The little credit bureau that did, with Paul Randall (Creditinfo)

You know, often people think of the Nordics as a long way away from Africa, but this is something that we've really worked hard on sharing that knowledge across markets in East Africa, you know, first-movers on mobile wallets, but then we've got in West Africa the use of the utility data. But also, although many of the variables are quite similar, you know, it's very important to look at the nuances of the data in that context. The very first episodes of Heart to Land Money to Strangers were published exactly one year ago today. And so to mark the occasion, he has a bonus episode. Iceland is home to just 371,000 hardy souls. If so, small in fact that when you google it from the UK, the first results are all for the local grocery store chain. That's a little unfair because they only have a population of 30,000 employees, but I'd address. The point is Iceland is not a market we would quickly think of if we were to go looking for the next David to take on one of the financial industries of various galites. But then again, the immense football team did surprise the world by making it all the way to the quarter-finals of the Euros in 2016, beating England along the way, which I mentioned only for reasons of historical accuracy, of course. Nevertheless, I probably shouldn't be that surprised then, that credit info than our 25-year-old credit bureau headquartered in Reykjavik is making such big waves in the industry. Welcome to Heart to Land Money to Strangers with Brendan Lagrange. As I chat to Paul Randall, CEO of Credit Info, about disrupting the credit bureau industry and leveraging data and tech to facilitate access to credit. Paul Randall, welcome to the show. Your CEO at Credit Info, and I'm delighted to be talking to you today, because actually Credit Info is a company I tried to get on very early in the show's life. I used to work for Burak, as you know, and you know, I had your global markets as I understand it, but either the contact details I had for import old, or he was avoiding me, but nevertheless, great to have you on. I think what really intrigues me about the credit info story is that credit info seems to be a rare disruptor in the credit bureau industry. This is an industry that has actually enabled a lot of the innovation we hear about in lending over the last decade or two, but the industry itself is still really concentrated in the three big names that have been there forever. Before we get into that, let's take a moment just to talk about your own background, because before you joined an ambitious little credit bureau based out of Iceland, no less, you were really well established in a traditional credit withdrawal with one of those big three credit bureaus having worked for some big name banking brands. Thanks, Brendan, for having me on the show and really excited to talk about credit info and a little bit of my background. I started off, actually, as a young graduate, and got into credit with mail order first. And I think that's always shaped my mind in terms of seeing credit as a facilitator for buying goods and means to an end rather than an end itself. And also the way that it's much more dynamic when you're talking about small values. And so I think always that side of credit away from just banking was always in my mind and also seeing credit as a dynamic industry, not something that is relatively slow with established banks. During my career, I'd work for Scorex, who was similar to to credit info across multiple countries expanding geographically and providing really quite niche consultancy. After that was acquired by experience, I think the structure and organization of how to deliver the consultancy changed me and many of my colleagues from having an in-depth knowledge about credit to having that knowledge together with the way to communicate it to different levels. And having got those skills and also had a fantastic time with experienced transforming some of the South Korean banks after the crisis. I think when I was approached with the opportunity to join credit info and saw the possibilities and the diversity of what was happening together with perhaps the yearning to be involved in terms of, I guess, some level of ownership and managing a specific unit which I started with the synanletics. So it was really the motivator that drove me forward. Okay, so yeah, the move from the biggest name in the industry to one of the small startups wasn't as dramatic as it maybe seems from the outside. You really had that experience in the more entrepreneurial side of credit and the more dynamic side of the industry. So you made that decision to move to credit info and it seems like a fantastic choice to have made all of 15 years ago in that time credit info is grown from strength to strength and your careers obviously progressed significantly within the organization. What has it been like for the 15 years? Well, since you made that decision to make the big move. I think to be very frank, I think some of the early days were quite challenging because whereas I expected to be going into an organically grown organization which I'd been in previously if we reference score X initially a lot of the growth of credit info was through acquisition. And it wasn't until Rayna won a fantastic opportunity in Kazakhstan to deliver the consumer bureau and beating experience against all the odds that the company started to change to focus more on more traditional credits scoring away from the Icelandic model of building a lot of different data sources primarily on business information. And so that meant there were new challenges to be faced which was that perhaps the current management directors weren't immediately bought into the concept of having decision analytics and moving that forward. And so it was a very methodical and slow process to actually explain the benefits and really selling internally. The second phase after the crisis Rayna took a view to them really focus on organic growth with the setting up of new credit bureaus around the world which has created much more the footprint that we have today. Yeah, let's talk about that a bit because the first time I really became interested in credit info was after watching that wonderful video that you can find on YouTube and I think on your website as well where Rayna discusses the history and sort of the inspiration or the culture I guess more so behind credit info. And I think it's really something I recommend everybody watch because he's obviously very charismatic in that as well but I think he opens it by saying I think in 10 years time will be big and it's a wonderful understatement in hindsight because as you said there's been a lot of growth since then but also global expansion to 30 plus countries. What are you doing differently because yeah as I said earlier on this is an industry where trans union is 50 years old a quick facts more than 100 years old experience more than 200 years old have you come in there and to win those deals and to I guess we'll dive into this more as well but to enter these markets which were ignored intentionally in some ways just as seen as too difficult to enter what's your approach that has made this work. So I think a little bit of the backstory of this was that a lot of development funds lost a lot of money at the beginning of the 2000s and they were often subsidized by IFC World Bank ERBD and what they realized was to actually support the lending in countries as well as giving funding to banks and microfinance they also had to build the financial infrastructure. So a team was set up in the IFC to actually support organizations to support central banks and countries to change the legislation and to create an infrastructure and one of those elements of the infrastructure was credit bureaus. Rainer recognized this and wanted to be able to put credit bureaus in any of these countries so what we needed was effectively a pre-formatted solution that we could put in relatively cheaply just parameterize it and then deliver it to those countries. Now we built the software and at the same time we also built a team who were actually going to support that process and so Rainer's vision was that this infrastructure was needed in every country so credit info with the company who were going to actually deliver to each of those countries. My understanding is that you're not waiting for all the traditional infrastructure to be in place you've really embraced right from the start alternative data or different data approaches so that you're not waiting for the three big high street banks to all agree on a format to submit to you and all those things that have scared the other players away you went in there with the intention of building a credit bureau and then finding a way to get the date you need to make that work. I think that was true in the very early days I think in the second way we had the advantage of good legislation that actually enforce the regulated entities to provide that data in a structured way which obviously takes time. So while that's happening in parallel we're also looking for as many data sources as possible to add and also knowing that additional data sources are going to be needed to onboard individuals who are not in the financial infrastructure at the moment or formal financial infrastructure. So we continue to do those things in parallel if we look at most developing countries we see that perhaps at the start of a credit bureau journey as perhaps five to eight percent of the population who are covered by formal finance. Typically, if you. You can get to or three other parts of the financial infrastructure involved. You can take that number relatively quickly up to 35, 40%. I think what's interesting in that approach as well is the easier route to take would be to say as a credit bureau looking to expand into new markets, looking to grow, we will go into markets where it's existing credit bureaus, we will be the alternative bureau that keeps the primary ones on their toes, you know, it will make some money there and then we'll look to make market shape, but you have gone into these hugely diverse markets, a long way from Scandinavian routes, countries that would make many managers nervous about what was involved. So, what is your approach to finding new markets? I mean, I see you've recently just launched in Angola. How do you look at the world map and decide where you're going to make your next move or expand your businesses? So I think some extent it was led also by what the infrastructure was changing and perhaps in the legal infrastructure to allow credit bureaus and support credit bureaus. So that was often the trigger for the next country. Also, we're looking at the strength of the central bank. I think that's an important aspect that we found that often in countries, the central bank in particular, is often the most respected entity in the country and their strength and power often is important to have certainly a relationship with them. And then we're looking for a certain level of political stability and population size, also given that ratio often, often, you know, 5 to 15%. We have opened in some very small countries, but certainly the potential to grow is important for us. It is really reassuring to hear a good word spoken about regulators and governments because it sounds like a lot of countries are taking a much more proactive approach rather than just hear something that needs to be robust and put in place and forgotten about. For sure. And I think it's really helped a lot and it's important for us in terms of the way we approach it is also to have local leadership, local people who have the right understanding of the market needs and also constantly communicating with the regulators because even if there is that first flush of excitement often can become lower in the pecking order of priorities. So it's important that we keep lobbying and making sure that we're getting the continued support when we're actually investing a lot of money to actually set up credit bureau. And I think, you know, reflecting on your question earlier about the comparison with some of the big boys, it is quite a large investment for us on our side and it takes a long time to build it and a lot of patience. And for sure there is always some hiccups on the way and challenges, but I think we're a little bit of determination now won't can get through that process. Yeah, and I guess there's a silver lining in that that when you are going in and we're thinking about it from scratch, we can have a leapfrog some of the structural complexities that we have in other markets that have grown organically over the last 40, 50 years. In terms of the data, the way it's produced, where it comes from, you know, who's considered as credit providers issuing the data, that can all be set up with the modern world in mind. So, looking at the data that goes into some of these new bureaus, is it still driven by the big name banks or who are the key players in these markets? Yeah, that first five to seven percent is going to be the banks who provide that and perhaps with the history. But then that next from up to 35, 40 percent is often the telcos. We have a huge relationship with SafariCom in Kenya who is an obvious one, but you know, we're engaging with all the telcos. We're also, you know, discussion with the utilities. So we have big relationship in Kodivaya with the electricity and that's particularly important for perhaps some of the businesses who are on the SME side who want to have that first footprint on a credit bureau. Well then we'll also look for other government aspects, often for validation in KYC. So we're looking at stolen passports. We may be looking at ID lists, maybe looking at car registration. So we're constantly engaging with anybody who has that information. But the real volume particularly in Africa at the moment is coming from the telcos. Yeah, and you mentioned the SMEs. We're recording this the week that the episode on the Thailand landscape went out and the Thai credit bureau is relatively rare. At least in my mind in that it has the consumer side as well as SME data in the credit bureau. But it sounds like in your euro's year oling out that is also happening more and more. No, very much. We often from a regulation perspective, the banks and microfinance need to provide us with all the information on consumers and businesses. You know, there's a lot of focus amongst the NGOs and development organisations around supporting SMEs. And I feel that we've probably got, you know, the biggest database outside South Africa of SMEs in Africa. And I think at the moment, obviously with reciprocity, the focus is on exchange of information within those providing information within the credit bureaus. But I think through the concept of direct to consumer or businesses taking control of their own data should allow us to provide that information on a wider scale to support trade. And recently we took an international credit report for a business in Kenya. Within the credit bureau, we knew which banks were servicing them, how much, when that was being serviced. And I felt that if they wanted to trade internationally, you know, this was the information that was really critical. And so, you know, our next stage is really to develop ways of providing that information to a wider audience to support trade. Yeah. And I think as I said before, we started recording. I've had a few episodes on SME lending. It's not my area of expertise, but to just hear how many hoops SMEs need to jump through to get credit. It is really worrying when that is the engine of growth around the world. A lot of developing countries, it's small business owners, micro business owners that underpin the economy. So I think anything that helps them is good for the people as a whole. Could I just add to that, one of the areas that we're working quite a lot with on the mobile lending is press SMEs as well, where they're perhaps processing much of their transactions through mobile wallets. And we're also using that aggregated information to support the lenders and providing credit to the SMEs there as well. We're listening to how to lend money to strangers with Brendan Lagrange. If you're enjoying it, I'd love you to hit that little plus button to follow. Now, time for a quick ad break and then we'll get right back to the show. The mobile wallet information I see in it is in a way is a parallel option to open banking. It's really where somebody's having their financial transactions, gives an indication of their income or their ability to spend, as well as some indication of the consistency of salary over time and income. So I think what we've seen is combining that with the credit bureau data really provides a really strong indication of risk. And we talked about the different data sources. Some of the data sources we may not be holding within the credit bureau. But what we're trying to do is actually facilitate so we can provide decision modules where we're bringing together that data that may be held by the telco or the bank in the mobile wallet and combining that with the credit bureau data. So it's easy to use to generate those decisions for the vendors. So I think back not too long ago in the credit bureau world, we might sell a bit of software to help connect the bureaus. But it would be either go all to credit bureau A. If that doesn't work for you, you re-read it all to credit bureau B. But it's great to hear them a more open approach where it feels like it is more of this built for the modern age approach where data comes and goes from all sorts of different sources and not always from the right organizations who've put in a credit bureau world that could still be interesting to use. Absolutely right. And the different data could vary from different markets. And I think this is something that we've really worked hard on. He's actually sharing that knowledge across markets. So we might have any Stavrica, first movers on mobile wallets. But then we've got in West Africa the use of the utility data. And so really the sharing of that information and often people think of the Nordics as a long way away from Africa. But there's initiatives that we're doing there that can be followed on different data sources, different sharing of information. And recently we've seen the sharing going the other way. So the Nordics also asking about the use of mobile data and how that can be integrated. This is really I think one of the key things that we need to think about as an organization is making sure that the learning that we have is one shared across the different regions. But also that we have to then integrate it. So it's relatively easy and low cost to roll out in new markets. It sounds like credit info is uniquely well placed to do that in that you don't have the traditional growth path where you would have built a multi-billion dollar US business, a multi-billion dollar UK business. And they would have had these internal behemoths and then a smaller part that's doing the emerging markets, doing the innovation that no matter how much priority it gets will always be seen relative to the big businesses. Your whole business is built around East diverse markets and serving them. And in a first for the show, it's really well reflected in a cookbook that I see that you've got that I think showcases an appreciation for the diversity of the markets you serve and valuing what the different parties can bring. Yeah, we've done that a couple of years now. Actually, I was very touched when I read the most recent version and the first story because we had a story together with the recipes was about an in and the slavery museum Monday. whole history around the different buildings and for me that also really brought it together about how important it was for people to share those messages of their countries and then being able to give the book to colleagues and to customers and partners with showing that this is a credit info and the diversity that we represent. Yeah, and I think a really nice way to take that message home. Food is such a great way of moving culture around the world. Now, early you mentioned open banking so maybe we should jump to that quickly because in some ways people will talk about open banking as a credit bureau killer as the thing that would replace credit bureaus in time. But you're fully on the open banking train as you've got an open banking division of your own rolling out open banking products around the world. So what is your philosophy on open banking? Yeah, I think for us we're very much focusing on being able to deliver it in our markets together as a blended solution. The different components, the credit risk, the default indicator but also the affordability risk so we can look at those in different dimensions and potentially also the fraud risk. There is many very good players out there who are very focused on just one aspect. For us it was about really complimentary solutions, enabling customers to have all the information necessary together in one solution. You just spoke about credit scores there and we did talk about the different markets you in and markets that many listeners wouldn't have experienced working in. What's your approach to rolling out data products in a market? Your background is Scorix. I'm sure credit scores are as close to your heart as they are to mine. Yeah, I think it's obviously one of the first solutions that we roll out once we've got information and some history and we've got some really powerful scores although many of the variables are quite similar, it's very important to look at the nuances of the data and the changes perhaps over time of data and some of those aspects that I mentioned before where you have perhaps 7% of the markets have got more traditional type lending, perhaps with an average loan of about $3,000 and then you have perhaps a further 35% 40% with average loan of 20 to $50. It's important to make sure that we're looking at the information in that context and perhaps building two suites of models to make sure that they're relevant for the type of lending that's been made but also there is a surprising amount of crossover that we are including the different variables from the different data source with in our final models and then we see as our role financial education for the financial institutions to see where the benefit is of using a score as they move to digitalisation and more automated processes. It can take a while for people to become comfortable with the idea of a score but that score is there and that some people are using it is obviously the first key step and I think if we're looking at how do we take loans at scale on to people's smartphones it will always be underpinned by some form of credit models. We spoke him so far about your mission of facilitating access to finance more in terms of your willingness and ability to go into markets that others may not but I was looking through the website and it's not just restricted to expansion to developing markets or serving and to serve populations through new data. I see you also published some really interesting research on closing the gender lending gap which was interesting because normally you hear something like the gender pay gap but you've got to look at it from a lending point of view so what was it that you found there? So I think what we saw was there's often seen that the access for women was considerably lower than that of men. We also know that organisations such as the World Bank are very interested to close this gap and we're providing those insights to them and working with them and the lenders about how their approach may change that over time and I think perhaps our initial role is to highlight what the situation is and perhaps also across different types of lending because we have that information. I know you recently were speaking with FICO about the use of benchmarking and I think that's something we're trying to bring in perhaps not in the same level of death. It's an important tool to highlight some of the perhaps I should say bias towards a certain groups and how we can work with the lenders and NGOs to try and firstly support education and secondly perhaps change the approach to some of the lending in certain situations. Clearly credit info is still after all these years now sort of well established but still a very ambitious organisation with lots going on. What is next for you? Should we be watching in the next year or so? So I think what I would like to see is probably on a couple of different fronts. I would really like to use more data across border whether it be for as we mentioned before about individual SMEs supporting the trade side of the business. I would like to make sure that each of our countries are towards the 40% of coverage and higher rather than the the 5.7% which may often be the starting environment so where necessary will be involved in lobbying as well as the natural growth of the market. Then the other aspect is a focus on ESG terms of using our data to actually support different types of lending, more relevant lending, whether that be more in the Nordics where perhaps it's about more regulated aspects of the type of lending this happened or a different perspective of lending in Africa. So perhaps also to give confidence to international investors to broaden the lending and also feel that they are lending to the right type of organisation with the right governance. And that's really where the brunt of climate change if we just focus on that is going to be felt. So you talked about innovation moving back and forward. I think it's a space where the Nordics probably markets were developed enough that that's a problem they can focus on but really where it's going to be felt first and foremost is in developing markets and some more so than others but I'm sure that having that link between the two is going to be really powerful for both sides of that chain. When we look at something like that which is a very new problem for all of us to think about and if people want to keep an eye on that if they want to learn what you're doing they want to explore some of those markets you're in some of these success stories you've had around the world where can they go to learn more about credit info? So pretty much all our news is either on the website credit info.com or on LinkedIn pages so we have a group page and then we also have pages for each of our regions where people can see if they're particularly focused on a local market. Perfect. I'll drop a link to those in the show notes as well Paul. Thank you again for joining me today. It's been a pleasure chatting to you. We're looking forward to seeing what's credit info does next. Thanks a lot Brendan. Really enjoyed being on the show. Thanks a lot. And thank you all for listening. If you enjoyed that please do rate and review on your preferred podcast platform and share widely including on LinkedIn and while you're there send me a connection request. The show is written and recorded by myself Brendan McGrange in Brighton England and edited with assistance by a cane hunter. Show music is by iamwake and you can find full written transcripts now in several languages show notes and more content at www.artilanemoney2strangers.show. And I'll see you again next Thursday. (upbeat music)