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If there is one thing that the last decade of fintech innovation has achieved, it is more awareness around consumer credit scores. The majority of the population know their approximate score and even teenagers are talking about it. For better or worse (I think it almost uniformly positive) consumers look at the score as a measure, maybe even the measure, of their financial health.
My next guest on the Fintech One on One podcast is Adrian Nazari, the CEO and Founder of Credit Sesame. It is companies like Credit Sesame that have been at the forefront of the increasing awareness about credit behavior and its impact on credit scores. Now, with a new B2B offering they are poised to reach even more consumers than ever before.
In this podcast you will learn:
- Why he decided to start Credit Sesame.
- What is still missing to help consumers manage their credit.
- What Credit Sesame offers for consumers today.
- The various ways they are using AI at Credit Sesame.
- Why they are exclusively focused on credit for financial wellness.
- Why they decided to start a B2B offering.
- Who they are focused on with this product.
- How Adrian is managing both a direct to consumer and a B2B offering.
- Why he thinks the B2B side will be the growth driver moving forward.
- How they are working with lenders to improve the borrower experience.
- How they are different to Credit Karma.
- The state of the US consumer today when it comes to their credit score.
- His vision for Credit Sesame.
Read a transcription of our conversation below.
FINTECH ONE-ON-ONE PODCAST NO. 516 – ADRIAN NAZARI
Adrian Nazari: US consumers are pretty resilient. Even though we’ve seen significant inflation, it seems like the income has caught up with that. And so we have not seen that bubble of better credit degrades significantly. Overall, when we look at our average consumer credit score, and if you track them over time, scores did improve a little bit and have come down a little bit, but the movements are not that significant. And I think it is also cyclical. We see over past holidays, a lot of consumer credit changes negatively because they may be spending too much money on Christmas shopping, et cetera, and they use their credit limit significantly. But over the course of the year, that comes down. So there’s cyclicality to it, and there’s obviously a macro trend. But I would say that overall, US consumer credit hasn’t changed significantly. You know, the other thing is that, honestly, the majority of US consumers do not have good credit. The majority of US consumers are near subprime. And I think that’s a risk because if there is a weakness in the economy, you can imagine if you have a huge cohort of consumers that are on the edge, it could significantly impact them in a negative way. So it is really good to be on top of that.
Peter Renton: This is the Fintech One-on-One Podcast, the show for fintech enthusiasts looking to better understand the leaders shaping fintech and banking today. My name is Peter Renton, and since 2013, I’ve been conducting in-depth interviews with fintech founders and banking executives. On the show today, we have Adrian Nazari, the CEO and Founder of Credit Sesame. Now, Credit Sesame is all about helping consumers manage and grow their credit. And they do this by providing tools that give deep insights into credit behavior. They’ve been around for more than a decade and have just recently expanded with a B2B offering. We do a deep dive into that new product and its core offerings. And Adrian gives his perspective on the state of the consumer today. Now, let’s get on with the show.
Welcome to the podcast, Adrian.
AN: Hi, thank you for having me.
PR: My pleasure. So let’s get started by giving the listeners a little bit of context here. So if you could talk about some of the high points in your career, and what you did before Credit Sesame.
AN: Absolutely. So Credit Sesame is my third venture. Prior to Credit Sesame, I founded two other companies, mostly in the SaaS, helping large financial institutions manage the liability side of the balance sheet for their clients, as well as in the sort of retail, helping them to automate their backend manufacturing and front end consumer interactions.
PR: Okay. So what was it then that you saw that led you to decide to start Credit Sesame?
AN: When I started working with large financial institutions, I realized there was a large gap between what banks and financial institutions offer and what consumers want on the credit and liability side of the balance sheet. As you know, when it comes to the asset side of the balance sheet, there are a lot of tools, analytics, and science that get applied to help people, for example, manage their retirement or investment. Unfortunately, when it comes to the other side of the balance sheet, on the liability side, the industry was lacking and is still lacking in terms of giving people tools, analytics, and approaches in a scientific way. So I saw an opportunity, and I was fortunate to have learned a lot about what credit is, how creditors behave, what consumers want, and I decided to start Credit Sesame to bring rigor and science to help consumers do a better job managing their credit.
PR: Do you think consumers are doing a better job managing their credit now than they were maybe five or ten years ago?
AN: You know, I think the proliferation of free credit scores, and Credit Sesame was a pioneer in that. We were the first company to give consumers free and untethered access to all of their credit information, not just their score, and help them understand it. After that, we saw a major trend amongst large financial institutions to offer free credit scores. Yeah, I think that the proliferation of a free credit score has helped consumers know what their credit is or understand, maybe get access to their credit. But, I still believe consumers have a long way to go to truly understand how to manage their credit. And that’s a difference. Ten years ago, you couldn’t even access your credit score. You had to pay for it. And many people didn’t even know what a credit score was. I think in that regard, we’ve made a lot of progress. But in terms of, now I have my score and what do I do now? I don’t think we’ve made as much progress.
PR: So what more needs to be done then? What do you think that we’re missing?
AN: Well, I think we are doing a lot, and what is missing from a technology perspective, I think a lot of the components are there. We, for example, created Sesame Launch, created AI, which is the first AI to aggregate over seven trillion data points that we’ve collected over the past 10 years. There is a lot more transparency by creditors and financial institutions that are willing to share their terms and conditions. So, we have made significant progress. At least Credit Sesame has been involved and has been leading the effort working with many large financial institutions to be more transparent. We have not applied analytics. We at Credit Sesame understand how credit scores work. So we have made a lot of progress there. And I think it’s really a matter of time for people to get their hands on these technologies and tools and be able to do better. So that’s from the technology perspective. But fundamentally, we at Credit Sesame have a voice, but our voice is not large enough to reach every corner of the US. And I think if you want to do a better job, we have to, for example, bring credit education to schools and start people, especially young people educated on the importance of credit, give them the tools they need. Everybody, especially young people, is very tech-savvy. They like to work with mobile phones and apps, but we need to make that accessible to them early in their age. Also, the same thing with a lot of immigrant communities that come to the US. They have to build credit. To build credit, they have to have credit. It’s a catch-22. So, it is very difficult for them to enter the financial system at ease. So we need to do the same thing as part of the immigration package, as part of getting them socialized into the US financial system. I think we should make these tools available to them for free at the very beginning so that they could not only join the financial system, but they could contribute and they could thrive.
PR: Interesting. Yeah. I think you make some really valid points there. So then take us through what Credit Sesame offers today for consumers. What do you do?
AN: We believe at Credit Sesame that credit is essential for financial well-being. Two-thirds of the US population lives paycheck to paycheck. It doesn’t mean that they’re poor. It just means that they don’t have savings, the cost of living, and their incomes are such that they are not able to save. So for that two-thirds of the population having good credit or credit wellness is financial wellness. It’s not about luxury or nice to have. It is essential if their car breaks down or if they have a medical emergency, they really need to have credit. So because of that, we founded Credit Sesame on the principle of building innovative financial solutions that bring in science, technology, and analytics to make credit more understandable and also accessible and help consumers lead to better financial success. So that has been the mission of Credit Sesame. And over the past 11 years, I founded the company about 11 years ago, we have built a lot of tools. We have six patents. We had the foresight to collect over seven trillion data points on consumer behavior and creditor behavior. We took the time to understand how credit scores work. And as a result of that, we’ve served and helped over 18 million consumers. We have a lot of creative tools, whether it’s the Credit Calendar that aggregates all of consumers’ credit obligations in one place at a snap, or providing analysis of the credit and letting consumers know what they’re doing wrong, what they’re doing right, and how they could make better decisions. For visuals, we have something called Credit Ring. Credit Ring will instantly give you not only what your credit score is but will give you a comprehensive picture of the health of your overall credit at a snap; with a lot of actions and interactions that you could have, including with simulators, plus we qualify consumers for a lot of financial products. So it’s not going to be, let me apply to see what happens. We bring a lot of confidence and transparency to consumers. We see 20 % of the people who sign up at the platform see their credit score improve within the first month. The majority of our users improved their score significantly by more than 50 points within the first six months. So, these tools and analytics work. It’s a service. Consumers contribute a lot to the success of the platform because they contribute by interacting, providing data, and providing feedback. So we’re proud of the work we’ve done, and we’re happy to be able to help consumers.
PR: Interesting. I wonder if we could dig into the Credit AI piece you just talked about. You mentioned 7 trillion data points, which is a truly staggering number. How are you using AI to really enhance the consumer experience?
AN: We use AI in many different ways. One way to use AI is we have observed what people, for example, apply for, let’s say a credit card, auto loan or consumer loan. And to the degree that with many financial institutions, we’ve integrated with their existing product set, we’re able to match them with those products with high confidence. To the degree that there are financial products that we have not integrated, we’re an open platform; we work with everybody. We’ve seen who gets approved and who gets denied for those products based on their credit profile. So the AI is able to look at your credit profile and, based on 10 years of history and constant learning, we’re collecting over 2.6 billion data points on a daily basis, is then able to help you, say, what are your chances of getting approved for certain products today? So you’re not taking a risk and applying and getting rejected and, therefore, potentially negatively impacting your credit. So that’s one use of AI. The other use of AI is understanding how credit discourse works and credit scoring models work. Our AI is able to analyze consumer credit information against the credit scoring models and then come up with strategies and ideas that consumers could implement to see their credit scores improve. So, not all credit products are the same. For example, you could get a new card, or you could get a new loan, but you may not know what the impact of this new loan is on your overall credit or financial health. So our AI enables consumers to access the credit that they need, but also do it in a way that improves their credit rather than, for example, having a negative impact on their credit. And in this case, you’re looking at processing a lot of information, your entire credit information, by the way, not just from one credit bureau, from all three credit bureaus, and sometimes they are not the same. They’re varying information against credit scoring models against various financial products that are offered in the industry. So, there’s a lot of data crunching that goes into it, but our AI could do that in a matter of a couple of seconds and come back with recommendations, suggestions, and insights that could help consumers get better in their finances.
PR: Interesting. Obviously, your name is Credit Sesame, you focus more on the credit side, but when you say help people get better at their finances, are you giving them ideas beyond credit, or are you really just focusing on how they’re using credit?
AN: No, we are exclusively focused on credit. As I mentioned, I think for the majority of US consumers, credit wellness is financial wellness, especially for the two-thirds that don’t even have savings. But we have really become an expert in everything credit, from understanding to leveraging credit to acquiring credit to managing credit, et cetera, and even protecting yourself against identity theft, identity fraud that typically leads to bad credit or somebody using your identity to obtain a credit card on your behalf. So we’re more focused on overall credit, but as I mentioned, for most people, credit wellness is financial wellness.
PR: Right. Okay. So, I want to switch gears a little bit because I noticed you recently moved into the B2B space, which I was really curious about. You’ve launched Sesame for Business. Maybe tell us what that is and why you did that.
AN: So we’ve become a trusted source for many consumers. As I said, we’ve served over 18 million, and our goal has been to bring in innovation. we’ve got, as I said, six patents and AI to help consumers. Over the years, we’ve been approached by large financial institutions and non-financial institutions who have shared our vision or mission of helping their clients achieve better financial health or credit health. Until recently, we couldn’t help them. But three years ago, we set out to build a new generation of our platform, which we call Sesame Platform. Credit Sesame is the first user of that platform to integrate AI, better visualization, etc. And because of that investment we’ve made, we’re now able to bring in or over a decade of experience, our AI, our patents, our learning of what consumers really want and how creditors have behaved in the past to the market to allow other financial institutions to do as good of a job for their clients as we have been doing, to take the learnings we’ve had over a decade to implement, for their own clients. So this is, in many ways, a continuation of our mission to continuously bring innovative solutions to help people manage their credit. But in this case, with the Sesame platform, we’re able to reach consumers to our partnerships with financial institutions. So that’s the Sesame platform. It’s called Sesame for Enterprise. And Sesame for Enterprise is an embedded credit management in a box that is highly customizable, highly configurable, scalable, and regulatory compliant, which allows even retailers, such as telcos and financial institutions to offer much to basically elevate their clients’ credit and financial experience.
PR: Okay, interesting. Then you mentioned some of the different verticals you’re going after, and banks and fintechs, I presume, are also going to be a target market. Do you have a pilot running right now? How are they using it?
AN: We announced a Sesame platform about a month and a half ago, maybe just a few weeks ago.
PR: Right.
AN: But I’m happy to say that a major financial institution serving tens of millions of consumers has already adopted it. It has not been publicly announced, but it will be publicly announced in a matter of weeks. I think the announcement will help the market realize the impact that the Sesame platform has or will have in the overall ecosystem around credit management and financial services. Because of the public nature of this company, we cannot speak to that. But I can also say that they won’t be the first or the last customers because we are already in serious discussions with multiple other financial institutions who want to adopt the Sesame platform.
PR: And are they using it in a similar way that you do, as in outreach? I’ve been on your email list for a long time. Are they going to be using it in the same way? Do you expect they are going to be niche kind of offerings? What will it look like do you think, for these businesses to use it?
AN: Our first customer is going to use it similarly to what we do. It’s going to cover the spectrum of overall credit management from people who are entering the credit space with low credit to people who want to leverage credit to people who want to protect credit and across various credit products. But that’s our first customer. It’s going to be full-service end-to-end credit management with an offer engine and marketplace, freemium products, as well as premium products for people who need more handholding. That’s our first customer. But as we’re talking to other financial institutions, and as I mentioned, many companies have approached us in the past several years. We see that the implementation sometimes would be limited to their own products and limited to their own service. But the credit management is going to be the same. The only question or thing is whether they want to open up the market to their consumers or they want to use this to offer their own products better. And as you can imagine, even banks have difficulty offering their own products to their own customers. Often, bank products are sold by someone sitting in a branch who may have got a two-week training to try to help the consumer make a credit or financial decision. So, we could help financial institutions do a much better job educating their clients about credit. We’re an expert there. I would venture to say we’re the best in the industry. We’ve gone deep there. In addition to that, also help their clients understand what financial products within the financial institution are the right product for their needs at that time and what the impact of that product is on their overall credit health. So they could sort of implement what we call a closed system where they’re servicing their own clients and credit education and offer their own products versus implementations where they open up the entire market to their clients to choose and move forward.
PR: Right. Gotcha. You’ve been a director of consumer business for more than a decade; you said 11 years. You now have a B2B offering. How are you managing both of them and trying to grow both at the same time?
AN: That’s an excellent question. So, our direct-to-consumer experience over a decade of experience has put us in a position to be able to lead the industry and the next generation of financial wellness or credit management. So it is because of that, because of us working with over 18 million consumers, collecting several trillion data, working with various creditors, et cetera, and observing their behavior, that is why we were able to build the Sesame Platform. Now, helping people manage their credit is a problem. And many companies have tackled that. But none of them have had our experience, an actual in-market, in-field experience to see how things shape up. Like when consumers take action, what is the implication of those actions? So, it is really our retail business in the past decade that has helped us build a Sesame Platform into what it is today. As we go forward, we believe that we could reach a much larger number of consumers through B2B partnerships because they already have many of them, like our first customer has tens of millions of consumers that it serves. So we think our voice is going to get bigger, and we’re able to have a lot more consumers that way. We will continue to maintain our direct-to-consumer because that’s our innovation ground. As you can imagine, it is not very easy to innovate within large financial institutions. So our direct-to-consumer is like an innovation ground. We already have a number of new innovations on the roadmap that we first are going to bring to our direct-to-consumer, make sure it works, make sure it’s vetted, make sure it’s perfect before we make that available in an accessory platform. So, our direct-to-consumer is a great innovative ground for us to continue to serve consumers.
PR: Right. But it sounds like what you’re saying, if I’m reading between the lines, you are really thinking that the business-to-business side is going to be the major growth engine. Is that fair to say?
AN: That is fair to say. And the reason for that is that direct-to-consumer marketing is very expensive. So, if you are trying to reach consumers in a direct way, you have to spend hundreds of millions of dollars over a period of time to reach a lot of consumers. Many of our enterprise customers already have millions of customers as a captive audience, and they are not serving them well when it comes to credit. So it’s a synergy. It’s a great match because we bring that, and they already have millions of consumers. You are correct; we do feel that through our B2B or Sesame Platform, we can reach a much larger number of consumers. And that’s going to become our big growth engine.
PR: So, is it going to be a white-label product? Is it going to be in the brand of the institution, or is it going to be the Sesame brand? I’m talking about what’s facing the consumer. How is that going to look?
AN: We provide flexibility. We will have a white label. So the first customer is a white label solution that is powered by the Sesame Platform, but the approach is white label. So, if you are a telco, a retailer, or a financial service company, you, we basically mimic their look and feel and brand. We are actually also able to integrate some of their own offerings into the platform, but it will be more of a white label solution powered by Sesame.
PR: Right. Okay. So, let’s get back to the consumer piece here. The online lending space is mature; it’s been around for a long time, and you’ve been working with some of the online lenders I know for a long time. But how are you working with lenders today, and that could also include credit card companies as well as banks and fintechs, how are you working with them to promote or improve the borrower application experience? How is that improving?
AN: That has been improving over time. I think we’ve still got ways to go. When we started at Credit Sesame, we had access to all consumer credit information. So, what we wanted to do was shop for financial products on behalf of our consumers. And we were very interested to know, for example, if there is a bank, call it Bank X, what are the terms and conditions that are acceptable to them so that we could apply that across many banks and basically do a much better job for our consumers to shop for financial products anonymously without having our consumers to apply and get rejected. So that was a value proposition for our consumers. We were surprised that many financial institutions were not willing to give away the terms and conditions of how they make decisions. And they’re very protective of that. So that was a very difficult task to achieve at the beginning. I’m happy to say that over time, we’ve seen a willingness on behalf of many financial institutions to share that information and be more transparent. And that transparency ultimately has helped them and has helped consumers and helped us. So, over the years, we’ve seen many institutions have developed what we call API. So, without negatively impacting consumers’ credit, we’re able to pay their APIs and see, for example, what sort of products or rates or terms one of our clients could get. And if they were out of market or they, for example, were not getting approved, we do not waste our users time sending them or offering that product to them. That has helped consumers tremendously as more and more financial institutions become transparent. And I think what has happened is, in the beginning, they were worried about being transparent with their terms and conditions, but now they’re seeing the benefit because they also don’t want to reject consumers. They also want to make sure the consumers that they acquire are consumers that actually are a good fit for their product. So it has brought a bit of an efficiency in the market. And I believe the old ways of, for example, consumers applying for 10 products and hoping for the best are over. Consumers expect a lot more. Consumers expect that, you know, here’s my credit information. You have that information. Don’t waste my time. Show me the product that I can actually get versus products that I may or may not be able to get. So we’ve seen a lot of improvements there, but we have a ways to go. Also, in the past, when a consumer wanted to apply for a product, even though we had all of their credit information, we had to re-enter all that information into the financial institution’s applications. We’re automating that so you literally see a financial product, and if you’re interested in it, your application could be pre-filled, so you don’t have to enter that information again. And it creates less friction, it creates more transparency, but we have a ways to go there.
PR: Right. Okay. So then also looking at your consumer business, what is the difference between your offerings and what Credit Karma offers?
AN: Absolutely. In the first few years, we were being compared with Karma a lot. We both offered free credit information and financial products, etc. For the most part, at a very high level, both of us helped consumers with credit. The difference is Credit Sesame went deep in the credit space. We started looking at how credit scoring models work. We became an expert in credit models. We started offering premium financial products; Credit Karma still offers free credit scores and no premium products. So, in a nutshell, we went deep around understanding managing credit. Credit Karma went shallow and wide. They started offering various financial products on money, insurance, and so on. I believe that when it comes to credit and credit management, having deep expertise in that one space and not diluting that is key to giving people the best credit options that are available to them. Along the process, we have six patents. We’re more of a tech/AI platform versus Karma is more of a marketing company that is going shallow and wide. So, we’ve deepened our expertise. We’re offering six or seven innovative products that are patented that they don’t offer. We have not reached as many consumers as they have. We have not spent as much money on marketing as they have. But I believe that we built a very compelling credit management product and platform. And I think in a matter of weeks when this announcement is made by our first customer, it will solidify our position as the leader in the credit management space.
PR: Looking forward to that announcement. I want to talk about credit scores. With all the data points that you’ve got and the history that you have, you’ve got unique insights into the state of the consumer and particularly how their credit scores have been trending. And obviously, we’ve had the pandemic, and lenders complained about credit score inflation that’s happened. Now we’re getting back to maybe more of a normal situation, but I’d love to get your sense of, what is the state of the US consumer today, particularly when it comes to their credit score.
AN: You know, you’re absolutely right. I think during the pandemic, we saw a lot of consumers get access to government aid and funding. Some of that funding went to paying their debt. But to say enough, most consumers did not pay their debt significantly. The debt accumulation slowed down. I honestly don’t think it’s because consumers all of a sudden thought, hey, I need to be really, really credit savvy. I think it was more a function of the circumstances where they couldn’t spend. You couldn’t travel. You couldn’t spend money going out every night, et cetera. That led to less credit usage during the pandemic, which impacted consumers’ overall credit scores. Less usage is better for your score. US consumers are pretty resilient. Even though we’ve seen significant inflation, it seems like the income has caught up with that. And so we have not seen that the bubble of better credit has degraded significantly. Overall, when we look at our average consumer credit score, and if you track them over time, scores did improve a little bit and have come down a little bit, but the movements are not that significant. And I think it is also cyclical. We see over past holidays, a lot of consumer credit changes are negative because they may be spending too much money on Christmas shopping, et cetera, and they use their credit limit significantly, but over the course of the year, that comes down. So there is a cyclicality to it, and there’s obviously a macro trend. But I would say that overall, US consumer credit hasn’t changed significantly. You know, the other thing is that, honestly, US consumers do not have good credit. The majority of US consumers are near subprime. And I think that’s a risk because if there is a weakness in the economy, you can imagine if you have a huge cohort of consumers that are on the edge, it could significantly impact them in a negative way. So it is really good to be on top of that.
PR: OK, so last question then. What is your vision for Credit Sesame? Where do you see this going five to 10 years down the road?
AN: We are really excited to pave the way to bring in the next generation of technology, data, and analytics to solve this problem. Transparency is still an issue when it comes to credit. Understanding credit is still an issue. Getting the right recommendation or insights is still an issue. So as I said, most US consumers do not have good credit. With the availability of scores, data, and information, there’s no reason for that. I mean, people make rookie mistakes, even though they may not be rookies, but they just don’t understand how things work. So our vision is that the Sesame Platform becomes the major or the prevailing platform for consumers to manage their credit everywhere: in their relationship with their bank, independently, to us directly, or to our partnership. Our vision is to bring that rigor, that innovation to help consumers achieve financial wellness, more financial wellness. We’d like to see more significant changes in consumers’ overall credit. We’d love to see everyone join the 800 Club, and everyone may understand what decisions they need to make and have the right tools to do it.
PR: Okay, well, yes, that’s a noble cause, and I think that it is something that consumers really do need; they need this information. We need to make it easy for them, right? And I think that’s a lot of what you’re doing there. So, Adrian, it was great to finally get you on the show. Really appreciate you coming on and best of luck to you.
AN: Thank you so much. Thank you very much for having me.
PR: It wasn’t that long ago that the average consumer had no idea about their credit score and why it was high or low. Today, through the work that Credit Sesame and others have done, I think a large percentage of consumers know their score. While that knowledge is an important first step, we need to provide easy-to-use tools that are ubiquitous to help consumers take control of their credit and become more financially healthy. Companies like Credit Sesame are doing just that. And I think the B2B offering that they’ve recently launched could be a game changer here. Anyway, that’s it for today’s show. If you enjoy these episodes, please go ahead and leave a review on the podcast platform of your choice. And thanks so much for listening.