Following on from our interview with the Credit Assessment Team, we’re now with Rahul, James and Hossein, who make up our credit analytics team. These guys are our data experts and build statistical models for every part of our business, including that ‘in house credit model’ I referenced in the last interview.
Although there are only 3 of them, what they lack in numbers, they make up for in experience. Rahul started at Funding Circle in 2012, and James and Hossein came on board in 2013. Between them they share an impressive 3 undergraduate degrees, 3 MBAs, 1.5 PHDs and 17 years working in risk and consulting. Pretty good eh?
In a nutshell, this team builds models.
The credit analytics team builds statistical models to predict the future, which we base a good portion of our business decisions on. The main area they focus on is credit risk, or in other words, the probability of a business not being able to pay back their loan. Statistical models are involved in all parts of Funding Circle so as a result, they work closely with teams across the company. And, especially close with those on the credit team, and together they form our Credit Committee.
Welcome to the interview. I have to say, this is going to be as much of a learning experience as it is running an interview! Can you take me through your day-to-day activities?
Rahul: Yes of course. A lot of our time goes into collecting data. We’re responsible for the credit infrastructure so we can build and refine our models. So to do that, we interact with data collection bureaus like Experian and Creditsafe to obtain the information we need. The other half of our time then goes into analysing the information that we’ve collected. We build excel-based models for a wide variety of needs; assessing and quantifying the risk of a loan for example. Every statistical model related to any part of the business comes through us.
OK, so what does that mean in the context of risk?
Rahul: Every borrower will have an expectation of loss. Our credit assessment team will use the expectation which the model provides, to approve or reject the loan application. If we expect the loan to default then a loan is rejected. But, models have errors in them inherently. This means that of the businesses we have approved, we still have an expected and estimated target loss rate.
Our intent is not to have zero losses, our intent is to have a precise estimate of what the loss rate is. eg. in the A+ risk band, we expect 0.6% of loans to default, net of recoveries.
The goal of our team is to not only make sure our loss rates and assessments are accurate, but also to ensure that our portfolio experiences the loss rates that we publish. We utilise the data from our loan book which has over 3 years of information to allow us to rebuild our models regularly to incorporate new information.
How did you come into building models, do you all have financial or statistical backgrounds?
James: I joined about 5 months ago, and prior to Funding Circle I was actually in academia. I studied theoretical physics at university and I have a Masters in financial maths.
Hossein: I did my PHD at Stanford and then I attended the Business School. I’ve also worked with a quantitative hedge fund and I’ve advised a number of startups in Silicon Valley.
Rahul: I studied engineering and then completed my MBA in India. I’ve worked as a consultant, and in risk management areas in a number of banks. I completed my second MBA in the States and then moved to London to work as a consultant, before starting at Funding Circle.
Quite a range of backgrounds then! So why did you decide to work at Funding Circle?
Hossein: Innovation in the financial industry is very rare, and I think that was the most exciting part for me. Peer-to-peer lending is disrupting one of the oldest professions in the world, and I wanted to be part of it!
Rahul: I was initially approached by a headhunter and then spoke to one of the co-founders Andrew [Mullinger]. He talked so excitedly about the business that I was sold in 10 minutes flat. The role itself also appealed to me; it was more of a startup when I joined so a lot of the processes had to be built from the ground up. The challenge the role presented was exciting, and after working in banks for 10 years I really wanted a change.
James: I was halfway through my PHD and the opportunity of Funding Circle came to me through my professor. I thought my PHD needed a new direction, saw Funding Circle and what it was all about and thought it would be a perfect route to follow.
How do we differ to other places you’ve worked at or had experience in?
Rahul: This is my first experience of working in a company with less than 100 employees, so there definitely are differences. We don’t have the legacy drag that banks have, so I feel our process is much more agile and lean. Changes and improvements take less time to implement which is really refreshing.
Hossein: I’ve worked in startups for the majority of my career. But I’ve worked with larger financial organisations in the past, and I think the key difference is, as Rahul mentioned, the time it takes to make decisions. We get things done quickly, and we have more freedom to research and implement ideas.
James: Well this is my first experience in a workplace environment. Although the research projects I undertook whilst in academics may have had different applications, the underlying theory and methodology can be transferred to a lot of different fields, including credit risk. So there’s a lot of overlap which has made it a smooth transition. In academia, nothing is applied first hand to the real world so you perhaps lose sight of what the goal is. Now I know what we’re aiming to achieve. Not only can you use the stuff you’ve learned, but you actually get to see what happens at the end.
With so many different projects going on, this must be pretty tricky to manage. What would you consider to be the most challenging part of your job?
James: Yeah as we’re always working on a number of different projects, you’re constantly dipping in and out of different areas and teams which can be a challenge, but I wouldn’t want it any other way.
Rahul: There are pros and cons to working in a young company. You can get involved in so many different things, but it may be challenging as there is a limited amount of resource. We have had to build everything from the ground up and when I joined, there was a lot less structure. The hard part is really to get things up and running quickly, when we have limited resources as we’re growing at a rapid rate. This I’d say is a good problem to have.
Hossein: Sometimes you think, “is there an accepted or obvious way of doing something that I’m missing?” That’s what makes it exciting, there isn’t a manual that you just read. You always have to think for yourself.
Exactly, and by thinking all the time, new solutions will be more forthcoming. What do you enjoy most about working here?
James: The culture is really cool, there’s a relaxed atmosphere but there is always direction. I’ve had the opportunity to work with lots of different teams, like the insolvency and marketing teams, which is great because I learn what’s going on in the company. I always know why I’m doing something, which I like.
Hossein: The culture is definitely a huge plus and I enjoy the work itself. It’s so exciting to be a part of the innovation and disruption of one part of the financial industry.
Rahul: Yes I agree, the culture is great. It’s so refreshing working here, we’re young and energetic.
The culture and people have been the most popular answers in this series so far. So let’s finish with this one, do you have any interesting facts or hobbies you’d like to share us?
James: I produce music in my free time, and I’m releasing an EP on a Berlin music label which I’m excited, if not nervous, about.
Hossein: Photography is the thing I like most. I recently bought an iMac which is exciting, there is so much you can do with them!
Rahul: I always wanted to join the army, but I got rejected because I wore thick glasses. So I decided on models instead! And, I really enjoy playing table tennis in the office.
I can vouch for that. For those who don’t know, we have a table tennis table in the office and Rahul puts up a very good fight…
Rahul: Yes, and don’t forget about Ping-Pong Fight Club last year! It was an all Funding Circle final in the competition for London tech startups. Helene (our Technical Project Manager) played very well, but I managed to beat her!
Helene played competitively at an international level, so that was very good going. And how could we forget, the trophies that Rahul & Helene won for Funding Circle are the largest we’ve won, and have pride of place by our reception area.
So far we’ve met people in the credit, insolvency and customer relations team. Who would you like to meet next?