Okay, welcome everyone, and thank you for joining this fireside chat with Moody's as part of the Redburn Atlantic 2024 CEO Conference. I am thrilled to be joined by Rob Fauber, Moody's Group CEO, for the first time at this conference, so Rob, thank you for joining. Maybe I'll hand over to you for some opening remarks.
Yeah, first of all, great to be here. Russell, thanks so much for inviting me. Before we get started, I just, I want to say my heart goes out to the family of Brian Thompson and everybody at UnitedHealthcare given the tragic news today. Russell, maybe just a few words before we get into the Q&A. You know, obviously it's been a good year through the third quarter, as many of you have seen. The ratings business is really performing. We had 41% revenue growth in the quarter. And you've probably heard me use this term, agency of choice. We've invested a lot in being what we think is the agency of choice for issuers and investors.
And that means we've got very experienced analysts, we've got rigorous analysis, we've got very active market engagement, and that positioning allows us to really capitalize on some robust periods of issuance like we've got right now. On the MA side of the business, 9% ARR growth in the third quarter, 93% retention rate. Our Decision Solutions segment, which is almost 1.4 billion of ARR, that's growing at 12% in the quarter. And together with some good cost discipline across the company, we had 32% adjusted diluted EPS growth. Looking forward, Russell, I think there's some very good durable demand drivers of growth on both sides of our business. And I'm sure we'll get into some of this in our Q&A. But in ratings, we've got 11% growth in these maturity walls, our latest refunding studies. Those maturity walls are now almost $5 trillion.
And a lot of that growth was in spec grade, and spec grade is typically favorable to our revenue mix, so that bodes well. I think we're poised for an uptick in M&A in 2025, and then you've got structural trends like the growth in private credit. You've got the massive amount of capital that has to be raised globally to fund the transition to a lower carbon economy, and we've got ongoing growth in not only emerging markets, but domestic issuance markets around the world, so all of that, I think, provides a very nice tailwind for ratings, and then when you think about the MA business, we've got ongoing digital transformations at financial institutions. Banks have been at this for a decade. Insurance companies are, I think, behind banks. They're in the earlier days of the digital transformation.
We've got increasing focus on third-party risk management and operational resilience, and there's some regulatory drivers of that as well, and you've certainly got growing demand to better understand the financial impact of extreme weather events and a changing climate, and we're seeing that across now, banks, investors, governments. It's not just insurance companies, and then finally, of course, you've got the increasing value of proprietary data to power AI applications, so again, some very good, I think, durable demand drivers to capitalize on those, what we think of as kind of deep currents. Russell, we've really invested and evolved the company over the last six or seven years. We now have a massive data estate that goes well beyond credit. I mean, it starts with 74 trillion in rated debt. We have a massive proprietary credit default database that powers a lot of our models and algorithms.
We've also now have the world's, what we think is the world's largest database on companies, 550 million companies, 500 million plus economic time series, information on tens of millions of commercial properties, something like 5 billion locations and risks that we model every month using some very sophisticated, hundreds of sophisticated catastrophe models. The list goes on, right? And that massive data estate, together with our models, our methodologies, our scorecards, our insights, I think of all of that as our risk operating system. And then we thread that content, the data, the models, we thread that through our workflow solutions, and we make it available via API to our customers for their own internal workflow in ways that they want and need.
And I think maybe an easy example, Russell, is you think about banks now wanting to understand the weather and climate risk of a piece of collateral they're taking when they're making a loan. And so now we are providing that content that we have available from RMS. We're providing that through our loan origination platforms at the point of lending. So all of this, I think, sets us up very well, Russell, to do more for our existing customers. Our biggest customer segment is banks and insurance companies, and also to begin to serve large corporates around an interrelated set of use cases. And again, all of that drawing on this risk operating system. So good performance year to date, durable demand drivers, new and enhanced capabilities to help our customers in a world of what we call exponential risk.
So hopefully that sets the stage for our Q&A, and I'll turn it back over to you.
Yeah, that's perfect. I mean, tons to interrogate there, Rob. Yeah, so this will be an interactive session. Anyone listening, please feel free to submit Q&A to me via the function on the bottom of your screen. I can see quite a few coming in already, so I'll try and weave those in. Rob, let's jump into some questions, perhaps on MIS. As you said, a fantastic year. How big has the tailwind been from refinancing, both in terms of absolute dollar terms and percentage of issuance? Do you expect a year-on-year drop in refi activity in 2025 such that sort of growth in this business is then more geared to or more reliant on the new issuance side of things, which may be a proxy for M&A?
Yeah, so maybe let me just kind of touch on, Russell, what I see as kind of the demand drivers for the ratings business when we kind of look out, and then we can drill down on the maturity walls because that's an important part of this, kind of underpinning future issuance. But you've probably heard us say many times that economic growth is ultimately the most important driver for the ratings business over the, let's call it medium to long term. Obviously, there can be structural things going on in the market, but economic growth. And if you look forward next year across, let's say, the G20 economies, you've got global growth that's expected to start to get closer to that pre-pandemic number. We've got an uptick in our outlook for economic growth here in the United States, closer to 3% for next year.
Then that all should bode well for defaults, right? So we have a declining spec grade default rate outlook for next year. And with declining defaults, you would expect to continue to have very tight spreads. We have very, very tight spreads right now. That's one thing that's contributing to these very constructive issuance markets at the moment. And then, of course, expectations that rates are going to come down in 2025. So all of that should be pretty conducive. And then maybe the last thing I'd say is M&A has been pretty soft for the last several years, well below kind of historical averages. There's a lot of pent-up demand from private equity firms both to exit, to monetize, and also to put a huge amount of dry powder to work. So all of that, I think, does give us confidence.
I don't think it's not a one-trick pony, if you will, right? It's not just this one thing has to happen. If you want, we can drill down a little bit on the refunding, Russell, if that's worthwhile.
Yeah, in terms of the refi, is it fair to say there is less, as you see it, stock of refi in 2025 relative to what has been refi'd in 2024? But as you said there, spreads remain tight. You're just going to see pull forward from 2026 and 2027 to top it up. Is that the right way to think about it?
Generally, Russell, I might put a finer point in a couple of spots. So a question that we get is, has there been a much higher level of pull forward this year that's effectively reducing the stock of maturities in 2025? And it's interesting when you look at investment grade and spec grade, because it's different. investment grade issuers tend not to have a lot of pull forward because by the very nature of being an investment grade issuer, you have market access.
Yeah.
Right? Spec grade issuers are a little different. We go through risk-on and risk-off periods in the market where it can be very difficult actually to get spec grade issuance done, particularly at the lower end of the credit spectrum. So we have seen more spec grade pull forward. It's a little bit high. It is a little bit higher than the historical averages of pull forward in spec grade. So there has been a bit more of that. But then when I look forward, the refunding walls have gotten much larger, and particularly the spec grade refunding walls. I mean, I think they've grown the spec grade refunding walls, I think it's 19% growth. Overall, we had about 11% growth in the refunding walls, 19% in spec grade.
If we look at just the absolute amount of maturities going into next year, they're about the same as they were this year. Yes, there's been some pull forward, but lots of growth in the stock of forward maturities. I do think there's the potential, as you said, Russell, for pull forward from these later years, and the refunding walls are quite substantial. I don't feel like we've robbed Peter to pay Paul, and it's at this point.
Okay. And then if we talk about mix in terms of activity, can you talk to us directly about how mix affects revenues, particularly thinking about how much price you might be able to take in 2025 if you want to just talk about next year relative to what was taken this year in 2024?
Yeah, so a few things on that. One on mix. Generally, spec grade, where you have these are issuers who tap the markets less frequently. Spec grade issuance tends to be what I'll call revenue mix friendly. And when you think about investment grade, not surprisingly, you have big issuers. Some of them are on what we call frequent issuer contracts. A number of the banks, for instance, would be on frequent issuer contracts. They're issuing huge amounts of debt all the time. So the investment grade is what I would call mix friendly. And then when you move over to structured finance, I would say the more complex the asset classes, the more revenue mix friendly it is. So CMBS and CLOs would typically be the most revenue mix friendly. And then when you have kind of plain vanilla ABS issuance, that's less mix friendly.
The interesting thing, Russell, is when the leveraged loan market is really humming, and it has been this year. You get a cycle, a virtuous cycle going because we're rating the leveraged loans, and then they're going into the CLOs, and we're then rating those. As I said, both of those tend to be mix friendly. When you see very strong spec grade issuance, that's when you think, okay, there's the possibility that Moody's transactional revenue will exceed issuance growth and vice versa. That's that. The second part of your question was around, I think, around kind of just pricing and how going into next year. I would say we try to be very, very thoughtful about how we price. We have a very long-term view given kind of our market position. We have a very thoughtful approach.
We don't just have one price increase that we just kind of put across the entire issuer base. We look very carefully across regions and sectors. And we also tend not to kind of tie things to inflation. That can be a double-edged sword, right? If you had done that and used that as the rationale for passing through higher price increases in the last year, your customers are going to come back to you right now, and you're going to have the opposite conversation. So we tend not to try to have a conversation about inflation and those things. It's really more about value. That's how we tend to think about it, is the value that the rating provides. And we want to be very, very clear with our issuers about that and then take kind of a long-term approach.
And that translates, Russell, on average to about 3%-4% across the franchise. And that's pretty consistent from this past year and going into next year. And I would expect it over the medium term to continue to be so.
Perfect. Let's talk about private credit. I think the narrative has flipped here somewhat. Sounds like the narrative has flipped from this being a headwind to growth for MIS to potentially being a tailwind. Can you talk about your thoughts here, how big the growth opportunity is, what Moody's is doing to capture it, to what degree we're likely to see this in 2025? Any thoughts on that would be great.
Yeah, so I think you're right. This is a tailwind. It should be a tailwind for us. And we have some things to do to make sure that we capitalize on the tailwind, on the opportunity here. And I would say, Russell, there's kind of two parts of the market. I think most people think of when they think of private credit, they think of direct leverage lending. And that's call that a $1.5 trillion market today. And of course, that's a growing market. But then when you listen to the Blackstones and the Apollos, they talk about a much bigger market for private credit, which they think of as asset-backed finance. And that's really a lot of what is sitting on bank balance sheets.
So I think we can all see there's kind of a secular debanking trend that's going on, and you see assets coming off of bank balance sheets and going into the fund and investor market. And that number, when you look at the Apollo Investor Day, they start to talk about numbers like $20-$30 trillion for the asset-backed finance market. And we're already servicing this, Russell, in the rating agency in a number of different places. So let me talk about where.
Yeah,
obviously, we're doing ratings and credit estimates on portfolio company. We have a big business serving the portfolio companies of the big alternative asset managers like the Apollos and Blackstones. But we've now got a growing franchise inside of our financial institutions rating group. And think of that as elements of fund finance.
So this is subscription lines and NAV lending and rated feeder funds and other things. That is all now flowing through our financial institutions ratings franchise. And then you've got in structured finance, we've got a number of mandates that we would classify as private credit. And we've got some very interesting esoteric transactions that we've been working on. What that's meant, Russell, is that we've had to develop new methodologies. We needed to get a subscription line methodology together. We've had to update and roll out new methodologies in structured finance so that we can rate the flow that is coming from these big alternative asset managers. There are other places as well across the franchise. I mean, we see it. We're rating the vehicles. We're rating the asset managers themselves. We're rating the BDCs. We probably have the leading share of ratings in the BDC market.
We've rated private credit funds. Those are public ratings. So you're going to see more and more of that flow right through the ratings business. And I get asked from time to time, what about the economics of some of these ratings? A lot of what I just described to you, the economics are exactly the same as public ratings. A lot of this is the private credit funds hearing from investors that they want ratings on this stuff in order for them to invest. A lot of these companies are insurers who want ratings. There are some cases where we may be providing what is not a credit rating, but maybe a credit estimate or assessment on a company that's in one of these vehicles. But that's great. I might not otherwise have done anything with that company.
And so that gives me an opportunity to develop a credit relationship with this entity that may evolve into a rating. So that's really on the rating side. There's some other things on the M&A side of the business, but hopefully that gives you a sense of how we're thinking about it on the rating side.
Yeah, so it sounds like you are very clear now, in fact, that this is a net tailwind for MIS, yeah?
Yeah. If we didn't get our act together and make sure we've got these new methodologies, then this is something that could have passed us by. Other people would do that. But we have really, really geared up to make sure that we've got the methodologies and the people and the resources to be able to handle the flow. And I will tell you, Russell, I'm really encouraged by the dialogue that I have with the big alternative asset managers. They want us to help this market grow. And that's the way I think we're all thinking about it. We have a role to play in the private credit ecosystem.
Yeah, okay. And that's just one area where you've been investing for growth in MIS. There have been a bunch. And although the revenues have returned close to historical highs, the margins haven't. So can you talk about where the margins might be able to go in MIS? Is there a level that naturally caps out where you reach a point where it's just you need to reinvest? Or is there some upside we can look forward to in the near term?
So I mean, you have seen some operating leverage come back into the business this year. You see where the results were through the third quarter, so there's definitely been significant margin expansion. Because again, this business has great operating leverage. It should, right? I guess I would say, Russell, that we've got the medium-term targets, which talk about kind of a low 60s adjusted operating margin range. We're obviously comfortable with that number. We're not far away from that year to date. I guess what I would say, Russell, is we have this concept of talking about trying to make the business increasingly volume agnostic within a band of issuance growth, right? We've got to do that and make sure that we get that efficiency, but we also have the right controls. We're a regulated business, and our customers place a lot of trust in us.
And so it's very important to have not only efficiencies, but efficiency with controls. But to become more volume agnostic, we've actually been accelerating the build-out of technology enablement applications and even AI tooling for our ratings teams. And we've had a very strong year this year, and that's allowed us to accelerate those investments. And I think that is a very, very important part of how we continue to get more operating leverage into the business.
Perfect. I'm going to take a couple of the audience questions, Rob, because they've been coming in as we've been talking. Firstly, around the private credit opportunity in MIS. Question here is, is it the same group of analysts looking at these companies, or is it a separate team to your public credit team?
Yeah, good question. So it's the same generally. But let me give a couple of caveats. One thing we did late last year is we established a global head of private credit in our ratings teams, our analytical teams. And that woman is named Anna Arsov, and she's the co-head of financial institutions. And so that's actually a great dual position because obviously the financial institution piece is so critical to all of this. But then she's able to look across the entire rating franchise to make sure we understand where all the flow is coming from, to make sure that we have analytical consistency in how we're looking at these things.
And then she's also able to think about where we need to add resources across the rating, the analytical resources across the rating franchise based on where the flow is coming from, and where we need to make sure that we're developing methodologies and building up data and other capabilities to allow us to support the growth in the market. So we have a head of private credit analytically, and then we're adding people across the rating teams. It's the same skill sets. People could rate public or private credit. So we don't just have a group that only does private credit, but we would have people that specialize in certain asset classes, right, where there may be much private credit, may be much more prevalent. And then we've done the same on the commercial side.
So we have a dedicated head of commercial for private credit who does nothing but engage with the alternative asset managers. And we also are out there meeting with the investors, the insurance companies, the pension funds to make sure we understand what they need from us as well. But one, I think, big takeaway, Russell, is it's not like we have to build something totally new to service this. And if you listen to somebody like Marc Rowan, he'll say, look, it shouldn't make much difference whether something's public or private, right? The liquidity risk may be different, but the credit risk should not be. And so therefore, it does make sense to have the same people, the same skills, the same tried and true methodologies to look at both public and private credit.
Okay. I think this next question, Rob, relates to when we were talking on the debate between spec grade and IG, but take it as you will. The question is, can you elaborate on what the issuance band looks like to be broadly volume agnostic on margin?
Sorry, can you repeat that just a second?
Yeah, we're talking about what the issuance band looks like to be broadly agnostic on margin between, I think, spec grade and IG. As in, if we saw a big year of spec grade, would that be positive or negative on margin versus a big year of IG, or is there not major impact on margin?
I'm going to answer it two ways. So the first way to think about this, and it's not necessarily on margin, but if we think about spec grade versus investment grade, the right way to maybe think about that is if we have more spec grade issuance, then you would think that it's more likely that our transaction revenue will exceed issuance growth, okay? And vice versa. So if we have heavier weighting of investment grade, it's more likely, not always true, but more likely that we might have revenue growth actually below issuance growth. If you saw a lot of bank issuance, then you'd say, okay, I'm guessing that transaction revenues at ratings is going to be below issuance growth because a lot of it was financials on frequent issuer, right?
And so the other thing I would say, Russell, is in terms of thinking about margin as it relates to issuance mix, when we have refi, when we have a lot of refi, that's revenue mix friendly, margin, that's margin friendly, sorry, it's margin friendly. Why? We already have a rating relationship with the company. So when we have a lot of new issuers, there's a lot of upfront work, as you can imagine, right? So we really like to have new issuers because that builds the stock of rated issuance over time, but it's a little more margin unfriendly, and refi is typically a little more margin friendly.
Yeah, okay, that makes sense. I think that was the crux of the question. There are a couple of questions in relation to the new administration in the U.S. I'm going to try and put these together, although it may separate them. But in terms of the impact of the Trump government on the ratings business, how do you think about that from maybe a regulation standpoint or an M&A standpoint? However you want to answer that question, Rob, and just give you a moment to think about that. Perhaps a sort of interrelated question here is, if Fannie and Freddie are privatized, can you talk through the likely impact on Moody's? The market seems to be assuming the impact, if any, will be small. Is that fair? I don't know if that's particularly directed at MIS or maybe just answer that from the broader context for Moody's.
Yeah, so I guess on the first one, how do we think about the impact on the ratings business from the change in administration? Part of it will depend on the policies and what the policies end up leading to in the economy. So I mean, you mentioned I can tick through a few, for instance. If we have a more conducive antitrust environment than we've had the last couple of years, that's going to be very good for M&A. I do think there has been a muted strategic M&A in part because of the antitrust environment in the United States. We'll see what happens with economic growth. I mentioned earlier our outlook is for improved economic growth. That would be good for the ratings business. You mentioned a question about regulation.
In general, I think of the regulatory environment for rating agencies as pretty stable in the United States. I think of it pretty stable globally. Could there be some? I know there's a lot of talk about deregulation in certain industries. I doubt rating agencies is anywhere near the top of the list in terms of deregulating. Could there be some changes? If there are, I would imagine it would be in some ways a little bit less regulation than more, but it doesn't really have much of an impact, I think, on our business. In fact, the regulation, I think, plays a very important role because it supports investor confidence in our industry and in the company. I just don't anticipate much of a change there. It's going to come down to the things I talked about driving the ratings.
Economic growth, will it be higher or lower? What's going to happen with M&A? Those are two really, I think, important drivers. In terms of privatization of Fannie Mae and Freddie Mac, I would, first of all, it's been talked about on and off for years and years and years. We'll see if it happens. We'll see what form that would take. We did have a big business once rating private mortgage issuance. So I think it would have the possibility, depending on what shape this takes, to be a real net positive for the business. But just because it's been talked about so many times and has not come to fruition, it's not something that we have put a lot of stock in at this point. It would be a, I think it would be a nice upside if it happens. That would be my sense.
Yeah, okay. And the final question that I ask before we move on to MA around CCXI. So has that played out in the way that maybe you hoped or thought? Are there ongoing barriers to entry for foreign participants in that market that are becoming a frustration for you in terms of your growth or ability to grow that business? And the capital that Moody's has tied up in CCXI, is that the best place to have that capital tied up, or could you deploy that capital somewhere for a higher return? Any thoughts on that?
Yeah, I mean, the great news is the invested capital that we have invested is very low. I was actually involved in setting up that joint venture back in 2006, Russell. So I've got a lot of history with this investment over 20 years and the ebbs and flows of U.S.-Sino relations, and maybe just to give you a little bit of context for where we are now, I think it's helpful to understand kind of the journey a little bit. When we originally invested back in 2006, we thought we would go to majority control. That was the plan. That's what we've done wherever we can with these international affiliates. During the first Trump administration, I mean, actually, if you think back, we had a phase one trade deal. If you think back, there was all this excitement about what we were going to do with China.
We were pretty confident at that point that we were going to be able to go to majority control. Then the pandemic happened, and things changed a lot in terms of U.S.-Sino relations and Chinese priorities. And it's interesting, at that time, Russell, around that same time, as part of the opening of the market, the Chinese also offered and allowed foreign companies to apply for a greenfield license, wholly owned. So there were two paths that we could go down. One was this minority ownership in the leading rating agency in China, or we could go it alone as a U.S. company and own 100%. And it's funny, Russell, because the questions I got back then were, aren't you missing the boat? This is your chance to have the Moody's brand in China. I mean, it was every investor meeting.
And I said, look, if you believe that an American company whose product depends on independent opinion and plays an important role in the allocation of debt capital across the Chinese economy, if you think the Chinese are going to allow that to be controlled by a U.S. company, then you're right. We probably should go with the greenfield. I said, but I can't imagine that. And it's very difficult to find where others have been successful with that strategy. So where we are today is we own 30%. We have, I would say, kind of joint market engagement with them. We have referrals. We do the occasional conference and research with them. But they run as a separate company. And I think we feel pretty good about it, actually. Like I said, it was a very small investment.
CCXI is probably the best investment financially we've ever made because this thing has, over the course of years, it is the market leader. It has grown substantially, and it's very profitable. And so we collect dividends from them. We have some collaboration with them. And the last thing I'd say, Russell, is, I mean, I think all of us who have dealt with China understand you got to think in decades because the Chinese are playing a very long game. And so when you get into these markets, if you exit, it can be very, very difficult to get back in. So I guess you could see us change the ownership level, but we feel pretty good about continuing to have an ownership and relationship with the leading player in that market.
Yeah, yeah, okay. That's a good answer. Thanks, Rob. In terms of, in the interest of time, let's move on to talk about Moody's Analytics. Great business, no doubt. However, there have been some concerns recently arising over the ability to achieve low to mid-teens revenue growth set out at the 2022 Investor Day as a medium-term target. Can you explain why there is a bit of a gap that has opened up between MA revenue growth and MA ARR growth? And in fact, will that close in 2025? And then there's a sort of second part to that. Are you still confident, I assume you are, in achieving the low to mid-teens revenue growth? And if so, sort of how do we get there?
Yeah, so two parts to it. One, and you're right, it is a great business. But on the kind of gap between revenue growth and ARR, remember that ARR is an organic, constant currency number. And if you think about the revenue mix in MA, it's 95% recurring, but it's 5% transactional. And if you look at what happened with transaction revenue growth year to date, that's down 15%. So there's a few things that go into the delta between our revenue growth and our ARR growth. One is transactional revenue is declining, and that's impacting revenue growth. Then you've got FX moves. We can have occasionally some issue with software rev rec for some of our legacy on-prem business. Some of those kinds of things can impact revenue that may not impact ARR growth.
And so that's also why we tend to kind of try to guide towards just how important ARR growth is. It also gives you a sense of what you should expect recurring revenue growth to be on a go-forward basis. And recurring revenue growth was 9% for us. If you look at the medium-term targets, I think they're ambitious targets. They serve as kind of a North Star for us when we think about the innovation and the investments and the changes that we need to do in the company. Obviously, we've got a little bit of daylight between where we are now and those medium-term targets. Now, the medium-term targets for MA are revenue. And we haven't done much bolt-on M&A over the last several years. So that's typically accounted for a little bit of incremental revenue growth.
The other thing I'd say, Russell, is if you just kind of deconstruct for a moment, and I mentioned this in kind of the opening remarks, if you just think about the pools of MA revenue, so Decision Solutions call it almost $1.4 billion of ARR, that's growing at 12%. That's in line with those medium-term targets. We then have a more mature research business. It's inside the Research and Insights. That's the fixed income and economics research. And you can see that's growing a little more slowly. And then our Data Solutions business is growing somewhere in between our more mature research business and Decision Solutions, which I tend to think of as our software as a service businesses that are growing at the kind of low teens.
Yep. If we break that down a little bit then, so noted Decision Solutions growth is low teens. But if we break it down, banking within Decision Solutions was 3% growth in Q3. Research and Insights, which is, as I understand it, mainly a banking product, growth there slowed to 4% year to date in Q3. Is this indicative of a more normalized level of demand for banks? Obviously, we had the regional banking crisis at that same period in 2023. So there was a pretty tough comp here. But are we down at levels where you'd expect those parts of MA to be growing, kind of going forward, the bits that are more geared to the banking sector? Or is that actually kind of a difficult comp? Things are going to pick up.
Are you expecting an improvement in demand from banks in 2025, potentially kind of a lagged effect based on improvements that we've seen in profitability this year? Is that driven perhaps very much by rates and the macro environment? Just your thinking around the parts of MA are particularly geared to banks as a customer.
Yep. So it's a good bit to unpack in there, Russell. So I'll take these one at a time. So banking, you mentioned the slower revenue growth. This is where we have most of the transaction revenue, which is declining at 15%. So if you look at ARR growth for banking, that's been pretty consistent in kind of the 9%-10% range since kind of back to the beginning of 2023. But again, transaction revenue, we still have some legacy on-prem that's not growing. That's just not an area we're focused on for the business. We still have some migration left to get our customers all on to SaaS. Then if you think about, I think the second part of your question is just kind of the nature of demand at banks. And you're right.
You've heard us talk in the earnings calls about tighter purchasing patterns for banks over the last 12 months or so. That's true. But I would say that it feels like to me we're having more conversations with banks about growth now than maybe over the last year or two, where it was probably more just around risk and regulation. And you've also got some, I touched on this a little bit earlier, Russell, but it's worth, there's some deep currents just with banks that are going to drive ongoing spend. And so it's interesting when you talk with the banks too, because you've got to make sure that you're delivering, I use this phrase, solutions that are both making them more effective, but also more efficient. You have to be able to do that. The value prop.
So banks are still investing a lot in the digitization of the bank. And in particular, we're seeing more of that move to the front office. So that's one reason that we just bought that company Numerated, because I'd say one of the areas we're particularly focused on is around the automation of end-to-end lending workflow. So we had parts of that. We have some software, but Numerated really accelerated the build of more of an end-to-end lending workflow solution. And what we're seeing banks want to do is not only are they wanting to automate more of what's going on in the front office, but they want to put more information in the hands of their lenders at the time that they're deciding on who to call on and who to make loans to.
And so that plays really well to us, right, in terms of all the data that we have that we can make available. So that's a big, I think that's going to be an ongoing driver that's going to support our lending business. Then you've got bank demand for understanding climate risk. So that's us integrating that content into our solutions. And gosh, don't forget that I know it's in our KYC business, but our KYC business does a lot selling to banks. And you see the growth there. And I think we all saw the recent fine at Toronto-Dominion, $3 billion. And that was just a reminder to everyone that you've got to get this right. You have to be effective, and you have to be efficient. And if you miss the effective, it's going to be very, very costly.
And so, Russell, imagine a bank saying, "I need to make sure I don't get hit with a massive fine." There's a very strong value prop for our solutions in helping our customers ensure that they're compliant. So I think you've got some, the last thing I would say also around efficiency, Russell, is it's been really interesting with the GenAI stuff we've been doing. And we've developed an automated credit memo. And you know about the Research Assistant. That has opened up a fantastic dialogue with our banking customers, again, about how do we think about Research Assistant is not just a subscription to your research, but as a tool to start to think about changing the labor leverage model in your research business, in your research teams. So those are some really interesting dialogues where the value prop starts to become different.
I think that that's going to be good in terms of thinking about our ability to upsell with our customers.
Yeah, okay. So, Rob, two follow-ups on that, actually, because there was lots in there. So firstly, I'll give you the both, and then that'll allow you to answer. And on the GenAI side, have there been hurdles to adoption for some of those customers that potentially will be overcome in 2025? Do you see an acceleration and adoption of those products in 2025? Question one. Question two, in terms of the KYC product, that was an interesting answer because, as you said, much of that is being sold to banks. I did say that there was evidence of structural pressures within banks impacting on your ability to sell. But that is not the case in KYC. KYC grew at 19% in Q3. So what's driving the growth in KYC?
Because there's not 19% more banks every year, you're not driving 19% pricing, and you're not increasing the number of modules available by 19%. So can you break down exactly why and how KYC is growing at 19%? And flip the other side of the coin, is there a risk that that moderates sort of going forward if we are in a prolonged period of kind of lower spending by banks?
Yeah. Okay. Let me take the GenAI first. So yes, there have been some hurdles to adoption, and it's interesting because in the ratings business, we're regulated, and our regulators have been very clear that we should not be deploying AI until we have a risk and control framework around it. It's the same thing at banks, and so banks have had to take a lot of time to develop these risk and control frameworks to be able to start to deploy AI. When you're at a small asset manager, you don't have to do that, so they were early adopters, so we've had dialogue with some of these big banks for months and months and months and months, and there are some that are in the very late stages of these approvals. We've been working with the banks.
I do think you are going to see in early 2025 us start to be public about some of the larger institutions who are now using our AI solutions. I think you're going to see some of that. On the KYC growth, a couple of things I would say here, Russell. First is for the banks themselves, and then I'm going to talk about the broadening of demand for these solutions. If you look at the spend and resources that banks are doing on KYC and financial crime, it is massive. It is billions and billions and billions of dollars. You talk to some of these big banks, some of the big banks have not just thousands, could even have tens of thousands of people doing financial crime diligence and KYC and all sorts of stuff. There is a massive spend at these banks.
What do they want to do? Back to effective and efficient. I want to get better at catching bad guys. We rolled out something called our Shell Company Indicator. That helps you spot shell companies. That's valuable. Then there's also the efficiency component. Then, thinking about how do I not have 5,000 people in India, and how do I use AI screening instead to reduce false positives so that I don't have to send as many cases to get reviewed. There's a number of things that we have the opportunity to sell into to help our customers be more effective and more efficient at banks. That's one. Then two, the broadening of demand. It's no longer just banks that need to understand, "Am I doing business with a sanctioned entity?" It's corporations.
We have announced the rollout of what we call a Unified Risk Platform that's going to help corporates around trade credit, customer onboarding and monitoring, think of that as KYC, and supplier risk management, all drawing on that risk operating system and the massive company database and our KYC capabilities. And so we're going to be selling that into corporates. That is part of what I would call our land strategy, land relationships with new big corporates that's also going to help drive growth in that segment.
Okay. And then one thing you mentioned earlier was that Moody's has the largest database of private companies in the market. And I was wondering what more you can do with that data. What more could Moody's potentially do? Could you look into front office use cases for that data in capital markets, for example? You've obviously just given access as part of a partnership to Moody's for that data. Intrigued as to what's involved in there, just how you can monetize that really good data set that others are paying silly money for to get their hands on right now.
Yeah. You know, when you think about it, when we bought it, Russell, and back when we bought it, I think it was like 220 million companies in 2017. Now it's over 550 million, but you had to go to this Orbis. You had to access this through this thing called Orbis, and now we've integrated that data into a lot of different solutions that we provide. Again, back to lending. We're pre-populating information for our banking customers, leveraging this database, and that allows us to generate additional revenue from those customers. What I just talked about, which is serving corporations around a connected set of use cases, like the common piece to that, Russell, is this massive company database, so I'm extending credit. I'm figuring out who my customers are, my suppliers, everything I want to know about them. It all goes back to this massive company database.
So that's another opportunity for us to monetize that data in a completely new, really new customer segment at scale. And then last, I guess I would say, I mean, you mentioned the partnerships. We're trying to be much more proactive in meeting our customers where they are. And so we've had good success in building workflow solutions and selling that and then integrating our data. That's been an important part of our growth over the years. But I think there's more and more of a realization that there's a lot of demand. But back to this idea of, "I need to know more about who I'm doing business with," whether it's procurement or supply chain. And guess what? There are companies that have very, very strong installed positions in those markets.
And so we're having very active dialogues with many of those customers, many of those companies to integrate our data into their workflow software where their customers are making decisions about who they're doing business with. I mean, it'd be difficult for us to build a procurement platform and compete with, say, Coupa, right? So instead, you think, "Well, how can I think then about partnering with these folks and making our data available in their platforms?" And so I think you're going to see more of that as a way to monetize this data.
Yeah, perfect. Rob, I think we could go for hours here, but we are up on time. Can I maybe just hand over to you to make a closing remark as to perhaps what you're most excited about for Moody's as we head particularly into 2025?
You know, Russell, I got our global MDs together in the last few weeks, and we spent a day and a half together. And I just talked about the, back to this idea of these really durable demand drivers, these deep currents that were so well positioned to play the role that Moody's plays in this world, which is to uncover meaning amidst uncertainty. That's how we think of our purpose as a company. And you think about these deep currents and about the fact that we've built out these capabilities, we've invested in these capabilities, and now we're sitting here with these big deep currents that we have an opportunity to play a very important role going forward. And I think that bodes well for how I think about growth over the medium term.
Yeah. Perfect. Thank you. Rob, thank you very much. It's great to have you join us here. I hope you get some time to relax over the festive season. We look forward to hearing from you and talking with you again at the full year results.
Yeah, Russell, thank you so much, and I'll talk to you on the earnings call.
Perfect. Thank you very much. And thank you to everyone who joined online.