Juan Manuel Ruiz Palmieri, Chief Lender Officer, Círculo de Crédito

Given the importance of credit histories, Círculo de Crédito helps consumers access new credit opportunities via alternative data.

Which main areas have you identified to continue supporting the unbanked population?

We have identified and worked in three different opportunities over the past 15 years. The first is developing models that do not depend on traditional data. We have been extremely successful in bringing innovative credit scores using sociodemographic variables and our household technology. We create unique files using aggregated address data that helps us identify the payments behavior of the family. Our model allows young family members to be scored using their family’s credit history. The second area is in initial credit footprint data. The government has large amounts of information on how citizens pay, do, and collect taxes. Bills such as energy or water consumption are the credit payment behavior available for the most of Mexicans, which turns out to be crucial for creating credit history, as it can be used as positive credit behavior and allow them to acquire more financial products in the future. We are offering our assistance to local and federal governments in order to report this information to us, where we can make it accessible for financial institutions in the benefit of the person and their credit score and history. The third area is in open finance and data aggregation. With data aggregation, we can access debit information that helps to measure cash flow and have a better understanding of the consumer profile. This represents a new model (sharing credentials) in Mexico, but is common in the US and Europe. Fintechs are already using data aggregation to paint a more complete picture of consumers. Many of them target people new to credit, who probably only have a debit card for their financial record.

Can you elaborate on the program Círculo de Crédito is developing with the public sector in Mexico?

It is a financial inclusion program, where we have been working with the states and municipalities to report payments on taxes and services to conform credit behavior in a person’s credit file. This is important data because it usually is the first footprint of many Mexican consumers. The data is rich, and several aspects can be enriched and inferred about a person; for example: Housing taxes, energy, and water are key to knowing that a consumer’s address has been verified, in some of them you can confirm if they are the owners of the house, and even get more information about their lifestyle. For example, through their energy consumption we can infer their socioeconomic status and more. This has turned out to be a difficult endeavor: there are 32 federal entities and more than 2,000 municipalities with autonomy around reporting this data, which poses the main challenge to get the data on all citizens nationwide. We believe this is crucial, as it allows us to create new credit opportunities for those who pay taxes and services, and there is no better place to see the impact of that information than in the credit history file. Once consumers understand the value of having a credit history, credit bureaus become their best friend.

How will the digital transformation that banks and other players are going through impact the credit industry?

The credit industry in Mexico went from a high concentration of credit in few players targeting the same customer to a much more diversified financial ecosystem. The disruptive models of fintechs such as crowdfunding and digital consumer lending are radically changing how credit is granted. This has pushed our clients to open digital channels in order to continue offering credit. This leads them not only to have a digital onboarding but also reduce digital friction and be alert of fraudulent requests. In order to satisfy the need for digital and the omnichannel requirement, we launched API Hub that contains a sandbox where any developer can have free access to make tests of all our solutions. It reduces time to market and facilitates connections. This is one more reason why more than 95% of fintechs prefer Círculo de Crédito.