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Equifax and FICO unite to move into alternative data market

With the Equifax-FICO alliance, the credit giants are offering a combined Data Decisions Cloud suite they hope can solidify their place in the alternative data market.

Equifax and FICO are joining forces to create Data Decisions Cloud, a data and analytics suite for banks.  The alliance helps recast the credit giants as alternative data providers in an increasingly competitive marketplace.

Unveiled March 27, it's a potentially lucrative deal for both Equifax and FICO, said Gartner analyst Moutusi Sau -- particularly in the area of providing and analyzing alternative data, which is information gathered from nontraditional sources.

Alternative data is an accelerating trend in finance. It includes looking beyond a credit score to a loan applicant's history of meeting other financial obligations. It's used for both credit rating and underwriting.

"Equifax and FICO have both been under pressure from alternative data sources that are providing credit ratings, capturing banks as their clients and also have an appeal amongst nonbanking lenders," Sau said.

Sau added that she thinks the new Equifax-FICO partnership will enable them to target a bigger piece of the consumer market beyond FICO's traditional enterprise market, thereby expanding their base. FICO and Equifax are known for their credit reporting, which uses consumer data and predictive models to anticipate consumer behavior, as well as providing analytics software to help enterprises manage risk, customer engagement, fraud and compliance.

The Data Decisions Cloud combines the Equifax Ignite data and analytics platform with FICO Cloud applications and the FICO Decision Management Suite. The vendors' combined suite aims to enable organizations to easily explore alternative data, uncover new insights, build predictive models and more quickly make data decisions.

The CEOs of Equifax and FICO discuss their

"It's designed to help organizations to meet the needs of their customers faster and more precisely than ever before," Nikhil Behl, head of marketing at FICO, based in San Jose, Calif., said in an email. "Primarily financial institutions will benefit from an increased pace of innovation for data and decisioning, supported by incredible industry expertise and explainable artificial intelligence."

Equifax and FICO said they also are planning to release three prebuilt products later this year. One is a connected system for real-time access to raw data that enables the quick creation and deployment of new predictive elements and promotes data science collaboration across organizations.

Sau said that product reflects the credit companies' strategy of targeting the alternative data market "in a big way," because it will essentially provide data feeds as a product -- a hallmark of the alternative data segment.

The other two planned products target compliance -- markets Equifax and FICO previously have not targeted. The compliance segment has been active lately due to the increasing popularity of using alternative data for risk management.

The race for alternative data

Equifax and FICO have both been under pressure from alternative data sources that are providing credit ratings, capturing banks as their clients and also have an appeal amongst nonbanking lenders.
Moutusi SauAnalyst, Gartner

The finance industry has been undergoing consolidation, particularly with many new partnerships similar to the alliance between Equifax and FICO. An example is financial software vendor FIS recently acquiring payments company Worldpay.

In this case, however, the more pertinent trend is finance organizations' building interest in alternative data, Sau said. In July 2018, Equifax acquired DataX, an alternative data provider -- its most significant foray into alternative data and a move to expand its data and analytics capabilities.

Equifax and FICO haven't been alone in moving into alternative data.

The vendors' main competitors are the big credit players, such as TransUnion and Experian, which also are riding the alternative data trend.

In recent years, Transunion acquired FactorTrust and Experian bought Clarity Services -- both alternative data startups. Experian's purchase of Clarity Services added information about 62 million consumers' alternative credit history for items such as rent and payday loans. Equifax and FICO's combined product suite also faces competition from smaller alternative data vendors, such as Cignifi, Import.io and Quandl.

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