FICO Platform Accelerates Innovation with ”Digital Twin” Simulation
Latest release of FICO® Platform includes advanced simulation among nearly two dozen major enhancements to the leading platform for applied intelligence
With our commitment to deliver game-changing technology, today we announced our latest release of FICO® Platform. This milestone brings together nearly two dozen major enhancements to our industry’s leading platform for applied intelligence.
These new features span the digital innovation lifecycle from data to insights to actions to outcomes, all supported by a modern, API-first, decomposed architecture with core platform services to power your digital operations. These new improvements ensure you can more effectively generate data features in real time, rapidly develop deep and trustworthy insights with machine learning, seamlessly author decision strategies with business-friendly simulation, and deploy the resulting innovations to achieve better business outcomes.
I would encourage you to review the release details for a list of everything new. As simulation is the highlight of this release, I’d like to share more with you on why simulation is such a game changer.
The Power of Digital Twins
While the idea of a digital twin for business has existed within the manufacturing and supply chain industry for some time, the concept has not yet reached its full potential in other industries like banking and retail. The concept is intuitive – organizations create a high-fidelity, digital representation of their business and this model allows them to see the impact of potential changes.
This digital twin is important because businesses today know the need to move fast – but the risk of getting it wrong in terms of customer experience, market share, reputation, and financial performance is great. This risk-averse (but very safe) mentality limits the creative power of digital teams to experiment with disruptive new ideas and strategies.
In the age of AI, data scientists build predictive models with increasing ease, yet the vast majority of models never make it to production. By Gartner’s estimate in 2023, only 10% of organizations can repeatably get predictive machine learning models into production. Part of this challenge is certainly technical, but an even bigger hurdle is trust, transparency, and business predictability.
The Value of Digital Twin Simulation
I recently had a conversation with a senior executive who had to update his pricing models for compliance reasons. These models would impact far more revenue than paying the fines for non-compliance and his team couldn’t give him a confident assessment of the complete downstream consequences of the change. To buy his team the time they needed to give him the confidence he needed, he decided to pay the fine, which was almost half a million dollars.
What this executive’s staff was missing was the ability to pull in the new pricing models to a fully representative “sandbox” of the bank’s operations over the last six months, evaluate the end-to-end impact and then factor in adjustments that reflect various future scenarios to ensure robustness under all circumstances. That’s where a digital twin of the business comes into play.
Today, FICO has helped this executive and his team establish the simulation capabilities they need to play with their business strategy and decision policies including all the analytic models that inform them, so they can accurately assess end-to-end business outcomes, more quickly create customer value, and do this with greater confidence while mitigating all manners of risk.
Robust simulation and digital twin capabilities bring the power of enterprise-wide scenario experimentation into the hands of business users and drive effective cross-functional collaboration with data and analytic teams. Now, business analysts can seamlessly transition between designing decision strategies and simulating real business outcomes. This immediate cause-and-effect response cycle enables teams to move more quickly and with great confidence.
FICO has even more in store for our simulation and digital twin capabilities in 2024. Stay tuned to learn how businesses can further refine their operating models and leverage real and synthetic data to evaluate performance, generate recommendations, and deliver winning strategies to augment business outcomes – an integrated value proposition that FICO believes is real-world “applied intelligence”.
As FICO continues to deliver world-class applied intelligence for the enterprise, I’m inspired by the pioneering work of our clients as they innovate and deliver troves of new value to their customers using FICO Platform. I’m delighted by their feedback that FICO is enabling them to move at an unprecedented pace. You are the community that drives what we do and how we do it, and you will always be the beating heart of how we develop solutions that enable you to address today’s and tomorrow’s problems. Read my 2024 trends post to learn more about my take on where digital transformation and enterprise decisions are heading in the new year.
Learn More at FICO World 2024
FICO World, the decisions conference, is almost here. Join us in San Diego from April 15-18 to explore our latest innovations, hear customer stories, and engage in mutual learning about how FICO Platform is transforming the banking and insurance industries.
We invite past, current, and prospective clients and partners to join us. This type of event can seem a little intimidating for anyone new to the platform story, but we promise you will leave with a fresh understanding and sincere enthusiasm about what the future holds. We look forward to engaging with you on how FICO can be the best partner and consultant for your organization.
Learn How FICO Platform Can Power Your Digital Transformation
- Read the press release FICO Supercharges Business Outcomes with Innovations in Simulation Technology on FICO Platform and FICO Platform release details
- Explore innovation with FICO Platform
- Watch the video “FICO® Platform: Applied Intelligence, when and where it matters”
- Read the whitepaper “FICO® Enterprise Intelligence Network: Redefining the next generation of applied intelligence”
- See customers discuss their use of FICO Platform
- Read the article from The Journal of Digital Banking, “How Financial Services Leaders Are Using Enterprise Intelligence to Optimize Efficiency Ratios”
- Watch FICO Platform in action with the story of your everyday consumer, Digital Jane
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FICO® Score High Achievers: Is Age the Only Factor?
<p>FICO’s latest research on <a href="http://www.fico.com/en/blogs/risk-compliance/us-credit-quality-rising-the-beat-goes-on/" target="_blank">national FICO® Score distribution</a> shows that US credit quality continues to trend upwards, with an increasing number of consumers scoring in the highest scores ranges. Given that, we decided it was time to refresh our study on “<a href="http://www.fico.com/en/blogs/risk-compliance/infographic-what-does-a-high-credit-scorer-look-like/" target="_blank">FICO® Score high achievers</a>,” where we examine the credit behavioural profiles of consumers with higher credit scores.</p> <p>As expected, our latest study showed that older people generally have higher scores, as has been the case in our <a href="http://www.fico.com/en/blogs/risk-compliance/age-before-beauty-credit-worthiness-before-youth/" target="_blank">past research</a>. This is largely because they have trade lines that have been open longer, which leads to higher scores (assuming the trade lines are in good standing and all other things equal). The most credit savvy among you will remember that length of credit history accounts for roughly 15% of the overall <a href="http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx" target="_blank">FICO® Score calculation</a>.</p> <p>But for younger consumers, it isn’t too helpful to say, “just wait until you are 50 years old, and that will fix things!” Thus, I decided to dive deeper with our analysis, including looking at the credit behavioural characteristics of younger consumers with high FICO® Scores.</p> <p>In this analysis, I looked at credit characteristics for the two highest score bands, 750-799 and 800-850, which have about 16% and 23% of the population, respectively. I further broke this down by looking at the characteristics of the youngest 15% in each group, which occurs at age 29 for the 750-799 group and 43 for the 800-850. We used FICO<strong>®</strong> Score 9 for our analysis, and examined typical variables of the categories that go into the make-up of the score.</p> <p><a href="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png"><img class="alignnone size-full wp-image-29367" src="http://www.fico.com/en/blogs/wp-content/uploads/2016/10/FICO-Score-High-Achiever-table.png" alt="fico-score-high-achiever-table" width="715" height="747" /></a></p> <p>Since there’s a lot to dissect in this chart, I’ll highlight a few findings that struck me: <ul> <li><strong>Credit history.</strong> Higher scores are undoubtedly associated with a longer time on file. What’s striking is the higher average time on file for the 800+ group, both overall and for revolving accounts (the most common trade line). Clearly, it helps to start credit use early in life – but that’s not the sole determining factor for high scoring. The younger cohorts in both the 800+ and 750-799 groups have time on file medians significantly less than their older counterparts.</li> <li><strong>New credit.</strong> High credit scorers do, in fact, pursue new credit. We see little variation in months since last trade line opening and last inquiry among all groups observed.</li> <li><strong>Pay on time.</strong> As you might expect, the further in the past the delinquency, the higher the score – and that’s <u>if</u> a delinquency ever happened. 95% of the 800+ people and 72% of the 750-799 group have never been delinquent, which is a striking contrast to the 57% for the total population. The percentages for the younger groups are even higher, especially so for the 750-799ers. Collection items are also scarce for these high scorers. While 23% of the national population have collection items greater than $99, the figures are only 0.5% for the 800+ group and 3% for the 750-799 group. It is clear that, in conjunction with starting a credit file early, paying on time is a key trait of the FICO® Score high achiever.</li> <li><strong>Balance and utilization.</strong> Finally, we look at how credit is being used, focusing on revolving product use. (Since most people only have one mortgage or one auto loan, variation in instalment product figures is minimal and driven by payment history, which is near perfect for high scorers, as we’ve seen.) FICO® Score high achievers tend to have more open revolving accounts. While the % active trades and utilization are generally lower, by no means do high scorers avoid the use of credit products. What drives the difference here is the amount of <u>available</u> revolving credit utilized. The 800+ group is roughly 1/4 of the national median, both in total and on their highest utilized card; they also have lower balances and more cards<em>. </em>The 750-799 group is more active and higher utilized, but still only at 2/3 of the national figures. The young 750-799 group compensate with lower revolving balances and, as a result, lower utilization, which is in line with what we see for the 800+ group.</li> <li><strong>Benchmarks.</strong> I’d like to point out that while this study provides good benchmarks of the typical credit traits of the FICO® Score high achiever, individual credit profiles will vary widely. And keep in mind that when we sort groups of consumers as a whole by different behaviours, some results may look superficially odd. For example, the 800+ band has a longer median average open account time (128 months) than average revolving months on file (140 months).</li> </ul> So, what do we conclude? A huge takeaway is that high scorers don’t have too much in the way of serious delinquencies and negative public record data.</p> <p>In most respects, the young 800+ people are like their peer group. They really only differ markedly in their shorter credit history and higher non-mortgage balance, both of which are a function of life stage. Our results show that you don’t have to be a credit product hermit; these high scorers have more credit cards. The takeaway is to start credit activity early and maintain well-managed and moderate usage.</p> <p>In many ways, the young 750-799 people are more interesting because their age profile is much younger. Their credit characteristics differ more from their peer group, particularly in terms of length of credit history. They compensate by having almost pristine credit records and lower balances.</p> <p>Ultimately, 39% of US consumers are FICO® Score high achievers, which they accomplish by following common-sense credit practices. It ain’t rocket science!</p>
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