“Fintech is the hottest thing in town, globally as well as in India”

In an exclusive interaction with Dataquest, Bharath Thothadri, Amex talks about how American Express is leveraging customer data to serve better.

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What is American Express' philosophy as an organization about information and risk management?

We are a data driven company. With over 10 million merchants and over 100 million card members, we are sitting on data worth trillions of dollars across the globe. Through their cards we have an incredible amount of information on who they are, where they live, and through their transactions - we know what their preferences are. Our whole premise is how we use technology to use this data for various aspects of our business. So, right from prospecting to targeting with the right products and services to approval for credit to collections, we have to use this data. We have also started a number of businesses, and they are in early stages where we try, leverage and monetize the data we have.

Kindly provide some examples in regard to these new businesses?

Firstly, we have over 10 million merchants, and these merchants know quite a bit about their customers and what they do in their shops and stores. But these merchants have no idea what their customer do once outside their establishment, or what they do with competitors. We have started this business called Business Insights, which leverages all the data that we have and it is primarily based and driven out of India. The second example I would like to mention is about monetizing our data in a very different way. Delineated as Performance Marketing, in this business we scale out the data we have and use advanced statistical models like 'look alike modeling.' It identifies potential new customers at the global level who behave like my existing customer and hence, could become my customers.

How much have these technologies helped your organization and its customers in terms of enhancing revenues, profitability, or new revenue streams?

In our core area, which is the prediction of likely hood to payback, this is very useful. For instance, the two most important things we need to check when somebody is using our card is whether he/she is our genuine user or somebody who is fraudulently using our card, and secondly, will the user pay us back. If you look at the credit matrix alone, then every year, in one-basis point improvement in our credit modelling risk, will create a profit impact for us in millions. And, we regularly improve our models by 10 to 100 basis points, so the annual impact just because of credit risk models is in the tune of a billion dollars. For a revenue base, this is significant and it is growing. So, data is really the key about who we are.

How is the situation on the expertise availability? Sometime back getting data scientists who knew how to cull out the relevant data and read it were very difficult to get in India.

It is not easy at all and we work very hard on it. As we are growing fast, and we also send out experts to other geographies, we hire about 150 people every year. Out of this, about 70 come from campus, and another 30 from referrals from those recruited from the campuses; the remaining are recruited from the market. Our team works very closely with our HR team for campus recruitment to generate interest amongst students, as well as identify ones with the right interest, skills and aptitude. We were the first and perhaps the only one to launch an app for the campuses which students can download, and through the app, we interact with them on a continuous basis. There are special games for the IITs and IIMs through which students and teams compete with each other, build ideas and proposals. These activities give students a sense of what the job entails. This is helping us a lot because earlier people thought that even if it is American Express, it is most probably a backend kind of a job. But these activities have helped this job being looked as an interesting, important and high profile. This year we have been a 'day zero company' in all the IITs and IIMs, like Facebook and Google.

Do you sense that the demand for these data scientists is going to grow?

With so many MNCs, Indian companies and start-ups looking for data scientists every year, it is getting really difficult to recruit the best ones. Data science is becoming a great place to be in because the demand is huge and growing continuously. I am entirely convinced that artificial intelligence and deep learning for leveraging data to automate fairly advanced things, is now happening in a big way now. Just consider the billions of smartphones that come loaded with Android and Google which has personal assistance tools.

Just like ICT has played transformational role in some sectors like taxi services, hotel booking, train tickets, banking, etc. Do you see something similar on the cards as far as credit cards or other financial services are concerned?

Absolutely, as you would know that fintech is the hottest thing in town, globally as well as in India. If you look at companies like Capital Floats or India Lends that have build technology platform and are possible game changers in financial inclusion. They may or may not lend money, but they gather information on individuals and then use advanced algorithm models to access their credit risk, and then different lenders can bid for these customers. The important thing is that these companies are reaching out not to people like you and me, but a completely new population set that had so far little access to financial services. And this will totally

transform how borrowing and lending happens. These start-ups are building these tech platforms and might not lend money, but are aggressively gathering and analyzing data. And most importantly, they make it a very simple and seamless experience for the customers, in contrast to the long and lengthy procedures in traditional banks which take weeks. It is just by sharing some basic information, a click of the button, and they can approve loan applications in a few seconds.

How do you see this space evolving in India?

I see quite a few forces at play here. There is quite a few private equity and venture capital money coming in. There are quite a few examples of similar successful stories in other parts of the world that can be emulated and customized for India. There is quite a bit of entrepreneurial action these days in India. The skill sets required for such work is basically data science and software, and we have enough of that. And the government is also trying very hard to reduce friction in financial services, be it payments, or lending and borrowing, and all this will be riding on Adhaar Card. It is still at initial stage, but the vision is wonderful. India is a market where the demand for credit far exceeds supply and most of the people out of the 1.2 billion population do not have access to credits because the right processes and systems do not exist. My view is that this is an amazing opportunity.

Gathering and using customer information is a very sensitive issue, yet it is being misused so blatantly these days. When there is so much data thrust for everything American Express is doing, does it create conflicts and dilemma for you all at the planning stage?

For us there is no conflict, because unlike many other companies, in the end the value of our brand is incredibly large, and the risk of dilution of our brand value is too big for us. It is a dilution of the trust people has in American Express and that is paramount for us. That is why we have a very comprehensive set of compliance and legal systems and processes with regards to gathering and using information. Our disclosures are very clear and transparent.

Today, American Express is seen as very exclusive. Its cards are perceived as very elite, and there are many establishments that do not accept Amex cards. All this technology deployment that Amex has embarked on, will see Amex cards and services for the common man?

Absolutely. We are dramatically increasing, globally as well as in India our merchant coverage. On the acceptance side, there is a global initiative OptBlue where we are leveraging third party companies to sell our acceptance to merchants. In India, we have partnered with ICICI and SBI for their merchant base. On the issuance side, in India we have both proprietary cards as well those issued through our network partners and both of them are growing rapidly here. In fact, for our proprietary cards, India is one of the fastest growing markets globally. Wherever appropriate, we are looking at newer sets and groups, to get American Express cards are in a broader set of hands. For instance, we are developing credit bureau capabilities for those who never had credit card before so that their credit worthiness can be quickly assessed through their bank account information. We are constantly and aggressively using data to profitably underwrite more and more people. With the help of data we are also introducing, where appropriate, a more diverse set of products. Thus we have been able to come out with card for consumer segments whose needs are totally different. For instance for those who travel a lot we have a card along with Jet Airways, and another one with MakemyTrip. With all this, we have been able to significantly increase the average spend of an Amex card user. As per RBI data, an Amex card member spends five times more than other card users in the market.

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