All posts by Guest Contributor
By: Maria Moynihan Cyber Monday recently passed and I'm curious to know if you were one of the many who contributed to the $1.465 billion spend online that day? ‘Tis the season - not only for increased online shopping, but for increased ID theft or risk of fraudulent activity. With a quick online search, you can find some good tips on how to protect your information. Here’s a great read on password protection. Other sources offer added tips, like the below, when submitting information online: 1) Ensure sensitive information is secure before submitting 2) Only access websites you know you can trust 3) Be sure you are comfortable with the information your mobile device is asking you to provide in specific apps Beyond the holidays and even beyond the type of organization you are interacting with, these online tips apply. Government agencies for instance, encourage similar cautionary behavior when interacting with them. In fact, several have even implemented tools and processes to ensure the proper level of information security, authentication, and checking occur. Take the Social Security Administration for example. Here is an agency that implemented a secure process for individuals to access their benefits online. By incorporating a step to quickly and efficiently cross check an individual’s identity, the agency was able to validate information, ensuring people seeking access to their information are truly who they say they are. Watch a video to see how the Social Security Administration offers secure real-time access to individuals’ benefits. And, most importantly, keep these important information safety tips in mind every day and enjoy a stress-free and peaceful holiday!
Research shows that investing in superior customer management easily can exceed returns of 20 percent in the first year of implementation. A return that compounds in subsequent years as a results of customer-centric strategies that drive customer's loyalty, new customer referrals, and increased revenue opportunities. Customer loyalty is a key driver that differentiates retail banks when trying to retain existing and attract new customers. And cited by customers themselves as the way to win their business today. Achieving superior customer management, however, can be expensive and operationally prohibitive; and let's not to forget to mention there are a number of different approaches that aim to meet such a standard, but fail because critical qualitative insights are not captured in back-end systems of record (SOR). These "black-box" strategies struggle to be widely adopted across the enterprise and die a slow, internal political death - with wasted resources left on the floor. It also leaves the customer feeling frustrated and dissatisfied, maybe even ready to flee. One such example was recently illustrated in an article in Credit Union Times. Changing the retail bank's approach to adopt best practices in developing holistic customer-centric strategies is paramount to the improvement of the customer experiences, and the bottom line. Quantitative data alone can represent only a partial view of reality whereas holistic customer strategies exploit the full value of the enterprise by synthesizing customer knowledge from SOR with external off-your firm financial information and critical qualitative input from customer-facing staff. Customer-facing staff are critical in the adoption of such strategies and need to be actively engaged to extract customer learnings that will lead to the modification and alignment of customer-level treatement strategy designs and predictive models with the real world. A collaborative approach, blending art and science, ensures complete adoption across the enterprise and measurable customer experience improvements that can be monetized for shareholders through improved customer retention and new customer acquisitions. Get access to details on the framework to design and deploy such customer-centric strategies.
By: Maria Moynihan The public sector is not unlike the private sector when it comes to data. Both require accuracy and relevancy for optimized processes and decision-making. For government agencies, maintaining a holistic view of constituents is more important than ever. By linking data across department systems, governments improve operations, citizen profiling and overall record management. No longer do agencies have to muddle through records of Maria Moynihan, Mari Moynihan, M Moynihan, and other variations of name or contact information when they all are truly one in the same. Unfortunately, without the right tools and know how, database maintenance, record deduplication, and account validation can be a daunting process. Below are five critical steps to helping government agencies execute successful linkage of database records: Step 1: Engage stakeholders Data stewards are not mind readers. They work with finite data and rely on stakeholders to provide insight. Seek input from users across departments and functions. Step 2: Identify impacts and priorities Data errors and disparate data prevent stewards from amalgamating records and defining a master database. Focus on areas of strategic priority. Step 3: Create success criteria Look for and set quantifiable metrics for matching. Consider what data needs to be linked and what thresholds are acceptable given objectives. Step 4: Define new standards Create established workflows and guidelines for evaluating, merging and purging records. Step 5: Leverage matching technology Integrate robust deduplication tools to design multiple workflows and handle a variety of matching challenges. In short, without data stewards seeking input from commercial stakeholders, an understanding of the data impacts, and establishing a clear process including defined methodologies and technology for deduplication, government agencies will remain challenged in trying to figure out if Maria, Mari, and M are the same person in databases. Click here to see the full guide to Creating a Single View.
By: Joel Pruis The commercial lending - traditional C&I, CRE and other - segment is one of the last areas to be “automated” or captured within an automated lending platform. Many of us talk about the need to automate this segment but the discussion needs to start with the question of “What does it mean to automate originations in the commercial segment? Let’s start to break this down and define it. Previously, we have covered how to define small business for your respective financial institution. If you use that as a measurement of what is small business, the remaining segment would by default be your commercial segment. It seems obvious but good to re-iterate to keep the context on commercial. What we are not planning to cover is the small business segment where there is relatively high application volume and low total dollar production. If we compare small business and commercial across two major characteristics, we the distinction becomes more clear. The above chart represents the typical situation – the probable not the possible scenario. For example, there are situations where the sales lead time is days not months for a commercial lending opportunity or a small business application can sometimes take over a year to get the application. I like analogies so let’s compare mass produced furniture vs. custom furniture to small business vs. commercial. Mass produced furniture is high volume but low dollar per unit (small business) while the custom furniture is the low volume but high dollar per unit production (commercial). Basically, the furniture being mass produced has a low need for any customization with high demand and a low cost of production on a per unit basis. Conversely, the custom furniture production has relatively low volume but a higher cost of production on a per unit basis. The custom furniture maker has no set designs, no set product line but rather examples of past work that has been done. There are no set materials that are to be used and no set prescribed method for manufacturing any particular item. While one customer may want a dining room table that has leaves to expand the seating as needed, another may want a drop-leaf table or simply a static table top. It is up to the customer to decide what the criteria is to best suit the need. The talented furniture maker will provide his/her expertise to provide the best product/solution for the customer but the end result is ultimately up to the customer. Such a design will be worked and potentially reworked multiple times before the right design in actually approved by the customer. Once the design is approved, the work begins on creating the piece of furniture. The creation may follow a standard set of procedures or may not. The key is that there is no set way that must be followed in the creation. The furniture maker will not wait until all material is available but rather can start on portions of the furniture (turning the legs, rough cutting the wood for the table top). While there is likely an agreed upon delivery date, the success is dependent upon completing the furniture by that date, not following a set prescribed path to completion. It is possible to design and capture the small business origination process with its defined roles and responsibilities in a detailed process map. The small business origination process can measure and monitor service level agreements and set expectations with the client around the entire process before the application is even taken. Prescribed order and dependency around the activity and/or task-level process mapping can be accomplished in the small business origination process with a high degree of accuracy and consistency from one application to the next. The commercial loan origination process, however, cannot be captured with a high degree of accuracy and/or consistency. Individual efforts can certainly be captured and specific service level agreements can be established. For example, the spreading of financial statements can follow a prescribed methodology and service level agreements can be established. However, attempts to establish service level agreements that when combined could adequately set expectations of total turnaround times, estimated completion times and prescribed methodologies would result in much lower compliance with such prescribed processes rendering it meaningless. Joel Pruis is a senior business consultant with Experian's Global Consulting Practice. To learn more about strategy consulting and access more thought-leadership from our team, please visit www.experian.com/consultingservices.
It comes as no surprise to anyone that cell phone usage continues to rise, while at the same time the usage of wire lines, or what used to be affectionately known as POTS (Plain Old Telephone Service), continues to decline. Some recent statistics, supplied by the CDC show that: 34% of all households are now wireless only 25 states have rates of primary wireless exceeding 50% Landline only households is now down to only 10.2% When you couple that with churn rates for cell phones that can exceed 40% a year, it becomes paramount to find a good source for cell numbers if you are trying to contact an existing customer or collect on an overdue bill. But where can debt collectors go to find reliable cell phone numbers? The cell phone providers won’t sell you a database, there is no such thing as 411 for cell phones, nor is it likely there will be one in the near future with the aforementioned 40%+ churn rates. Each cell phone service provider will continue to protect their customer base. There are a few large compilers of cell phone numbers; they mostly harvest these numbers from surveys and sources that capture the numbers as a part of an online service—think ringtones here! These numbers can be good, at least initially, if they came with an address which enables you to search for them. The challenge is that these numbers can grow stale relatively quickly. Companies that maintain recurring transactions with consumers have a better shot at having current cell numbers. Utilities and credit bureaus offer an opportunity to capture these self-reported numbers. At our company, over 40% of self-reported phones are cell phones. However, in most cases, you must have a defined purpose as governed by Gramm Leach Bliley (GLB) in order to access them. Of course, the defined purpose also goes hand in hand with the Telephone Consumer Protection Act (TCPA), which restricts use of automatic dialers and prohibits unsolicited calls via a cell phone. Conclusion? If you are trying to find someone’s cell number for debt collection purposes, I recommend using a resource more likely to receive updates on the owner of a cell over that of compilers who are working with one time event data. In today’s world, obtaining an accurate good cell number is a challenge and will continue to be. What cell phone number resources have been most effective for you?
Contributed by: David Daukus As the economy recovers from the recession, consumers are becoming more responsible with their credit card usage; credit card debts have not increased and delinquency rates have declined. Delinquency rates as a percentage of balances continue to decline with the short term 30-59 DPD period, now at 0.9%. With mixed results, where is the profit opportunity? Further studies from Experian-Oliver Wyman state that the average bankcard balance per consumer remained relatively flat at $4,170, but the highest credit tiers (using VantageScore® credit score A and B segments) saw average balances increase to $2,422 and $3,208, respectively. It's time to focus on what you have—your current portfolio—and specifically how to: Increase credit card usage in the prime segments Assign the right lines to your cardholders Understand who has the ‘right’ spend Risk score alone doesn't provide the most accurate insight into consumer accounts. You need to dig deeper into individual accounts to uncover behavioral trends to get the critical information needed to grow your portfolio: Leading financial institutions are looking at consumer payment history, such as balance and utilization changes. These capture a consumer’s credit situation more accurately than a point in time view. When basic principles are applied to credit data, different consumer behaviors become evident and can be integrated into client strategies. For example, if two consumers have the same VantageScore® credit score, credit card balances, and payment status, does that mean they have the same current credit status? Not necessarily so. By looking at their payment history, you can determine which direction each is heading. Are they increasing their debt or are they paying down their debt? These differences reveal their riskiness and credit needs. Therefore, with payment history added to the mix, you can more accurately allocate credit lines between consumers and simultaneously reduce risk exposure. Spend is another important metric to evaluate to help grow your portfolio. How do you know if a consumer uses primary a credit card when making purchases? Wouldn’t you want to know the right amount of credit to provide based on the consumer’s need? Insight into consumer spending levels provides a unique understanding of a consumer’s credit needs. Knowing spend allows lenders to provide necessary high lines to the limited population of very high spenders, while reducing overall exposure by providing lower lines to low spenders. Spend data also reveals wallet share—knowing the total spend of your cardholder allows you to calculate their external spend. With wallet share data, you can capture more spend by adjusting credit lines or rewards that will entice consumers to spend more using your card. Once you have a more complete picture of a consumer, adjusting lines of credit and making the right offer is much easier. Take some of the risk out of managing your existing customers and finding new ones. What behavioral data have you found most beneficial in making lending decisions? Source: Experian-Oliver Wyman Market Intelligence Reports
By: Kyle Aiman Let’s face it, debt collectors often get a bad rap. Sure, some of it is deserved, but the majority of the nation’s estimated 157,000 collectors strive to do their job in a way that will satisfy both their employer and the debtor. One way to improve collector/debtor interaction is for the collector to be trained in consumer credit and counseling. In a recent article published on Collectionsandcreditrisk.com, Trevor Carone, Vice President of Portfolio and Collection Solutions at Experian, explored the concept of using credit education to help debt collectors function more like advisors instead of accusers. If collectors gain a better understanding of consumer credit – how to read a credit report, how items may affect a credit score, how a credit score is compiled and what factors influence the score – perhaps they can offer suggestions for improvement. Will providing past-due consumers with a plan to help improve their credit increase payments? Read the article and let us know what you think!
By: Mike Horrocks It has been over a year that in Zuccotti Park the Occupy Wall Street crowd made their voices heard. At the anniversary point of that movement, there has been a lot of debate on if the protest has fizzled away or is still alive and planning its next step. Either way, it cannot be ignored that it did raise a voice in how consumers view their financial institutions and what actions they are willing to take i.e. “Bank Transfer Day”. In today’s market customer risk management must be balanced with retention strategies. For example, here at Experian we value the voice of our clients and prospects and I personally lead our win/loss analysis efforts. The feedback we get from our customers is priceless. In a recent American Banker article, some great examples were given on how tuning into the voice of the consumer can turn into new business and an expanded market footprint. Some consumers however will do their talking by looking at other financial institutions or by slowly (or maybe rapidly) using your institution’s services less and less. Technology Credit Union saw great results when they utilized retention triggers off of the credit data to get back out in front of their members with meaningful offers. Maximizing the impact of internal data and spotting the customer-focused trends that can help with retention is even a better approach, since that data is taken at the “account on-us” level and can help stop risks before the customer starts to walk out the door. Phillip Knight, the founder of Nike once said, “My job is to listen to ideas”. Your customers have some of the best ideas on how they can be retained and not lost to the competitors. So, think how you can listen to the voice and the actions of your customers better, before they leave and take a walk in the park.
By: Maria Moynihan State and local governments responsible for growth may be missing out on an immediate and sizeable revenue opportunity if their data and processes for collections are not up to par. The Experian Public Sector team recently partnered with Governing Magazine to conduct a nationwide survey with state and local government professionals to better understand how their debt collections efforts are helping to address current revenue gaps. Interestingly enough, 81% stated that the economic climate has negatively impacted their collections efforts, either through reduced staff or reduced budgets, while 30% of respondents are actively looking for new technologies to aid in their debt collections processes. New technologies are always a worthwhile investment. Operational efficiencies will ultimately ensue, but those government organizations who are coupling this investment with improved data and analytics are even better positioned to optimize collections processes and benefit from growth in revenue streams. No longer does the public sector need to lag behind the private sector in debt recovery. With the total outstanding debt among the 50 states reaching an astounding size of approximately $631 billion dollars, why delay? Check out Experian's guide to improving debt collections efforts in the public sector. What is your agency doing to capitalize on revenue from overdue obligations?
By: Teri Tassara Negative liquidity, or owing more on your home than its value, has become a much too common theme in the past few years. According to CoreLogic, 11 million consumers are underwater, representing 1 out of 4 homeowners in the nation. The irony is with mortgage rates remaining at historic lows, consumers who can benefit the most from refinancing can’t qualify due to their negative liquidity situation. Mortgage Banker’s Association recently reported that approximately 74% of home loan volumes were mortgage re-finances in 2Q 2012. Consumers who have been able to refinance to take advantage of the low interest rates already have, some even several times over. But there is a segment of underwater consumers who are paying more than their scheduled amount in order to qualify for refinancing – which translates to growth opportunity in mortgage loan volume. Based on an Experian analysis of actual payment amount on mortgages, actual payment amount was reported on about 65% of open mortgages (actual payment amount is the amount the consumer paid the prior month). And when the actual payment is reported, the study found that 82% of the consumers pay within their $100 of scheduled payment and 18% pay more than their scheduled amount. Actual payment amount information as reported on the credit file, used in combination with other analytics, can be a powerful tool to identify viable candidates for a mortgage refinance, versus those who may benefit from a loan modification offer. Consumers methodically paying more than the scheduled payment amount may indicate that the consumer is trying to qualify for refinancing. Conversely, if the consumer is not able to pay the scheduled payment about, that consumer may be an ideal candidate for a loan modification program. Either way, actual payment amount can provide insight that can create a favorable situation for both the consumer and the lender, mitigating additional and unnecessary risk while providing growth opportunity. Find other related blog posts on credit and housing market trends.
What does the mortgage interest rate, currently at an all time low of 3.55% (for 30 yr. fixed), mean for financial institutions? According to the latest Experian-Oliver Wyman Market Intelligence Report, 75% of the mortgage originations are refinancing vs. purchasing loans. As mortgage rates decrease, financial institutions face losing mortgage loans to other lenders in the refinance climate. Consumers are looking to save money and mortgage payments are generally the largest monthly expense. Economic indicators, such as decreasing credit card and mortgage delinquency rates, reveal that consumers are more watchful of their spending and more closely managing their debt. Overall consumer debt has come down 11% from the peak in 2008, with a majority coming from the lowest VantageScore® model credit populations. Consumer confidence continues to drop, indicating consumer pessimism due to increasing gas prices and declining job growth. Given the mixed trends in the economic landscape, we can conclude that some consumers are still doubtful on economic recovery and will seek ways to save more and pay down their debt. Consumers with existing mortgages will most likely take advantage of the lower mortgage rates and refinance. So how can financial institutions help prevent attrition? With the current economic situation, managing retention efforts on a daily basis is imperative to retaining consumers. By monitoring their portfolio and receiving information daily, financial institutions are quickly informed if an existing mortgage client is shopping for a new mortgage with another lender, enabling them to act swiftly to retain the business. Information obtained from daily monitoring of accounts helps financial institutions speak with customers more intelligently about their needs. Because of this competitive environment, and often irrelevance of brand loyalty, financial institutions need to build relationships and increase customer loyalty by quickly meeting the financial needs of their most profitable customers. To demonstrate how taking daily actions can help boost loyalty, reduce attrition, and increase profitability, the Technology Credit Union recently revealed how they obtained a 788% ROI. Access the case study here. What efforts has your institution taken to reduce attrition over the past year? VantageScore is a registered trademark of VantageScore Solutions, LLC.
By: Kyle Aiman For more than 20 years, creditors have been using scores in their lending operations. They use risk models such as the VantageScore® credit score, FICO or others to predict what kind of risk to expect before making credit-granting decisions. Risk models like these do a great job of separating the “goods” from the “bads.” Debt recovery models are built differently-their job is to predict who is likely to pay once they have already become delinquent. While recovery models have not been around as long as risk models, recent improvements in analytics are producing great results. In fact, the latest generation of recovery models can even predict who will pay the most. Hopefully, you are not using a risk model in your debt collection operations. If you are, or if you are not using a model at all, here are five reasons to start using a recovery model: Increase debt recovery rates – Segmenting and prioritizing your portfolios will help increase recovery rates by allowing you to place emphasis on those accounts most likely to pay. Manage and reduce debt recovery costs – Develop treatment strategies of varying costs and apply appropriately. Do not waste time and money on uncollectible accounts. Outsource accounts to third party collection agencies – If you use outside agencies, use recovery scoring to identify accounts best suited for assignment; take the cream off the top to keep in house. Send accounts to legal – Identify accounts that would be better served using a legal strategy versus spending time and money using traditional treatments. Price accounts appropriately for sale – If you are in a position to sell accounts, recovery scoring can help you develop a pricing strategy based on expected collectibility. What recovery scoring tools are you using to optimize your company's debt collection efforts? Feel free to ask questions or share your thoughts below. VantageScore® is a registered trademark of VantageScore Solutions, LLC.
By: Uzma Aziz They say, “a bird in the hand is better than two in the bush” …and the same can be said about customers in a portfolio. Studies have shown time and again that the cost of acquiring a new financial services customer is many times higher than the cost of keeping an existing one. Retention has always been an integral part of portfolio management, and with the market finally on an upward trajectory, there is all the more need to hold on to profitable customers. Experts at CEB TowerGroup are forecasting a combined annual growth rate of over 12% for new credit cards alone through 2015. Combine that with a growing market with better-informed and savvy customers, and you have a very good reason to be diligent about retaining your best ones. Also, different sized institutions have varying degrees of success. According to a study by J.D. Power & Associates, in 2011 overall, 9.6% of customers indicated they switched their primary bank account during the past year, up from 8.7% a year ago. Smaller banks and credit unions did see drastically lower attrition than they did in prior years: just 0.9% on average, down from 8.8% a year earlier. For large, mid-sized and regional banks unfortunately, it was a different story with attrition rates at 10 to 11.3%. It gets even more complex when you drill down to a specific type of financial product such as a credit card. Experian’s own analysis of credit card customer retention shows that while the majority of customers are loyal, a good percentage attrite actively—that is, close their accounts and open new ones—while a bigger percent are silent attriters, those that do not close accounts but pay down balances and move their spend to others. Obviously, attrition is a continual topic that needs to be addressed, but to minimize it you first need to understand the root cause. Poor service seems to be the leading factor and one study* showed that 31% of consumers who switched banks did so because of poor service, followed by product features and finding a better offer elsewhere. So what are financial institutions doing to retain their profitable customers? There are lots of tools ranging from easy to more complex e.g., fee and interest waiver, line increases, rewards, and call center priority to name a few. But the key to successful customer retention is to look within the portfolio combining both internal and external information. This encompasses both proactive and reactive strategies. Proactive strategies include identifying customer behaviors which lead to balance or account attrition and taking action before a customer does. This includes monitoring changes over time and identifying thresholds for action as well as segmentation and modeling to identify problem. Reactive strategies, as the name suggests, is reacting to when a customer has already taken action which will lead to attrition; these include monitoring portfolios for new inquiries and account openings or response to customer complaints. In some cases, this maybe too little too late, but in others reactive response may be what saves a customer relationship. Whichever strategy or combination of these you choose, the key points to remember to retain customers and keep them happy are: Understand your current customers’ perceptions about credit, as they many have changed—customers are likely to be more educated, and the most profitable ones expect only the best customer service experience Be approachable and personal – meet customer needs—or better yet, anticipate those needs, focusing on loyalty and customer experience You don’t need to “give away the farm” – sometimes a partial fee waiver works * Global Consumer Banking Survey 2011, by Ernst & Young
By: Ken Pruett The great thing about being in front of customers is that you learn something from every meeting. Over the years I have figured out that there is typically no “right” or “wrong” way to do something. Even in the world of fraud and compliance I find that each client's approach varies greatly. It typically comes down to what the business need is in combination with meeting some sort of compliance obligation like the Red Flag Rules or the Patriot Act. For example, the trend we see in the prepaid space is that basic verification of common identity elements is really the only need. The one exception might be the use of a few key fraud indicators like a deceased SSN. The thought process here is that the fraud risk is relatively low vs. someone opening up a credit card account. So in this space, pass rates drive the business objective of getting customers through the application process as quickly and easily as possible….while meeting basic compliance obligations. In the world of credit, fraud prevention is front and center and plays a key role in the application process. Our most conservative customers often use the traditional bureau alerts to drive fraud prevention. This typically creates high manual review rates but they feel that they want to be very customer focused. Therefore, they are willing to take on the costs of these reviews to maintain that focus. The feedback we often get is that these alerts often lead to a high number of false positives. Examples of messages they may key off of are things like the SSN not being issued or the On-File Inquiry address not matching. The trend is this space is typically focused on fraud scoring. Review rates are what drive score cut-offs leading to review rates that are typically 5% or less. Compliance issues are often resolved by using some combination of the score and data matching. For example, if there is a name and address mismatch that does not necessarily mean the application will kick out for review. If the Name, SSN, and DOB match…and the score shows very little chance of fraud, the application can be passed through in an automated fashion. This risk based approach is typically what we feel is a best practice. This moves them away from looking at the binary results from individual messages like the SSN alerts mentioned above. The bottom line is that everyone seems to do things differently, but the key is that each company takes compliance and fraud prevention seriously. That is why meeting with our customers is such an enjoyable part of my job.
Join us Sept 12-13 in New York City for the Finovate conference to check out the best new innovations in financial and banking technology from a mixture of leading established companies and startups. As part of Finovate's signature demo-only format for this event, Steve Wagner, President, Consumer Information Services and Michele Pearson, Vice President of Marketing, Consumer Information Services, from Experian will demonstrate how providers and lead generators can access a powerful new marketing tool to: Drive new traffic Lower online customer acquisition costs Generate high-quality, credit-qualified leads Proactively utilize individual consumer credit data online in real time Networking sessions will follow company demos each day, giving attendees the chance to speak directly with the Experian innovators they saw on stage. Finovate 2011 had more than 1,000 financial institution executives, venture capitalists, members of the press and entrepreneurs in attendance, and they expecting an even larger audience at the 2012 event. We look forward to seeing you at Finovate!