector analysis. One simply can no longer meaningfully track consumer-oriented stocks without leveraging alternative data.
The challenge for Consumer Edge is that transaction data is one of the most commoditized types of alternative data, with close to twenty different sources offering credit and debit purchases or other forms of transactions. Consumer Edge is relying on its analytic roots by offering market context, pre-calculated metrics and demographics – and a new front end — in an effort to differentiate its offering.