Entrepreneur Ryan Graciano on starting Credit Karma and the future of fintech in the digital era

Ryan Graciano, Co-founder and CTO, Credit Karma, has passed through the initial hurdles with Credit Karma and has today successfully emerged on the other side.

Before starting Credit Karma, Ryan was working for a company called Venetica in Charlotte, North Carolina, with a team of 60 people. The company was later taken over by IBM.

While working for IBM, Ryan felt he wanted to do something more consumer-oriented and something that had a bigger impact on him. During this time, he met Kenneth Lin, the present Co-founder and CEO of Credit Karma, and they started discussing about credit information and offering credit score for free.

In 2007, they got together and started Credit Karma, a free credit and financial management platform, along with Nichole Mustard.

“We knew that as a single bank, we’re not going to be able to give everyone the best price. So what we’re going to do is try to be in a place that aggregates all banks and give you the best price by connecting the consumer to the best thing,” says Ryan, talking about their approach while starting up.

In the latest episode of Prime Venture Podcast series with Amit Somani, Managing Partner at Prime Venture Partners, Ryan Graciano sheds light on the journey of fintech users and the future of fintech in the digital era to help entrepreneurs grow and build their startups with powerful insights of the makers and doers of the startup ecosystem.

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Free credit scores

Back in 2007-2008, when three credit bureaus in America were charging about $20 to release credit score to the consumers, the need to make such valuable information freely accessible to all and realising the temporary nature of this business practice gave birth to Credit Karma, says Ryan.

When asked about the story behind this interesting nomenclature, Ryan says, “From the SEO SEM front, they wanted credit to be in the name and they had just kicked around a bunch of different names in the alliteration of Credit Karma. And the concept - that by putting something good out there, you would get something good in return - was central to our early product. We were building all these different ideas for point systems where you could build on top of your credit score with credit earned points.”

Creating organic awareness

While talking about emerging markets like India, where customers are not entirely aware of the concept of credit score and how it is applicable to everybody or that it is called the CIBIL score, etc., Ryan dropped in quite an insightful nugget of information.

“It’s generally not worth trying to go after building broad-based awareness for something because the cost it takes to do that requires a large war chest. But if you can attach your message to something already organically out there...that can be a very successful way to proceed,” he says.

So, for something like a credit score, one can piggyback off an existing kind of revolution in connection with the credit score, say homeownership, use the prevailing organic media around it, and ensure people connect with your product with the thing that’s happening, Ryan advised.

“When consumers broke that $20 a month relationship, they would look for ways to get their credit score in a cheaper and free fashion. And we would be there on the blogs, on the forums, and everywhere we could essentially get our message out cheap because we really couldn’t raise money,” he says, recollecting their starting days.

But once their beta version was out in 2008, success followed quite rapidly. Credit Karma had 30,000 members in its first two to three months itself, and this just blew the world away.

The thin-file problem

Unlike the decade-long, credit-driven society of the US, Indian credit customers have never been a part of the formal financial economy and the problem of thin file.

Ryan says, “With a connection to payroll or proof of steady income, you can really get a lot more confidence in consumer credit, because that’s actually just one of the most common issues - the ability to pay may be there, but may not be consistently there.”

So services have come out with things like income "smoothing", or predicting what the next 30 days will look like based on your last 90 days of income history. Such things will prove quite helpful in the absence of access to the willingness to pay data, he suggests.

Ryan then spoke about the acquisition of Credit Karma by Intuit. He said, “It’s pretty exciting right here. What we’re doing right now is we’re actually moving out of the debt side, not out, but we’re adding the asset side of the balance sheet. So what we’re doing is we’re launching. We have a checking product on top of the success of our recent savings product.

"The idea is that if we’re going to become a place that can become your financial hub, we can create a much more compelling and interesting consumer experience.”

To hear more, listen to the podcast here.