The Business Year

Gustavo Lacroix

MEXICO - Finance

Empowering Consumers

CEO, Cí­rculo de Crédito

Bio

Gustavo Lacroix started his career in Banamex, where he was responsible for technological research. He founded his own company in 1992, dedicated to the development of solutions for the financial industry. Lacroix was also senior CRM consultant in NCR and joined the credit bureau industry in 1996, working in Transunion and Dun & Bradstreet before establishing Cí­rculo de Crédito.

“Giving consumers greater authority over their data can equally help them get more access to credit service.“

In what ways is regulation making the digital transformation of the financial industry more difficult?

Mexico’s regulatory framework for the finance industry is likely one of the most regulated in the world. For example, consumers are required to go through authorization for every inquiry. In order to comply with the legal framework, credit bureaus have to make users go through an authorization process featuring several questions that makes the user experience terrible. We need to update the law to take full advantage of new digital tools. There is also the issue of consumer data privacy. Most of the data is collected directly from consumers by the grantors, who share this information with the bureau. Users need to make sure their information will be safe throughout this process. The challenge is gaining the trust of consumers, which is why we invest millions of dollars in information security. It is easy for a company to gain the trust of consumers, but it is just as easy to lose it. There is an ongoing evaluation of the balance between risk and value in the minds of consumers, and now they are more empowered to control the use of their data. Giving consumers greater authority over their data can equally help them get more access to credit services, specifically those without credit histories. Financial inclusion is not only about the unbanked, but also people with bad credit histories. There are almost 10 million people in Mexico in this scenario. We are continuously working on developing algorithms that include more information about consumers than before so fewer people are excluded from financial services.

Where do credit bureaus fit into the digital transformation of the banking sector?

Most pieces of a credit report are static, and we use data algorithms to give our clients a more complete image of a person’s credit history. Most credit bureaus work with a specific set of data that has not changed in the last 50 years. We are now adding new sets of data with the collaboration of fintech companies to offer more comprehensive credit scores. We do this so users do not just receive a bunch of numbers but a clear report on their credit history patterns via microservices in our API platform. This approach is extremely different from what was available 10 years ago because it allows any grantor to use our services without having to invest a lot of money. We are doing our part by adding more data to the equation and building better algorithms. It is also about finding better ways to connect APIs. Throughout our 14-year history, we have developed different ways of connecting data to our platforms, some are extremely specific and complex.

Why is the business designed as a franchise?

Our expansion plans are based on franchises, as we want investors in different countries to use our model to open a credit bureau. They could be small credit bureaus seeking to upgrade with access to better technology and products. From our side, we can offer to change their fixed-cost variables, so they pay per transaction. This makes it easier for the investor to maintain their business, as credit bureaus face their biggest costs at the beginning, when growth levels are low and expenses are high. When we started in Mexico, our focus was on targeting segments that were unattended by our competitor, particularly in microfinance and the commercial areas granting credit services, mobile phone companies, and pay TV. Then, we partnered with FICO, a data analytics company that creates a variety of credit scores, to adapt its model to the Mexican market. In 2018, FICO announced its new score in the US that includes utilities to predict default; we have been using this score already for 10 years now. We have prioritized inclusion since the beginning. This has been a great success for us, as it is likely one of the best scores in the country.

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