What is your strategy for India, both in terms of its market potential and utilising it as a source of talent?
Well, we’ve been present in India for quite some time now, but as a market, it’s relatively recent. We have an operation in Bangalore with 1300 employees, which is about one-third of our global workforce. Most of our development work takes place in Bangalore, even the platform that we have launched has been developed in India. We’ve been present in India for 15 years. Our company has sold products like our Falcon fraud detection system to major banks. Now we have introduced our decision platform in the market, a next-generation CRM, which is already widely used globally by top financial institutions.
India has transformed as a market. Everyone here has a bank account, and there’s a robust digital infrastructure connecting people that wasn’t as strong earlier. This fits perfectly with our technology.
To give you some background, FICO has played a significant role in building consumer credit economies worldwide. We started in the United States in the 1980s, developing credit scores. We made it cost-effective to provide unsecured credit to a larger number of people. This played an instrumental role in building the US credit card industry.
We’ve taken this technology to countries like China, Brazil, and others, but biggest achievement is the platform we’ve built. In the past, assessing creditworthiness relied on historical data, creating a chicken-and-egg situation where only people with credit history could get more credit. Even today, around 55 million Americans are unscorable because they’re new to credit.
In India, due to the government’s management of infrastructure, we’ll quickly understand consumer behaviours that took other countries decades to grasp. This positions us to rapidly grow the consumer credit segment of the Indian economy. I recently spoke with a CEO who emphasised that to grow the Indian economy beyond 7%, consumer credit must grow at over 20% annually. We’ll contribute to this by using technology to evaluate credit. While secured credit can only go so far, we’ll also extend credit to those new to credit and those with limited financial history. Our approach focuses on responsible lending to individuals who can manage it well.India has developed a robust technology stack in recent years. How would you compare it to digital infrastructures in other countries?
I believe the India technology stack is a powerful enabler. Historically, when it comes to credit assessment, companies have relied on limited data sets, with credit card payment history being a prime example. It tells us if someone has paid their bills on time in the past, which is a strong indicator of future behaviour. However, this data set has its own limitations.
In the United States, we’ve had to look for new data sources because a large percentage of the population is unscored due to limited credit history. We’ve had to look at data such as rental payments, utility payments, telco payments, and even checking account information. Questions like how frequently one overdraws their account, average balances, and consistent income deposits from employers all provide important insights into creditworthiness.
In many parts of the world, getting such data has been difficult. However, in India, these data sources are not only available but also poised to become more accessible. This abundance of data will revolutionise credit assessment and enable us to make more accurate predictions about an individual’s creditworthiness.
In India, getting data is not a problem, but just that the data pools reside at different locations…
Indeed, the difficulty is not data availability, but rather where the data is stored. Fico works on two fronts. On one hand, we have our scores company, which uses credit card payment and credit bureau data to provide predictive insights. However, we have always worked to improve underwriting, risk management, and credit availability for people with poor credit.
Fico software was created with adaptability in mind, and can read data from a variety of sources. Our platform can pull and integrate hundreds of datasets, and there is no limit to what may be added. This approach enables us to make underwriting and risk decisions using a variety of data and analytics in addition to normal scorecards.
Furthermore, our platform specialises in building and sustaining digital relationships with customers. Unlike the traditional approach, which treats customers as segments, our platform is designed for one-to-one marketing. Each individual is a unique entity with its own data personality. We do not divide people into groups; rather, we consider what we know about them.
This approach is critical when a bank interacts with a consumer because it allows us to offer personalised advice, offers, and products based on a deep understanding of the end consumer. We consider every customer interaction, call center conversation, text message, email, or product inquiry when making decisions. This approach became even more critical during the Covid-19 pandemic, as everything shifted towards digital interactions.
Our platform has experienced significant growth, consistently registering high double digit growth in the last 16 quarters.
In which product do you see more opportunity in India: consumer credit scores or platform?
Yes, but I believe the significant opportunity lies in the platform side. Here’s why: credit scores rely on bureau data and credit card payment data. In India, there are 93 million cards, which is great. However, we need to reach the other 1.3 billion people. The banks in India tend to be conservative, and rightly so. This is where the platform comes into play. We do have credit scores in India, and we also have the platform. However, I see the platform as the primary driver of growth.
There are very few players globally who can operate at the scale required in India, and we are one of them, particularly with our platform. We handle the majority of the world’s credit card transactions, and this involves a large number of transactions in real-time. Our data centers can process these transactions in mere milliseconds, often under 10 milliseconds. This is the level of capability we bring, ensuring hyper-personalisation and hyperscale with minimal latency when we enter the Indian market.
India has stringent data protection laws with heavy fines for data breaches. How do you plan to ensure the safety of the data?
Data security has been a top priority for us throughout our 67-year history. We’ve never experienced a data breach, and that’s because we’ve invested significantly in robust security measures. Our clients, which include some of the world’s largest banks, subject us to rigorous audits before adopting our software. So, we’ve been extensively tested and have a strong track record in this regard.
In terms of engineering, we take several precautions to minimize risks. Firstly, we don’t store data; we’re an analytics company, not a data company. When we do handle data, we employ encryption and other measures to ensure its safety. We take extra care to protect personal data, with only very few exceptions. So, while we’re conscious of the data protection laws and potential risks, we’re confident in our ability to keep data secure.
How does FICO differ from companies like Accenture, IBM, or McKinsey, all of which are involved in data analytics? What sets you apart?
Firstly, we have a rich history that spans 67 years, and data analytics is deeply ingrained in our DNA. FICO was founded by a mathematician and an engineer in 1957, initially focusing on credit decisions. Over time, we’ve mastered the art of applying analytics at scale, particularly in software. While analytics can be a niche area, scaling it with software is challenging and has taken us decades to perfect.
However, the primary reason for our differentiation is that we provide an end-to-end solution. Many others analyse historical data, form hypotheses, and build models. They share insights with their superiors, and everyone has ideas. But what sets us apart is that our platform enables users to simulate their hypotheses easily. They can test their underwriting adjustments, conduct simulations, and gain insights before deploying changes. Our platform encourages an iterative, adaptive approach to running businesses. It’s flexible, and every day is a learning experience, making it a favourite among bankers. We prioritise ongoing learning and adaptability, which distinguishes us in the field of data analytics.
The FICO Platform was largely made in India. Can you tell us more about that?
Absolutely. The platform represents the evolution of our entire software business. We used to have various software products developed globally. However, we realised that having disparate point solutions wasn’t efficient. So, we decided to create a unified, modular, and collaborative platform. Most of our engineering talent is based in India, and that’s why the platform was primarily developed here. While there is a cost advantage to having operations in India, it’s not the primary motivator. We are drawn to the incredible talent pool available in India. We have a strong reputation in the country, and we attract some of the brightest minds in the industry. These talented individuals work on developing industry-leading, world-class software. Our workforce in India has been growing by over 11% annually for many years, and our attrition rates are well below the industry average, which speaks to the strong talent and work environment we’ve cultivated here.
There’s an ongoing debate about best-of-breed solutions versus single-point vendors. Where do you stand on this debate?
Well, I don’t believe there’s a one-size-fits-all answer to this debate. It really depends on the specific situation. Consultants often say, “It depends,” and that’s because different scenarios call for different approaches. In some cases, point solutions are the ideal choice. For instance, consider our Falcon fraud product. It’s specialised in detecting credit card fraud and boasts a 90% market share in the US, 65% globally, and 60% in India. It’s optimised for this specific purpose, offering industrial-strength fraud detection with response times as low as 10 milliseconds. We’ve successfully reduced fraud rates in banks to incredibly low levels using this point solution.
However, when it comes to the FICO platform, it’s an entirely different story. The platform is incredibly versatile and comprehensive. You don’t need multiple point solutions because the platform can handle a wide range of tasks. It serves as a toolkit or an erector set, allowing you to build virtually any solution you need, including fraud detection. So, while the platform falls into the category of suite solutions, I would argue that it’s challenging to find standalone point solutions that can outperform what you can achieve on the FICO platform.
How are you utilising artificial intelligence within your own business, and how do you assess the impact of artificial intelligence on product management?
We’ve been deeply involved in AI for a significant period, even before it became a trend. Our history includes 35 years of working with neural networks and decades of experience in machine learning. When it comes to AI in our field, which is primarily centered around underwriting and credit decisions, we apply AI with a specific focus. Regulators require transparency in decision-making, so we’ve developed patented methods for ethical AI and explainable AI. However, we do leverage AI in areas where it can be used more liberally, such as creating synthetic data for models.
Our journey in artificial intelligence dates back quite a while. For instance, we secured our first AI patent related to fraud detection 32 years ago. So, while AI may be a current buzzword, we’ve been deeply engaged in this space for an extended period. We hold numerous patents in AI and machine learning. What sets the FICO platform apart is its emphasis on operationalising analytics to drive tangible outcomes. According to Gartner, less than 10% of AI and ML models across industries are operationalised. Our platform addresses this challenge by providing a container that enables operationalisation, insights derivation, workflow integration, and outcome generation. As a result, over 90% of our customers’ AI and ML models are effectively operational and driving outcomes, contrary to the industry’s average.
There must be a bunch of startups looking to disrupt your business, how do you keep track of these upstarts?
Well, it’s an interesting dynamic. Some of these newcomers initially embrace our technology. They start by using our solutions because they find it to be the first and easiest step. However, not all of them continue to do so as they scale up. Often, they come up with innovative ideas that may work at a smaller scale but become unsustainable as they grow. Regulators sometimes intervene, leading these companies to pivot or shut down certain operations. We’ve observed this pattern with startups like Upstart, among others. It’s not necessarily illegal, but it may not be feasible at scale.
For instance, take the case of SoFi. They initially focused on lending to students from prestigious universities like Stanford and Ivy League schools. However, once they saturated that market, they had to adapt their value proposition to broaden their reach. SoFi is a respectable company that eventually became a significant consumer of FICO products.
On the other hand, there are fintech startups that naturally gravitate towards our platform because they don’t have legacy systems. They can start fresh and use the FICO platform for a wide range of applications. A great example is Trust Bank, a digital bank in Singapore. They partnered with us to rapidly launch their digital bank, offering quick and flexible decisions on credit card approvals. Within 30 days, they acquired 4,50,000 customers, and the approval process took only three minutes. Trust Bank’s success demonstrates how fintechs can leverage our platform to achieve their goals efficiently. We have invested over half a billion dollars in our software business, which has allowed us to create the innovative FICO platform. In essence, we’re disrupting ourselves before someone else has the chance to disrupt us.