Equifax shakes off its one-trick image

When Rick Smith took the top job at Equifax six years ago, he inherited a great company resting on its century-old laurels.

Making money wasn’t the problem. A culture of entitlement, however, was. The Atlanta-based credit reporting giant had products that customers — mainly lenders — needed, and Equifax was OK with that.

It wasn’t motivated to grow.

Equifax needed a jolt of energy. For a company loaded with a gold mine of consumer data, Equifax lacked a spirit of innovation to bring that data to clients in new ways, Smith said in a recent interview with The Atlanta Journal-Constitution.

“My view is you are entitled to nothing as a company. And as a person, it’s a meritocracy. It’s not about what you did yesterday that matters,” Smith said.

Since September 2005, when Smith joined Equifax, he set out to do no less than re-imagine the business.

Smith shuffled almost the entire leadership ranks as well as the credit agency’s board and preached product innovation. That last part — innovation — is a trait instilled in him for two decades as an executive at General Electric.

“He’s truly pushed the organization to be decisive and forward thinking about new products,” said Carter Malloy, an analyst who follows Equifax for Little Rock-based Stephens.

To get there, Equifax needed to find new talent to create the new products that would form the basis of the refreshed company.

Some of that talent Equifax recruited. The rest came through a series of acquisitions made through the downturn.

Three-fourths of the company’s revenue had come from credit reports before the recession. Given Equifax’ ties to the United States economy, investors in the company worried about that exposure going into the downturn, Malloy said.

Smith forged an international growth plan and Equifax now operates in 16 countries. The company entered India to build its credit reporting system and is a top-three player in North America, Russia, the United Kingdom and many fast-growing South American countries.

Smith also linked with metro Atlanta civic and business organizations and even went to colleges to sell Equifax not as a sleepy credit bureau, but a cutting-edge technology and data firm.

“It’s not a credit bureau. It’s far, far more than a credit bureau,” Smith said.

In recent years, Equifax bought Talx, which helps employers file unemployment claims and is a vendor to the Transportation Security Administration, helping screen hires. Talx also provides income verification services for creditors when consumers apply for a loan.

Equifax also bought IXI, a wealth information database, and Anakam, a technology company that provides unique identity security products and contracts with the government and health care companies.

Among the raft of new products Equifax has built are also additions to its bread-and-butter business: the traditional credit report. A swath of available products includes data about consumers’ work history, income and wealth.

Credit reports and scores historically were an excellent indicator of a consumer’s ability to sink or swim with debt.

While they are still seen as reliable predictors, the recession revealed that data was not as reliable as once thought. It might have been a good indicator of propensity to pay, but not as good a predictor of someone’s ability to repay when jobs and other assets are lost.

Even some highly rated consumers deemed prime before the recession weren’t quite the safe bet once thought.

Without those and many other changes, Smith said, Equifax would have suffered setbacks during the economic collapse.

Instead, he says, the company barely flinched. Now Equifax, he said, is poised to take off. Today, about 57 percent (vs. around 75 percent pre-recession) of the company’s revenue comes from credit reports.

“We weathered the Great Recession extremely well,” Smith said. “In fact, I tell people we came through the recession stronger than when we entered.”

Decoupling from the U.S. economy and building new products while entering new lines of business helped fill the revenue holes. Equifax’s revenue dipped just 6 percent from the peak of 2007 to the trough of 2009.

“The one underlying component that helped us weather the storm was not just international [expansion]. It was innovation,” Smith said.

As part of the company’s “new product innovation” initiative, Equifax temporarily pulls top minds out of their full-time jobs and places them into full-time problem-solving sabbaticals. They revisit product lines to improve them or find new ways to crunch numbers for additional bites of the revenue apple.

“We now build 60 to 70 new products every single year,” Smith said. “In 2010, we generated almost $200 million in revenue from products we’d built, designed and sold over the last three years.”

For a company with $2 billion in annual revenue, that’s 10 percent.

“Had we not innovated, we’d be dead,” he said.

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Continuing coverage

The AJC has been covering how the economic crisis is changing the way consumers and businesses behave. Today we look at how lenders will be sizing up borrowers differently in the future.

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