We spoke to TransUnion’s global managing director of fintech
TransUnion are one of the largest information and insights companies on the planet.
We spoke to David Finch, their global managing director of fintech, to get his thoughts on embedded finance, financial inclusion, and the future of fintech.
Hi David, thanks for joining me today. Please could you introduce yourself and give me a quick bit of background for yourself.
I lead the fintech business for TransUnion globally. We specialise and go very deep with digital payments, digital lending, digital banking and embedded finance; my role is to drive that business forward.
We’re present in all continents of the world. Our main hubs are our global HQ in Chicago, as well as a big presence in Canada, Latin America, Brazil, Europe, Africa.
India and then APAC region. Really, the role is to set the strategy and build our capabilities to service the market.
The key theme that underpins a lot of that is financial inclusion. A lot of fintechs are succeeding by expanding their services to people that are either new to credit or un- or under-banked.
There’s been a huge rise in offering for buy now, pay later (BNPL). Why do you think that is?
During COVID there was a huge push to digital ecosystems. With e-tail, a lot of investment went into creating digital journeys in a very fast amount of time. A lot of traditional financial institutions were hybrid: they had some digital journeys, but in many instances you had to go into a branch to open an account.
We saw BNPL and embedded finance accelerate as they had a very strong digital journey already. You’re at the end of an Amazon journey and you’ve got options to buy with one click, or you can choose finance with a single click.
Because of COVID we were all unable to visit the high street; this pushed us all online, and then the convenience in the digital journeys, the really good customer experience that a lot of the BNPL providers presented, kept us there.
Many successful brands BNPL are now deploying other financial services to their consumer base. They’re offering credit cards, secured loans, unsecured loans, savings accounts, and with some of them you can buy and sell cryptocurrencies.
I read a report recently that said almost half (46%) of young people (those aged 18 to 34) don’t know they can get into debt using BNPL products, and 46% are also unaware that BNPL lenders can add fees for missed payments. Do you think there are potential problems with these lenders then extending into more traditional credit products?
In highly regulated markets I don’t think it’s such a risk because the regulators, if I think about them in India, in Brazil, in the UK, Canada, the US, have very strong controls to how you can operate as a business when offering credit products.
There’s an obligation by the regulators to ensure that they are responsibly lending. That’s where businesses like us and other data providers come in as well. We can make visible people that are new to credit but might have non-credit records that can help to understand someone’s affordability, for example if they’re renting, whether they’ve been consistently paying their rent, or paying other subscriptions like mobile phone contracts or streaming services. These types of non-traditional financial data sets give an enhanced view of someone that might be newer to the credit journey.
You’ve also got credit education. There are apps that we provide to a lot of our customers that they can present to their customers as an education tool. It’s a little bit of gamification, where you play around with what credit is, what a good credit score is, how you could have a bad credit score and what could you do to improve it.
There’s always risk when you’re lending in any market, but we work very closely with the regulator to make sure that we’re supporting the regulator, the end consumer, and our customers.
In my opinion, one of the best things about fintech is its drive for financial inclusion. What do you think spurs this on?
About one-third of the world are unbanked, do not have any form of banking services. Alongside this you’ve got under banked, where perhaps an individual opened a bank account, they’ve taken a loan, they might have a BNPL account or a credit card. But when you look at their income they’re entitled to, and can afford, more credit, which might help them buy that first car or buy their first house. Or if you’re a small business owner, it might allow you to buy that next piece of equipment for your business.
Servicing the under banked population encourages global economic growth, so there’s a lot of encouragement from governments around the world to make sure to promote financial inclusion.
I also think that the younger generation is far more digitally savvy. They’re far more aware of financial or fintech solutions, perhaps, than the older demographics. For all financial services, not just fintechs, it’s a very important demographic to engage with, to try and acquire and on-board, because as those 18-year-olds become 25-year-olds and then 35-year-olds, you’ll still have brand loyalty.
What key topics are we going to be discussing in the near future?
From an investment perspective: where’s the money flowing globally? Lending is still the favourite of investors, digital payments probably second. Lots of countries are building their own domestic payment platforms; India and Brazil, for example, have created instant payments for consumers.
Digital banking is another big one. There are new banks in Brazil posting billion-dollar profits; there’s a huge surge in Philippines with digital banks. In Europe, the US, and Canada, there are fewer new digital banks popping up, but the successful ones are getting bigger, stronger, and more resilient, deploying more of a one-stop digital banking service.
In general, investors now assess fintechs on their capabilities, for example whether they have built the best possible business model that will give them the right to play and win, or whether their capital has been used to buy growth. Regulators expect them to balance innovation with compliance-first culture. Given this, many successful fintechs are focusing on sustainable growth (responsible growth vs growth at any cost, investing in ‘fin’ part of fintech while continuing to optimise for ‘tech’, building robust compliance processes and culture).
I can’t remember the last time I had a conversation that AI wasn’t a part of it. Where do you see TransUnion going in the future? Is AI a big part of that?
We’re a leader in the fintech world. Globally, we work very closely with all the biggest brands across all the different regions. We also support those in the middle, and newcomers. So, our chief product officer at the start of this year started to build out bespoke and tailored solutions for fintech. In 2025 we’ll be looking to be launching some of those globally.
AI and machine learning have been part of our capabilities for a while now as we explore responsible use of Gen AI within our product stack, and we’re very much focused on where that can take us with the customer base that we have. But where we’ve really invested over the last couple of years is cloud migration – putting all of our solutions into the cloud. Having them in the cloud will help not just the fintech world, where we’ll improve system speed, product deployment, scalability, but it’ll also help non-fintech parts of our business that will enjoy the benefits of that strategy.
Related news: TransUnion appoints Madhusudan Kejriwal chief executive officer.
Image: © David Finch/TransUnion