With banks looking to refine their lending
criteria still further in the wake of the financial crisis, leading
US decision management firm FICO – which used to be branded Fair
Isaac – is well positioned to strengthen its already considerable
market presence, says the company’s CEO, Mark Greene. Dan Jones speaks to
him.

Having rolled out FICO 08, the latest version of the credit scoring
model that is used as an industry standard in the US – 91 of the
largest 100 financial institutions use FICO scores – and beyond,
FICO is now looking at how it can further help banks mitigate their
exposure to existing and future credit risks.

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The importance of the FICO score has only
increased given the current risk aversion being seen in most major
markets. Timothy Kirchner, vice-president of MetLife Bank in the
US, told RBI in May that “today it’s all about high FICO
scores” (see RBI 612).

However, FICO’s CEO, Mark Greene, told
RBI that the belief that banks’ current credit line
management policies are wholly based on fears of non-payment is
inaccurate.

“That is a worry, but it’s a secondary worry.
The main reason for decreasing credit lines is to free up
regulatory capital,” he says.

“The bank may have a $10,000 credit line open
to you, you may only use $3,000 but they still need to
reserve/provision for the possibility that you’ll use the remaining
$7,000. If they shut your line down to $5,000 they can liberate
that regulatory capital,” he added.

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A consumer’s reaction

While this is far from a new trend,
Greene is of the opinion that FICO can provide the tools for such
actions to be made on a precise basis, taking into account both a
bank’s requirements and a consumer’s likely reaction to such
moves.

Nonetheless, Greene admitted that
curreFICO total revenuent and projected delinquency rates are “alarming”,
especially given the fact that the traditional payment hierarchy –
in which consumers typically paid off their credit cards only after
servicing their mortgages, auto-payments and utility bills – has
been turned upside down by the US housing crisis and consumers’
increased reliance on credit cards as more than just a product of
convenience.

“The credit card delinquencies could
potentially dwarf what we’ve seen in mortgages both in the UK and
the US,” said Greene.

Other recent FICO product developments are
focused on earlier stages of the credit cycle, such as improvements
found within the FICO 08 system.

“We realised that if you were late on any
payments, we were treating that as a derogatory factor, without
regard to how late you were, on how many products and what amount.
So now in our FICO 08 score, if you have one credit relationship
where you’ve been late, or you’ve only been late a little amount,
that’s just a small derogatory. We’re taking a more nuanced
approach,” commented Greene.

That more granular outlook has also extended
to the creation of a Mortgage Research Partnership in the US
between FICO and five of the country’s six leading mortgage
originators.

Based along similar lines to FICO’s existing
Credit Card Research Partnership, the collaboration aims to serve
as an environment for accumulating data, more accurately defining
industry requirements, trialling new products and establishing a
best practice approach.

In January 2009, the company announced that it
was changing its name from Fair Isaac to FICO, in keeping with the
abbreviation more readily associated with its credit scoring
products.

“Fair Isaac wasn’t a name that travelled”,
said Greene. That represented a problem for a company which is in
the process of expanding its international presence: historically a
North American operation, 30 percent of FICO’s business now comes
from overseas.

Those markets include the UK, where FICO
provides services to the majority of the country’s leading banking
institutions, most of whom are now highly concerned about rising
delinquencies.

“Many chief risk officers have told us they’re
moving large portions of their staff – front office retail banking
staff – and putting them into collections. One bank is taking 60
percent of their frontline customer facing staff and putting them
into collections,” Greene said.

Whether such actions have come too late is
debatable – other institutions such as Australia’s ANZ spoke of
major shifts in its employee distribution mix back in 2008 – but
Greene believes that banks can take effective counter-measures to
the rising tide of late payments.

“FICO scores are retroactive or rear view
mirrors in some sense – they say how reliably this individual has
paid off past debt. That’s useful, but people also want to know
your go-forward ability to take on more debt, so we brought out a
companion score called the FICO credit capacity index,” he said.
“That gives us the ability to make anticipatory collections – we
call you before there’s a problem and work out some kind of
arrangement. That’s a much bigger focus now.”

MyFICO.com

Consumers, too, are understandably
paying more attention to their own financial well-being.

MyFICO.com, the company’s consumer website,
has seen “a strong upsurge” in usage from consumers eager to
examine their credit scores and other aspects of their financial
health, according to Greene.

Such trends are likely to continue for as long
as financial institutions’ extended travails continue to hamper any
economic recovery.

Greene concludes: “What we see, through the
eyes of our banking clients, is that nowhere in the world can we
definitively call the bottom yet.

“Any further corrections in the stock market
could further undermine consumer confidence.

“The majority of banks are not yet talking
about growth, but a small yet growing number are saying ‘we’re
getting close enough to the bottom, we should be anticipating the
recovery’ and are starting to invest in early life-cycle activities
like the next round of marketing and customer origination in areas
where they’d like to grow.”

IT Contracts

RBI Fintech DealWatch
tracks recent major technology contract wins with a focus on the
retail financial services industry as well as fintech mergers and
acquisitions and innovative new product launches

Country

Participants

Type/value

Details

Date

US

Bank of America, First Data

Payments outsource

Bank of America has outsourced its merchant
processing to a new joint venture company with First Data. Bank of
America will contribute 240,000 merchant relationships and First
Data 140,000 clients to the new company. Banc of America Merchant
Services will be 46.5 percent owned by Bank of America and 48.5
percent by First Data; the rest is owned by a third-party
investor.

29 Jun

US

Alliant Credit Union, PSCU Financial
Services, mFoundry

M-banking contract

Chicago-based Alliant Credit Union has
selected PSCU Financial Services and mFoundry to deliver mobile
banking to its 250,000-plus members. With over $6 billion in
assets, Alliant Credit Union is the seventh largest credit union in
the US.

23 Jun

US

Bank of Virginia, Fidelity National
Information Services

Core processing solution

Bank of Virginia has selected Fidelity
National Information Services’ BancPac core processing solution in
conjunction with other integrated FIS solutions, including item
image capture, item processing, statement rendering and more.

23 Jun

Brazil

IBM, TSYS

Information technology services agreement

IBM has signed an information technology (IT)
services agreement with TSYS, one of the world’s largest payment
services companies. The recently established relationship with IBM
will support the building, implementation and management of TSYS’
technology infrastructure in Brazil.

23 Jun

Denmark

Nordea, EDB Business Partner

ATM contract

Nordea’s 500 ATMs in Denmark will be upgraded
over the course of the next three years following the bank’s
signing of a contract with EDB Business Partner. EDB will supply
software and operating services as well as other ATM tools.

22 Jun

Jordan

Capital Bank of Jordan, Temenos

Core banking contract

Capital Bank of Jordan is to roll out the
Temenos T24 core banking system across its 11 branches. The bank
sees the system as helping its domestic and international retail
banking expansion plans.

22 Jun

Malaysia

Sumitomo Mitsui

Core banking implementation

Japan’s Sumitomo Mitsui has rolled out a new
core banking system at its Asia-Pacific operations in Malaysia. It
plans to install the system across all eight Asia-Pacific countries
in which it operates.

22 Jun

UK

Cashbox, BT

ATM contract

UK ATM operator Cashbox has signed a deal
with UK telco BT to turn its 2,500 ATMs into wireless internet
hotspots. The initial rollout will take place in 10 locations.

22 Jun

US

Citizens Equity First Credit Union, NYCE

Contract renewal

NYCE has announced that Citizens Equity First
Credit Union (CEFCU) has renewed its NYCE Network participation.
NYCE is the credit union’s exclusive provider of domestic ATM and
point-of-sale access. NYCE Payments Network is a leading US
electronic payments network and is a subsidiary of Metavante
company. With assets of $4 billion, CEFCU is one of the US’ largest
credit unions.

21 Jun

India

Satyam

Rebranding

Satyam Computer Services, the global
consulting and information technology services provider rocked by
an accouting scandal last year, has unveiled a new brand identity,
‘Mahindra Satyam’.

21 Jun

Global

Oracle, PayPal, others

Interoperability initiative

A group of technology firms including Oracle
and PayPal have launched the Kantara Initiative, a partnership
aimed at promoting interoperability among online identity
verification systems. The launch follows a year of planning and
also features firms such as Intel and Sun Microsystems.

19 Jun

Indonesia

Bank Central Asia, Wincor Nixdorf

Branch revamp

Bank Central Asia (BCA), one of Indonesia’s
largest banks, has partnered with Wincor Nixdorf to rejuvenate its
branch network. The goal of the new open-concept branch is to
create an environment that offers faster and more efficient
services. In consultation with BCA, Wincor Nixdorf and its
architect partner Kranz InnenArchitekten redesigned the new
branches into three distinct zones: customer service,
teller-transaction and a self-service area.

17 Jun

Germany

Sparkasse KölnBonn,
prosystemsIT

VOIP contract

German savings institution Sparkasse KölnBonn
has signed a contract with prosystemsIT which will see the vendor
replace 7,000 analogue terminals at the bank as part of a shake-up
of its VOIP systems. Sparkasse KölnBonn has an existing 25 percent
stake in prosystemsIT.

17 Jun

New Zealand

Westpac New Zealand, ACI Worldwide

E-security contract sign-off

Westpac New Zealand has completed the
implementation of ACI Worldwide’s Proactive Risk Manager as part of
a drive to reduce fraudulent activity and provide its 1.2 million
customers with greater protection.

17 Jun

India

First Data, ICICI

PoS terminal acquisition

First Data has successfully bid for ICICI
bank’s point of sale terminals, according to The Economic Times of
India. The network of 160,000 terminals could cost $72 million,
according to the paper.

17 Jun

Global

Actimize, Syfact Business

Acquisition

Risk management solutions provider Actimize
has acquired investigative case management solutions firm in a move
Actimize says will expand its enterprise financial crime
platform.

17 Jun

Thailand

Bangkok Bank, Fiserv

M-payments contract

Bangkok Bank has rolled out Fiserv’s Mobile
Money service as part of a bid to capture the growing number of
mobile users in the country. The service allows users to transfer
money and pay bills.

16 Jun

United Arab Emirates

Al Hilal, Polaris Software

Debt collection system

Al Hilal, a leading bank in UAE, has gone
live on Polaris’ Intellect Collect debt collection system. The
solution will help Al Hilal realise its vision of creating
financial supermarkets for its customer to experience the entire
range of banking services “under one roof”, says the bank.

16 Jun

Canada

Bell Mobility, Rogers, Telus

M-payments roll-out

Enstream, a joint venture owned by Canadian
telecoms firms Bell Mobility, Rogers and Telus, has launched mobile
payment service Zoompass, allowing customers to transfer money and
make payments through their phone handsets.

15 Jun

Global

Infosys

Direct banking solution launch

India’s Infosys has launched Finacle Direct
Banking in an attempt to capitalise on banks’ low-cost customer
acquisition plans. Two unnamed leading global banks have already
signed up to the solution.

15 Jun

UK

HSBC Bank, Global Payments

Stake acquisition

Payments processor Global Payments has
acquired the remaining 49 percent interest in its joint venture
with HSBC Bank, HSBC Merchant Services, for $307.7 million. Under
the terms of the deal, HSBC will extend an existing ten-year
marketing alliance with Global Payments to 2019.

12 Jun

UK

Barclaycard, Welcome Real-time

Rewards scheme contract

The UK’s Barclaycard has contracted France’s
Welcome Real-time to help develop software aimed at encouraging UK
retailers to participate in its forthcoming nationwide rewards
programme (see RBI 614).

12 Jun

Scandinavia

BBS, Ingenico

Acquisition

E-payments processor BBS has announced it has
agreed a deal with Ingenico to purchase merchant solutions firms
Sagem Denmark and Sagen Manison Finland for an undisclosed fee. BBS
had previously purchased Ingenico’s Swedish business in 2006.

12 Jun

Australia

Aviva Australia, Salmat VeCommerce

Biometrics contract sign-off

Insurer Aviva Australia has introduced voice
biometric authentication technology from Salmat VeCommerce at its
contact centres. Since the deal was done, Aviva Australia has been
purchased by National Australia Bank for $665 million.

11 Jun

Australia

NAB, Salmat VeCommerce

Biometrics contract sign-off

NAB has given its retail customers the option
to replace PIN entry with voice biometrics technology following the
roll out of the service from Salmat VeCommerce.

10 Jun

China

Guangdong Development Bank

ATM contract

China’s Guangdong Development Bank has signed
a deal with ATM provider NCR to purchase more than 800 ATMs, taking
its total ATM numbers to over 2,000.

10 Jun

US

American Savings Bank, Fiserv

Multi-channel contract

American Savings Bank has signed a deal with
Fiserv which will see the bank provided with over 20 products from
Fiserv’s Signature Bank suite. American Savings Bank, a $5.2
billion institution headquartered in Honolulu, Hawaii, said it
selected Fiserv based on the company’s ability to provide solutions
to meet the bank’s objectives and goals. In particular, the bank’s
decision makers cited Fiserv’s multi-channel capabilities as “head
and shoulders” above the competition.

8 Jun

Pakistan

Allied Bank, SAS

Risk management

Allied Bank will roll out risk management
technology from SAS as part of a drive to meet Basel II data
management and reporting requirements. SAS says the technology will
also allow Allied Bank to launch more consumer products.

8 Jun

Brazil

HSBC Bank Brazil, Vasco

M-banking contract sign-off

HSBC Brazil has launched fully-integrated
m-banking services for its retail customer base via the Digipass
for Mobile system from e-authentication solutions provider Vasco.
The system means customers of all HSBC Brazil’s electronic channels
are identified by their social security number.

2 Jun

Kuwait

National Bank of Kuwait, SmartStream

Cash reconciliation contract

National Bank of Kuwait has implemented cash
reconciliation technology from SmartStream. The TLM Corona will
enable the bank to oversee transactions in real time through a
centralised process.

2 Jun

Taiwan

Yuanta Bank, TCS

Core banking contract sign-off

Taiwan’s Yuanta Bank has become the country’s
fourth financial institution to go-live with TCS Financial
Solutions’ core banking system. Yuanta said the rollout was
completed on schedule.

31 May

Libya

Wahda Bank, Path Solutions

IT partnership contract

Libya’s Wahda Bank has signed an agreement
with Path Solutions to implement iMal, Path’s suite of banking
products that includes core banking and risk management
services.

29 May

South Africa

Albaraka Bank, Misys

Upgrade completion

Albaraka Bank, the South African subsidiary
of Bahrain-based Albaraka Banking Group, has finished the
implementation of a core systems upgrade from Misys. ABG is one of
the world’s leading Islamic banking group with units in 12
countries and a global branch network of some 300 branches.
Albaraka Bank was established in 1989 and is, according to the bank
itself, the country’s only fully-fledged Islamic bank.

27 May

Italy

Banca Carige, Diebold

Branch revamp

Banca Carige, based in Genoa, Italy, has
contracted with Diebold to implement a ‘transformation project’ for
its branches. The bank has started to renovate its automated
branches, utilising Diebold Agilis software and Opteva ATMs, with
Diebold providing a multichannel and multivendor platform based on
Agilis software. Diebold is also providing cash dispensers, ATM
cheque book dispensers, ATM foreign currency dispensers, ATM cash
and cheque deposit units, night drop depository and self-service
information terminals. The project entails the supply of more than
250 ATM systems designed for the entire network of Banca Carige’s
650 branches based in the region.

27 May

Japan

Mizuho, NTT DoCoMo

M-payments contract

Japan’s Mizuho and telecoms firm NTT DoCoMo
are to launch an m-payments service allowing people to transfer
money without the need for bank details. The service, which is
still pending regulatory approval, will allow subscribers to
transfer money by entering the recipient’s telephone number.

27 May

US

Whitney National Bank, Jack Henry &
Associates

Technology platform

Whitney National Bank has selected Jack Henry
Banking as its technology partner and the SilverLake System as its
technology platform. The Louisiana-based bank, which has more than
$12 billion in assets, will install SilverLake in-house.

18 May

Source: RBI