All posts by Guest Contributor
In 2017, a meaningful jump in consumer sentiment bolstered spending, and caused the spread between disposable personal income and consumer spending to reach an all-time high. This increase in spread was mostly financed through consumer debt, which according to the Federal Reserve Bank of New York has brought total consumer debt to a new peak of $12.8 Trillion surpassing the prior peak in 2008. The Experian eighth annual State of Credit report greatly supported the consumer behavior trends observed for the past year. Spanning the generations It is no surprise that generation Z (the “Great Recession Generation”) is conservative and prudent in their approach to credit because they are the most familiar with the post financial crisis economy. Results showed Millennials experienced a drop in overall debt, and an increase in mortgage debt reflects the national homeownership affordability challenge facing this generation. As first time homebuyers, millennials have to relatively tighten their spending as they dedicate an ever-growing portion of their income to housing. On the other end of the spectrum, the results of the study showed that Baby Boomers’ had sizable debt (including mortgage debt), which reflects the generation’s intent to stay active in their communities and in their homes much longer than prior generations have done. A recent Harvard study reported that by 2035, one out of three American households will be headed by an individual 65 years of age or older, compared to current ratio of one out of five households. What’s on the horizon? It is reasonable to assume that these trends may continue into 2018, as the underlying conditions continue to persist. A closer eye should be kept on student and auto loans due to the significant increase in portfolio size and increasing default rates compare to other debt. Editor’s note: This post was written by Fadel N. Lawandy, Director of the C. Larry Hoag Center for Real Estate and Finance and the Janes Financial Center at the George L. Argyros School of Business and Economics, Chapman University. Fadel joined the George L. Argyors School of Business and Economics, Chapman University after retiring as a Portfolio Manager from Morgan Stanly Smith Barney in 2009. He has two decades of experience in the financial industry with banking, credit management, commercial/residential real estate acquisition and financing, corporate finance, mergers and acquisitions, quantitative and qualitative analysis and research, and portfolio management. Fadel currently serves as the Chairman of the Board and President of CFA Society Orange County, and is an active member of the CFA Institute.
The average number of retail trades per consumer has been trending down since 2007. But the average consumer retail debt is trending up, roughly $73 year-over-year. When analyzing single-store credit card debt by state in 2017, we found: States with the highest retail debt: Texas ($2,198) Alaska ($2,170) Arkansas ($2,067) States with the lowest amount of retail debt: Wisconsin ($1,374) Minnesota ($1,440) Hawaii ($1,442) Whether you’re a retailer, credit union or financial institution, stay ahead of the competition by using advanced analytics to target the right customers and increase profitability. More credit trends
Credit card balances grew to $786.6 billion at the end of 2017, a 6.7% increase to the previous year and the largest outstanding balance in over a decade. And while the delinquency rate increased slightly to 2.26%, it is significantly lower than the 4.73% delinquency rate in 2008 when outstanding balances were $737 billion. The increase in credit card balances combined with the slight growth in delinquencies points to a positive credit environment. Stay up to date on the latest credit trends to maximize your lending strategies and capitalize on areas of opportunity. Get more credit trends and insights at our webinar on March 8. Register here
Organizations that can mobilize their data assets to power critical business initiatives will see a distinct advantage in the coming years. In fact, most C-level executives (87%) believe data has greatly disrupted their organization’s operations over the past 12 months. Here are more insights from the newly released 2018 global data management benchmark report: As digital transformation efforts proliferate and become commonplace, organizations will need to implement processes and technology that scale with the demands of data-driven business. Read the full report
It’s clear the digital marketplace is here to stay. Online activities among consumers reflect the increased adoption of digital commerce. In fact, recent findings from our 2018 Global Fraud and Identity Report show the top activity on mobile devices is online shopping, followed closely by personal banking. Consumers trust technology and, by proxy, the businesses that help enable it. It’s critical for organizations to continue to build trust online without disrupting the consumer experience. It’s the goal — and the responsibility — of businesses. Learn more
Our 8th annual State of Credit report shows that consumer credit scores and signs of economic recovery continue on an upward trend, coming close to a prerecession environment. The average U.S. credit score is up 2 points to 675 from last year and is just 4 points away from the 2007 average. Originations are increasing across nearly all loan types, with personal loans and automotive loans showing 11% and 6% increases year-over-year, respectively. Consumer confidence is up 25% year-over-year and has increased more than 16% from this period in 2007. With employment and consumer confidence rising, the economy is expected to expand at a healthy pace this year and continue to rebound from the recession. Now is the time to capitalize on this promising credit trend. State of Credit 2017
Global Fraud and Identity Report 2018 Customer recognition. Convenience. Trust. Fraud risk. We obtained input from more than 5,500 consumers and 500 businesses worldwide on these priorities for our Global Fraud and Identity Report 2018. Top takeaways include: Your customers expect you to protect them. Are you meeting this need? Spot fraud by recognizing your customers. Can you identify yours? While perfect fraud prevention shouldn\'t undermine customer happiness, we can\'t forget that fraud victims aren’t happy customers. Businesses recognize the importance of trust - and the need for technology to enable it. Most businesses tend to demonstrate suspicion when it comes to preventing fraud, following a route of detection rather than permission or trust. This leads to lost sales and damages that customer’s lifetime value. There’s a better approach. Read the full report>
Once a scorecard has been redeveloped, it is important to measure the impact of changes within the strategy by replacing the old model with the new one. This impact assessment can be completed with a swap set analysis. The term swap set refers to “swapping out” a set of bad accounts and replacing them with or “swapping in” a set of good accounts. Different approaches can be used when evaluating swap sets to optimize your strategy and keep: The same overall bad rate while increasing the approval rate. The same approval rate while lowering the bad rate. The same approval and bad rates but an increase in customer activation or customer response rates. When measuring your swap sets, remember to also include the population that doesn’t change — those accounts that would be approved or declined using either the old or new model. Learn more>
The multitude of modern fraud strategies available today necessitates applying an appropriate level of confidence to increase the likelihood of catching fraudsters without disrupting legitimate customers’ experiences. This approach is known as “rightsizing” your fraud solution. Here’s how fraud detection rates can be improved while reducing the number of false positives and disruption of legitimate customers: A right-size approach means tackling your fraud problem with a highly tailored solution that enables your business rather than crippling it. Next week, we’ll discuss this forward-looking approach to fighting fraud, or you can jump ahead and read our latest tip sheet. Tip sheet>
Cybersecurity has become one of the most significant issues impacting international security and political and economic stability. Our new report, Data Breach Industry Forecast 2018, outlines 5 predictions for the data breach industry in the coming year. Here are 3: The U.S. may experience its first large-scale attack on critical infrastructure, causing disruption for governments, companies and private citizens. Failure to comply with the new EU regulations will result in large penalties for U.S. companies. Attackers will use artificial intelligence to render traditional multifactor authentication methods useless. Read all five predictions>
Auto originations continue to increase — particularly within prime categories. According to Experian’s latest State of the Automotive Finance Market report: Prime consumers grabbed the lion’s share of the total finance market, at 40.9%. Super-prime buyers showed the largest increase, reaching 20.2%. Consumers outside the prime category (credit score of 600 or lower) decreased to the lowest share on record since 2012. Credit unions and captive lenders increased market share of total vehicle financing, growing to 21% and 29.8% — an increase of 6.9% and 35.1%, respectively. As auto loan originations continue their upward trend, lenders can stay ahead of the competition by using advanced analytics to target the right customers and increase profitability.
Traditional verification and validation parameters alone are not enough to stop identity fraud. Fortunately, there are many emerging trends and best practices for modern fraud and identity strategies: Applying right-sized fraud and identity proofing solutions to reduce user friction and manage fraud risk appropriately. Maintaining a universal user view by employing diverse breadth and depth of data assets and applied analytics. Expanding the user view through a blended ecosystem by collaborating with vendors, peer agencies, and partners in identity and fraud management. The future of identity proofing is more than just verifying individual identities. Check out our tip sheet linked below for more strategies. Modernize your fraud and identity strategies>
For most businesses, the customer experience is at the heart of every strategy. Debt collection shouldn’t be different. Here’s why: 21% of visits to an online debt recovery system were made outside the traditional working hours of 8 a.m. to 8 p.m. Of the consumers who committed to a repayment plan, only 56% did so in a single visit. PricewaterhouseCoopers reported that 46% of consumers use only digital channels to conduct banking, avoiding traditional offline channels. Conversely, data collected by Gallup between 2013 and 2016 showed that 48% of American banking customers would only consider using a bank that offered physical branches. The debt collection process is an often-overlooked opportunity to build customer relationships and loyalty. Leverage data and technology to replace outdated approaches, minimize charge-offs and create environments that value each customer. Learn more>
It’s no secret. Consumers engage and interact with brands through a variety of channels, including email, direct mail, websites and mobile. And since most organizations work to keep the consumer experience at the core, they tend to invest in an omnichannel approach that caters to the consumer’s preferences. The lone exception may be during the collections process. Often, once an account falls behind on payment, the consumer experience falls behind with it. But should it? While many banks and financial institutions view the collections process merely as an opportunity to collect outstanding debt, the potential is much more. If treated effectively, the collections process can present an opportunity to develop a positive customer relationship that builds loyalty over time. If handled poorly, the collections process could cost an organization a number of lifetime customers. To correct this, banks and financial institutions need to implement the same omnichannel approach in the collections process as they do with every other consumer interaction. Collections can no longer be treated as a linear process that leads from one channel to the next. There needs to be a more personalized touch — communicating with consumers through preferred channels, contacting them at the most opportune times. Sound complex? Sure. But consider a recent Experian analysis that invited consumers to establish a nonthreatening dialogue with an online debt recovery system. The analysis revealed 21 percent of visits to an organization’s website were outside the traditional working hours of 8 a.m. to 8 p.m. Furthermore, of the consumers who committed to a repayment plan, only 56 percent did so in a single visit. Each consumer is different. So is each situation. And banks and financial institutions need to acknowledge those differences. Luckily, technology can address the complexities of an omnichannel and personalized approach. Platforms such as Experian’s PowerCurve® Collections enable banks and financial institutions to simplify the collections process for both the consumer and the organization. By treating the collections process the same as any other stage in the consumer journey, organizations have an opportunity to build a relationship. And to do so, banks and financial institutions need to leverage the data and technology at their disposal. If they do so appropriately, they’ll minimize their charge-offs and also create a lifetime customer. To learn more about leveraging the collections process to build customer loyalty, download our white paper Getting in front of the shift to omnichannel collections.
Sophisticated criminals work hard to create convincing, verifiable personas they can use to commit fraud. Here are the 3 main ways fraudsters manufacture synthetic IDs: Credit applications and inquiries that build a synthetic credit profile over time. Exploitation of authorized user processes to take over or piggyback on legitimate profiles. Data furnishing schemes to falsify regular credit reporting agency updates. Fraudsters are highly motivated to innovate their approaches rapidly. You need to implement a solution that addresses the continuing rise of synthetic IDs from multiple engagement points. Learn more
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