FICO Suite 10 Brings New Precision and Flexibility to Credit Scoring Decisions

Photo by Lukas from Pexels

FICO announced this week that its latest credit risk solution FICO Score 10 Suite will be available to lenders via the U.S. credit reporting agencies this summer. The new technology leverages trended credit bureau data to boost its predictive power, enabling lenders to make more precise decisions on credit risk.

The company said that the new Score 10 Suite could reduce the number of defaults in a lender’s portfolio by up to 10% for newly originated bankcards, and 9% among newly originated auto loans versus the previous, FICO Score 9. The new solution performs even better with newly originated mortgage loans, the company added, with a 17% reduction in defaults.

“FICO is a cornerstone for consumer lending decisions,” Jim Wehmann, executive vice president for Scores at FICO said. “We continuously innovate using the latest, most robust data, while maintaining consistency with previous models to ensure backward compatibility and minimize operational changes required to adopt a new score.”

The company is touting the use of trended data as one of the key enhancements of the new technology. Trended data provides a historical view of data like account balances which gives lenders a more complete understanding of how an applicant manages their finances. At the same time, FICO Score 10 maintains FICO Score minimum scoring criteria, and features backwards compatibility with previous versions of FICO Score. This helps ensure that lenders experience a seamless transition to the new offering with maximum ease of use and stability.

In addition to the emphasis on trended data, the new scoring regime also takes an interest in personal loans that the applicant may have. The increasing use of personal loans, to pay down credit card debt for example, has grown in recent years. MarketWatch noted earlier this week that personal loans are the fastest-growing debt category in the U.S. The takeaway is that FICO Score 10 will make it easier for those who are managing their finances well to avoid being penalized for instances when debt might spike due to a large, single-instance purchase. Meanwhile, those who are adding debt (personal loan, home equity loan, etc.) as a strategy to manage their debt may find the new scoring criteria more challenging.

FICO closed out 2019 with the release of two new products and an acquisition. In November, the company launched FICO Identity Proofing, a digital onboarding solution; and FICO User Authentication, a set of multi-factor authentication functionalities. Both new solutions were made possible by the company’s acquisition of security access provider EZMCOM that month.

An alum of our developers conference, FinDEVr New York 2016, FICO was founded as Fair Isaac Corporation in 1956. The company is based in San Jose, California.

FICO Acquires EZMCOM

Analytics and decision management technology company FICO announced two new products this week as it snapped up security access provider EZMCOM. Transactional details of the acquisition were undisclosed.

The acquisition has facilitated the launch of FICO Identity Proofing, digital onboarding technology; and FICO User Authentication, a suite of multi-factor, biometric, and behavioral authentication capabilities.

EZMCOM was founded in 2006. The company’s identity proofing, biometric, behavioral and risk-based authentication technology is used by tier-1 banks across the globe, ultimately serving 60 million customers.

“As our clients expand their digital offerings, they are requesting more sophisticated identity proofing and authentication capabilities to complement our fraud, compliance, customer lifecycle, and customer engagement applications,” said FICO CTO Claus Moldt. “Behavioral and biometric authentication are becoming the gold standard to prevent identity spoofing and improve customer protection, while reducing friction. By adding this technology to our portfolio, we will provide our clients with a seamless approach to authentication and customer onboarding – across digital channels, mobile devices, servers and workstations.”

Founded in 1956 as Fair Isaac Corporation, FICO presented “Rapidly Deliver Contextually-Powered Stream Processing” at FinDEVr New York 2016. 

Finovate Alumni News

On the web

  • Zopa Tests Savings Product Before Full Launch.
  • Starling Bank Offers Income Protection Insurance Via Anorak Partnership.
  • Q2 Closes Acquisition of PrecisionLender.

Around the web

  • Revolut unveils metal cards in silver and space grey.
  • Chief Administrative Officer of the Royal Bank of Scotland interviews BioCatch CEO.
  • ITSector inaugurates 6th Software Development Center that will focus on the financial sector, AI, and 5G.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

Finovate Alumni News

On Finovate.com

Around the web

  • Jack Henry & Associates named a top workplace by The San Diego Union-Tribune.
  • Raketech partners with Trustly for in-banner Pay N Play technology.
  • First Data launches Clover Mini and Clover Flex in Argentina.
  • Banco Original chooses FICO to launch digital platform.

This post will be updated throughout the day as news and developments emerge. You can also follow all the alumni news headlines on the Finovate Twitter account.

FinDEVr APIntelligence

FDNY17_EventLogo_v1(wdate)Tickets for upcoming FinDEVr London and FinDEVr New York are at their lowest prices now. Register before Friday for New York to save!

On FinDEVr.com

  • Join FinDEVr New York’s Impressive Audience — Save On Tickets Through Friday!

The latest from FinDEVr Silicon Valley presenters

  • PwC and Oracle team up to help FIs meet new accounting standards
  • Technology from Modo Payments supports new loyalty point POS payment partnership between FIS and Verifone.

Alumni updates

  • FICO and Ethoca partner to improve card acceptance rates, fight CNP fraud, and reduce disputes.
  • Finextra: Blockchain launches Digital Asset Research Lab.
  • OnDeck and payment solutions provider WEX team up to provide small business financing.
  • Token partners with VirtusaPolaris, information technology consulting and outsourcing company.

Stay current on daily news from the fintech developer community! Follow FinDEVr on Twitter.

A Look at the First Week of Nasdaq’s Fintech Index

While many of you were busy catching Pikachu last week, you may have missed that Nasdaq, in collaboration with KBW, launched an index to track financial technology. Officially named KBW Nasdaq Financial Technology Index (KFTX), the fund tracks 49 fintech companies, including 17 Finovate and FinDEVr alums.

On Monday, 18 July, the index opened at 1,000 points and closed at almost 1,014 points on Friday, 22 July.

Screen Shot 2016-07-25 at 2.52.11 PM

Finovate and FinDEVr alums listed in the index include:

According to Nasdaq’s press release, the companies in the index “represent roughly one-fifth (18%) of the investable domestic financial universe and nearly 4% of the investable domestic equity universe to account for approximately $785 billion in total market cap.”

It’s worth noting that the index, which will be rebalanced quarterly, does not consider activity from private companies, startups, or banks. Large, public companies may not be as sprightly as two guys in a garage, but they create their fair share of cutting-edge products and services. When creating the index, KBW and Nasdaq adhered to three guidelines:

  1. The companies mainly sell financial services
  2. Not primarily brick-and-mortar operated
  3. Income is generated from fees, rather than interest

Other companies in the index include (each company in the index is weighted equally):

Alliance Data Systems Corp. (ADS); Bankrate Inc. (RATE); Black Knight Financial Services Inc. (BKFS); BofI Holding Inc. (BOFI); Broadridge Financial Solutions Inc. (BR); Cardtronics Inc. (CATM); CBOE Holdings Inc. (CBOE); CME Group Inc. (CME); CoreLogic Inc. (CLGX); Dun & Bradstreet Corp. (DNB); Euronet Worldwide Inc. (EEFT); EverBank Financial Corp. (EVER); EVERTEC Inc. (EVTC); FactSet Research Systems Inc. (FDS); First Data Corp. (FDC); FleetCor Technologies Inc. (FLT); Global Payments Inc. (GPN); Intercontinental Exchange Inc. (ICE); MarketAxess Holdings Inc. (MKTX); Moody’s Corp. (MCO); MSCI Inc. (MSCI); Nasdaq Inc. (NDAQ); S&P Global Inc. (SPGI); SEI Investments Co. (SEIC); Square Inc. (SQ); SS&C Technologies Holdings Inc. (SSNC); Total System Services (TSS); The Western Union Co. (WU); VeriFone Systems Inc. (PAY); Verisk Analytics Inc. (VRSK); Virtu Financial Inc. (VIRT); and WEX Inc. (WEX).

Pennsylvania State Employees Credit Union is First to Add Free FICO Credit Scores to Online Banking

image In what I hope is the beginning of a trend, Pennsylvania State Employees Credit Union (PSECU) is offering free FICO credit scores to its online banking customers. The CU says more than 200,000 members are eligible to receive free scores.

Although, Wamu and HSBC (note 1) both offer free scores for their respective credit card customers, PSECU is the first financial institution to offer scores to checking account customers within the online banking area.

There is no charge for the service, but members must enroll to participate. A new score will be posted online each month in the online banking area. Members also have the option to receive alerts when their scores are updated.

image The service is powered by Fair Isaac’s MyFICO service. According its press released today, the company is talking with other financial institutions about participating in the  Scores on Statements program. Currently, 1.5 million consumers have access to free credit scores through the service.

Bottom line: Without knowing the financial arrangements, it’s impossible to estimate the ROI. But credit scores have real value to consumers and any financial institution providing them for free is likely to improve its standing. It’s also possible that a free credit score service could be a profit center if fee-based credit report monitoring options are marketed to enrollees of the free service (note 2).  

PSECU page explaining the free FICO score program (link, 15 Jan 2008)

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Notes:
1. Only HSBC’s Sears Solution MasterCard includes the free scores. 

2. See our Online Banking Report on Credit Report Monitoring for more information on the opportunities for retail banks and credit unions.