The Acquire Podcast Ep. 10: FICO hyper targets local communities in its push for greater financial literacy
- FICO's Chief Marketing Officer, Nikhil Behl, joins us on the Acquire Podcast.
- 'We cannot rely on osmosis to drive financial literacy forward', he says -- so FICO is taking an active role.
Welcome to Acquire, Tearsheet’s Marketing Podcast. I’m your host, Tearsheet’s head of studio, Rebecca Cohen.
Today’s guest is Nikhil Behl – the CMO of FICO. FICO was founded way back in 1956, making it one of the oldest standing firms in the financial industry. Today we’ll talk about how it manages to keep its relevance and purpose in today’s world. Unlike most financial companies, FICO is a true common household name, thanks to the FICO Score; every American knows about FICO Scores, and most of us are usually confused, and potentially worried, by our three-digit score.
But it wasn't meant this way. FICO developed its score in the late 80s as a solution to a problem: lenders did not know how to effectively evaluate risk when assessing borrowers. A credit score is simply a measure of a consumer’s credit risk, and worthiness in qualifying for financial lending products like mortgages, or car loans; today they're also used by landlords, and insurance companies. Credit scores are based on a consumer’s credit file, with specific inputs and outputs from their financial life.
As we all know, FICO Scores are just one type of credit scores, but their overwhelming use and reliability have made them synonymous and somewhat of the gold standard when it comes to credit.
But we can't talk about credit scores without mentioning the obvious: the various arguments against credit system. In today’s economic landscape, what was supposed to be a simple and straightforward three-digit number that helps makes things make sense, has become what some call an ‘exclusionary tool’ that leaves the many people -- who don't possess the traditional inputs and outputs that yield a good credit score -- behind closed doors on financial opportunities like buying a home or just renting an apartment.
Whether these arguments are true or not, the credit scoring system, the lending landscape around it, and the financial systems at large have been changing and will continue to change. And FICO is not planning to stay behind.
That’s why I invited Nikhil, FICO’s CMO, to speak to us about what FICO has been doing things the past few years in response to the changing world, especially during the pandemic, and specifically about their recent marketing campaign Score a Better Future, which puts forwards credit education and free resources for consumers.
Side note: Nikhil’s been the CMO of FICO since 2013. Unbeknownst to me prior to making the Acquire Podcast, but being CMO is quite a hard job, with a quick turnaround – so serving that role in a major company for nearly a decade is an incredible accomplishment. I was so excited that Nikhil made the time to speak to us – I hope you enjoy our conversation.
The following excerpts were edited for clarity.
FICO: 2022 onwards
FICO is all about driving financial inclusion. And if you look at the impact that we've had over the last 30 years of the FICO Score, you can see the impact of that in financial inclusion across minority groups, especially from a US perspective.
If you look at minority homeownership or car ownership pre and post FICO Score, you can see how that's permeated through those groups. We believe that we've had a foundational and fundamental impact on making credit access much more fair and freer than it's ever been in the past. And we're not done.
Because even as we sit here today, there are over 3 billion people worldwide that fall outside the credit mainstream: they either don't have access to credit, don't have a bank account, have very little data with credit bureaus, and so lenders skip over them or classify them as high risk.
In reality, it shouldn't be that way. So as an enterprise, we are committed to drive financial inclusion and create availability and equality of opportunities for people that don't necessarily have that today; we want them to have affordable access to credit, and to build their credit history and credit profiles.
Walking the walk
With financial inclusion being a core tenet to us, we have a number of initiatives and efforts in place to help drive that on a global basis. One of those ways is around education. It's about helping consumers understand how credit markets work, how financial markets work, and what goes into things like the FICO Score.
In that credit education space, we developed Score a Better Future as a means to reach out to consumers in local communities across the US to help them understand how the credit markets function, what is credit, then have an opportunity to spend one-on-one time with nonprofit counselors, that help them understand their credit profiles, and then put a plan in place to make them better. The goal at the end of the day is to help them build a more financially secure future, have a better understanding for how financial markets actually work, how access to credit works, and how they can improve their own credit profile.
Rebranding the credit score
The FICO Score is misunderstood, and it is sometimes thought of as a gatekeeper, but the reality could not be further from that. At the end of the day, the FICO Score is a means for those who provide credit to have a free, fair, unbiased mechanism to determine how to provide safe access to credit.
In the old days, you would walk into a bank branch, meet with somebody, they would look at you and judge the interaction with you to determine whether you were going to be creditworthy or not. And the reality is that credit worthiness has nothing to do with how old you are, what your education is, the color of your skin, or your gender; what it really does, and what the foundation for the FICO Score is based on, is your ability to repay credit that you might have taken in the past.
We believe that it is important for us to help people understand how credit markets work, how access to credit works, how responsible credit works, what goes into the FICO Score – and we realize that this is an effort that's much larger than us. So it makes sense for us to partner with external folks out there to do this.
The voice is as important as the message
We've partnered with hundreds of local and national partner organizations, like Operation HOPE, whose mission is to expand economic opportunity and make free enterprise work for everyone. That is an incredible mission, and it fits perfectly with our core tenants, so they were a natural fit for us and a great partner for us in this endeavor.
We started off in 2018 with this effort, and our goal and objective at that point in time was to do hyper local events: we've been to 25+ cities; we've had many events; we've brought in local and national elected officials to participate and partner with us; we've had thousands of consumers that attended and participated in these sessions with us; and the results have been fantastic. Not only with attendance off the charts, but when we've surveyed and did research on those attendees, the vast majority (85%) of them said that it was an incredibly valuable experience for them, that it helped them understand how credit functions and helped them put a plan in place to build a more secure financial future.
Moving to digital -- for better or worse
The pandemic taught us a lot, we had to change track once that occurred, and we're getting ready now for post pandemic world where we're going to take the best of those hyper local events we started off with, and the virtual events that we did during the pandemic that allowed us to reach a much broader audience.
We’re taking the best of both and launching out here with a post pandemic structure that allows us to reach even more consumers and to bring in even more partners: the National Consumers League, the National Urban League, the Consumer Action Group, the National Committee of Real Estate Brokers, the National Association of Women Business Owners.
So it’s given us an opportunity to bring in a broader group of people, and an even broader consortium, to help attack this and solve the problem that there are still people that don't have access to credit, and we'd love for them to be able to do that.
Serving everyday Americans means childcare and working after hours
When we started this exercise, we were hopeful that it would gain traction, and we would be able to make a difference. And we very quickly realized that we had underestimated the demand and need for something like this.
When we first started with these hyper local sessions, we would partner with a local organization, we would reach out to local elected officials and local press, even national elected officials, and we were hopeful that they would want to partner with us and participate. And we were just incredibly overjoyed with the response that we received from them. They were incredibly happy that somebody was willing to come into their local communities and help run something like that.
So we quickly realized that we needed to increase the size of the venues; we needed to bring in more nonprofit counselors; we realized it should be during after work hours, so that folks who were working during the day would have an opportunity to come and attend; we needed to add childcare in our centers so mothers could leave their kids with a responsible person while they went in. And so we learned a lot through that process, and it really allowed us to continue to evolve our programming and capabilities.
What doesn't stop you makes you stronger
With the pandemic, we had to change track and move to virtual, and we found that we were able to reach an even broader audience with virtually; we could do the broad sessions, then Zoom-based one-on-one counseling sessions with counselors.
Then we realized that instead of it being just local market driven, we could partner with affinity groups like the National Mortgage Association or the National Association of Women Business Owners, and have them reach out to their constituents, and have their constituents actually come in and participate.
We also realized that we could use more digital means to reach a broader set of folks, so we started to build a more prevalent social profile to reach consumers so that they knew about these offerings. Now as we come out of a post pandemic world, we know that we can do both.
I'm sure we have a lot more to learn, I'm sure we'll continue to evolve the program to reach more people, and I'm really, really excited about the curriculum that we're building.
Financial illiteracy is an American problem
There are certainly salient features from market to market, and the challenges that they're dealing with could be somewhat different. But more than differences across geographies, we found similarities.
The US is the largest and richest economy in the world. At the same time, it is remarkable how there is still a lack of understanding in how financial markets even function. To some extent, I think we've all learned through osmosis – having exposure to dialogue with people, though a happenstance way about how a lot of this works. And the realization we've come to is that we cannot rely on osmosis to drive financial literacy forward; there has to be a deterministic way and means in which we can help the consumer population understand how the financial system actually works.
I have a teenage daughter, and you would assume that in my own household she would have a much better understanding of how financial markets work, how access to credit actually works, and how credit markets work. The reality is, she doesn't. So I should not be leaving it to osmosis to help her understand that; I have to actually take the time to explain it to her. And if in my own home that is the case, then why should we assume that that's not the case, in every home across the US.
We’re actively working on building a module-based curriculum that we can provide to highschools, colleges, and online education environments, so that they can, in a much more deterministic way, start to teach how financial markets work, how credit markets work, and how access to credit works: how do you maintain a good credit profile? What are your responsibilities when you take credit? What does repayment actually mean? What is good credit versus bad credit? How do you evaluate some of these things?
We're in a pilot mode right now with a handful of schools, and we're working with partners to prepare for a broader launch to bring credit literacy to teachers and administrators across the US.
Financial education: sacred work
I love the word ‘sacred’ – it is such an important word, and we take that word and what it means incredibly seriously. We have a sense of responsibility based on that, and it is core to our mission, and built into our value structures as a company, and as employees and people. It is because of this incredible mission that we have the responsibility that comes with that mission, which we take very seriously. That’s what makes FICO such an incredible place to be and why I have been here, and why the FICO family is here.
As for the Great Resignation: we are not seeing the same flight that a lot of other companies are seeing. I think that a large reason for that is that we are very mission driven.
The FICO Score has been around for 30 years, it has had a profound impact on financial markets, on consumers and their ability to get access to credit – and we're nowhere close to being done.
66 years young
We find that we are even more relevant in today's world than we've ever been. We helped to create the traditional banking and financial services infrastructure that exists with all the traditional banks who are all our customers, but our fastest growing customers today are all the fintechs that you hear of out there that are making a noise in the marketplace. Many of them who are talking about building the next FICO Score, also happen to be some of our largest and fastest growing customers.
We’re seeing on a real time basis how the products and solutions we are bringing to market are having a profound impact on their ability to succeed, build their businesses, and build this new infrastructure for tomorrow's financial services marketplace. And we're incredibly excited to participate in building that, just as we built the last one.
The FICO Score has proved over a period of time to be the single best way to measure and determine the propensity to repay credit. Now, one of the beauties of the time that we live in is that there is access to a tremendous amount of data, and very sophisticated analytic capabilities. What we're finding is that a lot of these fintechs and traditional banks (which, by the way, is not new) are augmenting the FICO Score with additional data and models to make the signals even better than they used to.
So I don't see that so much as a rebuilding or a replacement, rather an augmentation.
The other thing is that we ourselves are innovating and working on new products and scores that bring in alternative data. For example, FICO Score XD, where we've been looking at the traditional credit files and augmenting the score with incremental, alternative data sources to develop additional capabilities. I continue to see innovation in this space, and we continue to enhance our capabilities in the quarters and years to come.