UK company Experian is one of the largest credit bureaus in the world. It provides information for making more than 5 billion credit decisions a year. The company’s credit bureau has 3 terabytes of information and an annual turnover of over $1.9 billion. Last October, Experian announced its intention to enter the Russian market and offer its services to companies operating in various sectors of the economy, first and foremost banks. Experian International Commercial Manager John Hadlow says that they have already begun talks with representatives of the Central Bank, the government, and Russian bankers.

- Mr. Hadlow, does the credit bureau constitute your company’s main business?
- Experian is part of a group of companies called GUS Plc (Great Universal Stores). It has been operating on the UK retail and corporate services market for more than 145 years and has a turnover of over $10 billion. The scale of Experian’s activity is somewhat more modest. Our main business is to provide other companies with information enabling them to make well-considered decisions. We operate credit bureaus in the US, UK, and Europe. About a third of the US market and two thirds of the UK market are under our control. And we consider ourselves leaders, at least in terms of the number of files stored in our database and requests for furnishing information we receive from our customers.
- How did everything start? What was Experian’s business development strategy?
- In 1980, a team of managers in the parent company realized that the consumer information the company possessed had value. They realized that this information could be consolidated and standardized and then offered to those making credit decisions for risk assessment. The company had both negative information about borrowers (in particular, about overdue accounts) and positive information. To provide this service, a subsidiary, CCM Ltd., was founded. In 1980s, it operated mainly on the UK market and was one of pioneers both in risk assessment and online processing of credit applications.
- What difficulties did you face? For example, how were legal issues solved? You know, laws vary from country to country, and some countries might have no relevant legislation at all.
- Of course, different countries have different laws. For example, in the US, credit information can be used for marketing purposes, whereas in Europe, this is prohibited. In our recommendations to Russian specialists, we are advising them to consider the European rather than the American approach.
- What do these recommendations consist of?
- Both Russian and European legislation is based on the following concept. Borrowers’ personal data should remain confidential, with the exception of certain cases. One of them is when a borrower or a consumer agrees to transfer information to third parties. Yet, even here there is an exception. We believe that it should take place only if a borrower breaks contractual obligations. Disseminating information about dishonest borrowers is in the business community’s interests. Most countries have a rule under which the information about defaults can be made available to creditors. Today, Russian banks exchange this sort of information informally. We want to make this process systematic and legal.
- Probably, you have already had time to examine the Russian market. Why have credit bureaus failed to emerge in Russia so far?
- One of the key problems lies in banks’ mutual trust. The customer information in databases is their daily bread. It is confidential and very valuable for a bank. Therefore, there must be the utmost confidence between banks and the organization storing this information on their behalf. There must be a 100% guarantee against mistakes or leaks. Hence, the procedure for gaining access to information at credit bureaus is of great importance. In our case, it can be made available only with consumer consent. I’ll explain: when potential borrowers complete a loan application, they give their consent to have the information verified by a credit bureau. Or, on the contrary, they don’t give their consent. A contract between the credit bureau and bank expressly includes a provision stating that we are only notified of information that consumers have given their permission to verify. The contract would also stipulate the terms and conditions by which banks could obtain information from us. The banks, which only share negative information, would not have access to positive information made available by other banks. No one will be given unfair advantages.
Only if customers commit crimes will banks access to their file. But a court must declare them guilty.
- What is future of the loan market in Russia, in general?
- The Russian market is small at present. But it is growing. When my colleagues and I came to Russia five years ago, it was too early. If we had set up a credit bureau then, we would have lost money. Today, Russian society is gradually becoming a consumer society. By this I mean a society where people actively purchase goods on credit. Currently, interest rates are quite high in Russia but they reflect the risks involved. Incidentally, a credit bureau reduces these risks.
If you ask me whether competition between credit bureaus will appear, my answer will be affirmative. But ultimately, only a limited number of organizations will establish trusting relationships with banks. The legality and quality of the information will be our main competitive advantage.
- By the way, how much will information cost?
- In the West, the prices vary greatly, ranging from 20 cents to 20 dollars. But most credit histories cost from $1 to $5.
- Will there still be a niche for smaller credit bureaus when Experian comes to the Russian market?
- I think, yes, there will. But in the long term, they are unlikely to survive, though. All major markets have only one or two credit bureaus.
- How much are you ready to invest to set up a credit bureau in Russia?
- It’s difficult to say now but it may be a question of about $1 million. We’ll use the most advanced technology. At the same time, we won’t disregard the infrastructure already available on the Russian market. For example, there are data centers in Russia perfect for collecting information that would help us save money.
- One last question: when do you plan to start?
- We could possibly enter the market as soon as in the first quarter of next year. But much will depend on to what extent the market and its players are ready.