Fair Isaac Corporation (NYSE:FICO): The Original AI Stock with the Patents to Prove It

June 7, 2024
Fair Isaac Corporation (NYSE:FICO) CEO Will Lansing explains how AI will continue to power his company's stock returns.

Fair Isaac Corporation (NYSE:FICO) CEO Will Lansing

William Lansing is the Chief Executive Officer of Fair Isaac Corporation (NYSE:FICO).

Before joining FICO, Mr. Lansing served as CEO and president of InfoSpace, and also as CEO and President of ValueVision Media.

He was a partner at General Atlantic Partners, a global private equity firm.

Prior to his work at General Atlantic, Mr. Lansing was CEO of NBC Internet, an internet media company and as CEO of Fingerhut, a direct marketing company.

He has also held leadership positions at General Electric, Prodigy and McKinsey & Company.

Mr. Lansing has been on the board of directors of FICO since February 2006.

He also is on the global board of advisors for Operation Hope and the board of directors of SafeGraph.

He received a B.A. degree from Wesleyan University and a J.D. degree from Georgetown University.

He develops his thesis for continuing his company’s excellent stock market returns in this exclusive one on one interview with the Wall Street Transcript.

“[Fair Isaac Corporation (NYSE:FICO) was] founded in the 1950s by a mathematician and an engineer in California, who had this idea that you could apply analytics to data and make good decisions by doing that, make more precise decisions, more predictive decisions.

And so, they started this firm to do that.

And we were really kind of an analytics consulting firm for many years.

We quickly gravitated to financial services because the decisions there are high stakes decisions, they are money decisions, mortgages and auto loans, credit cards. And so, people were prepared to pay more for precision around those kinds of decisions.

So that’s where we focused.

We would build these scorecards for banks, individually — proprietary scorecards for the banks, where they could evaluate the creditworthiness of prospects based on a bunch of different factors. And so, we did this for decades.

There are really two sides of our business.

There’s a software side and the scores side.

So, I’ll take you down the scores track, and then we’ll talk about the software side.

In the 1980s, we partnered with one of the large credit bureaus, Equifax, and launched an industry-wide score.

This was a score available to any bank that was interested, and they could get the data from Equifax and the score from us, and that would inform their views about whether or not to lend money to a prospect.

Then we did the same thing with Experian and TransUnion, two other big credit bureaus, and we became the industry standard.

What happened was lenders really liked it.

They standardized on it because it was a very low-cost way to score a big population, and it met all the regulatory guidelines.

It’s objective, scientific, fair, unbiased, colorblind, gender neutral, and it had a lot of qualities from an analytic standpoint that tied with what the regulators were looking for. So that went pretty well.

And then what happened was the regulators said, this is a pretty good tool for us to understand how much risk the banks have.

So they started to ask for the FICO Score of various portfolios, and then when the banks would securitize their loans, they would sometimes sell their loans to investors downstream.

When they securitize the loans, the investors ask, what’s the creditworthiness of the loan that I’m buying?

And again, the FICO Score was a good objective metric for evaluating that.

The investors started to demand the FICO Score.

And so, we had interest from the lenders, from the regulators, and from the investors, and that combination of all those constituencies kind of established FICO as the industry standard in credit evaluation.

And then finally, we decided to get the consumer involved and we give FICO Scores for free to consumers.

Now, hundreds of millions of consumers get their FICO Score for free, either from their bank or directly from FICO.

So there’s a lot of demand for the FICO Score now and a lot of awareness about it. So that’s the scores side.

And now to the software side.

Back in the 1970s, the management of the company had this idea that they could get beyond just being an analytics consulting firm if they built software.

So, let’s take the intellectual property and build it into software, and then we can get higher margins and greater returns.

So they did that and we built software, again specifically for banks in originations, collections and recovery, credit line management, and fraud detection.

All the major issues that banks wrestle with the risk cycle, the credit risk cycle.

We had software that would solve those problems. And so, we became the industry standard for banks and for bank software.

And then about 12 years ago, we got focused on a path towards building a platform that a bank could use to interact with all of its consumer customers, and we call that FICO Platform, and it’s a decisioning platform.

It lets a bank — it could be a retailer, it could be anyone who has a consumer for a customer, but let’s just use banks, for example, because that’s where most of our business is today — it lets the bank take any data from any source and bring it into the decisioning engine in the platform and then apply the right analytics to answer some question.

The question could be, what do we offer this customer the next time they show up in a branch, or when they call into the call center, or if we’re making an outbound call, what should we offer them?

Or a text, or an email or whatever — whatever that interaction with the consumer is, our software helps the bank to optimize that.

And we’re best-in-class in that.

We have the world’s leading decisioning platform and it’s been adopted by almost half of the top 300 financial institutions globally, and we’re growing very rapidly, over 30% year over year, so it’s pretty popular.”

Fair Isaac Corporation (NYSE:FICO) CEO Will Lansing embraces the development of AI throughout the technology supply chain.

“AI is totally wrapped up with analytics.

I mean, machine learning, artificial intelligence, neural nets, it’s all part and parcel of the same kind of analytics challenge, which is: How do you apply analytics to make decisions, to predict things?

And we’ve been at the forefront of that for over 60 years.

In fact, we first got started with AI right around 1992 with our neural nets and machine learning for our fraud detection software.

And we have many patents in the area of AI and it absolutely is an important thing for our business and informs where we’re going.

We’re not big on hype, but we are big on solving problems for our customers.

And so, obviously, AI is a part of the analytics portfolio that we bring to our customers…

In the area of AI, we’re focused on making sure that we have what we call explainable AI and ethical AI.

We want to make sure that it’s not just a black box, but when you use it, you have to understand: What are the parameters?

What is the AI using to make its decisions?

How is it trained?

And we have some technology, some patented technology, for managing that…

We believe that the consumer should be empowered to make a lot of these decisions about where their data goes.

And so, for example, in the scores business, we’ve launched a score called UltraFICO.

What that does is, it lets consumers decide which of their information should be used for making a credit determination, and they can invite a lender to please look at my checking account.

Look how pristine my behavior is.

Look, I never overdraw.

Look, there’s my income showing up on a regular basis.

I’m a good credit risk. I’m responsible.

So our UltraFICO score is designed to put the consumer in the driver’s seat.”

To get more insight into the AI technology powering Fair Isaac Corporation (NYSE:FICO), read the entire 3,284 interview with Will Lansing, CEO, exclusively in the Wall Street Transcript.