As we enter May, a month dedicated to recognizing our U.S. Armed Forces, it’s only fitting to think about how we are honoring this special group of people. Yes, there will likely be car deals, coupons, and even a few beautiful ceremonies, but as both lawmakers and leaders have recognized, these individuals and their families deserve protections every day. Especially in the financial services universe. There should be no exorbitant fees. No excessively high interest rates. And when they are called to active-duty, they should have avenues to ease their financial commitments and/or exit out of lease agreements. Thankfully, the Servicemembers Civil Relief Act (SCRA) and a strengthened Military Lending Act (MLA) were introduced to help. In fact, we are in year one of the enhanced MLA Final Rule in which compliance was mandated by Oct. 3, 2016. The extended MLA protections include a 36% Military Annual Percentage Rate (MAPR) cap to a wider range of credit products, including payday loans, vehicle title loans, refund application loans, deposit advance loans, installment loans and unsecured open-end lines of credit. The cap additionally applies to fees tacked on for credit-related ancillary products including finance charges and certain application and participation fees. The amended rule covers credit offered or extended to active-duty service members and their dependents, if the credit is subject to a finance charge or is payable by written agreement in more than four installments. And finally, one of the most important additions is that creditors must verify active-duty and dependents at origination. Right now, this can be accomplished by either working with a bureau, like Experian, or by vetting lists directly with the Department of Defense’s (DOD) own database. To continue to help with client need, the bureaus are working with the DOD and financial institutions to ensure alignment in delivery of military member and dependent data for a consistent, immediate and accurate MLA verification process. While much has been introduced over the past year to strengthen protections, there is still more to come. The compliance date for credit cards is Oct. 3, 2017. To date, the MLA status of millions upon millions of consumer credit applications have been verified, ensuring our military members and their dependents receive the financial protections they are entitled to under law. There are roughly 3.4 million military members and dependents in the MLA database, and this is an audience who sacrifices a great deal for our country. Thankfully, protections are finally being enforced to ensure they are taken care of too.
Experian and Creative Strategies share survey results about Apple’s AirPods, Google Home, Amazon Echo and Echo Dot for consumer behavior with voice devices.
Sometimes life throws you a curve ball. The unexpected medical bill. The catastrophic car repair. The busted home appliance. It happens, and the killer is that consumers don’t always have the savings or resources to cover an additional cost. They must make a choice. Which bills do they pay? Which bills go to the pile? Suddenly, a consumer’s steady payment behavior changes, and in some cases they lose control of their ability to fulfill their obligations altogether. These shifts in payment patterns aren’t always reflected in consumer credit scores. At a single point in time, consumers may look identical. However, when analyzing their past payment behaviors, differences emerge. With these insights, lenders can now determine the appropriate risk or marketing decisions. In the example below, we see that based on the trade-level data, Consumer A and Consumer B have the same credit score and balance. But once we see their payment pattern within their trended data, we can clearly see Consumer A is paying well over the minimum payments due and has a demonstrated ability to pay. A closer look at Consumer B, on the other hand, reveals that the payment amount as compared to the minimum payment amount is decreasing over time. In fact, over the last three months only the minimum payment has been made. So while Consumer B may be well within the portfolio risk tolerance, they are trending down. This could indicate payment stress. With this knowledge, the lender could decide to hold off on offering Consumer B any new products until an improvement is seen in their payment pattern. Alternatively, Consumer A may be ripe for a new product offering. In another example, three consumers may appear identical when looking at their credit score and average monthly balance. But when you look at the trend of their historical bankcard balances as compared to their payments, you start to see very different behaviors. Consumer A is carrying their balances and only making the minimum payments. Consumer B is a hybrid of revolving and transacting, and Consumer C is paying off their balances each month. When we look at the total annual payments and their average percent of balance paid, we can see the biggest differences emerge. Having this deeper level of insight can assist lenders with determining which consumer is the best prospect for particular offerings. Consumer A would likely be most interested in a low- interest rate card, whereas Consumer C may be more interested in a rewards card. The combination of the credit score and trended data provides significant insight into predicting consumer credit behavior, ultimately leading to more profitable lending decisions across the customer lifecycle: Response – match the right offer with the right prospect to maximize response rates and improve campaign performance Risk – understand direction and velocity of payment performance to adequately manage risk exposure Retention – anticipate consumer preferences to build long-term loyalty All financial institutions can benefit from the value of trended data, whether you are a financial institution with significant analytical capabilities looking to develop custom models from the trended data or looking for proven pre-built solutions for immediate implementation.
It should come as no surprise that reaching consumers on past-due accounts by traditional dialing methods is increasingly ineffective. The new alternative, of course, is to leverage digital channels to reach and collect on debts. The Past: Dialing for dollars. Let’s take a walk down memory lane, shall we? The collection approach used for many years was to initially send the consumer a collection letter recapping the obligation and requesting payment, usually when an account was 30 days late. If the consumer failed to respond, a series of dialing attempts were then made, trying to reach the consumer and resolve the debt. Unfortunately, this approach has become less effective through the years due to several reasons: The use of traditional landlines continues to drop as consumers shift to cell and Voice Over Internet Protocol (VOIP) services. The cost of reaching consumers by cell is more costly since predictive dialers can’t be used without prior consent, and the obtaining and maintaining consent presents its own set of tricky challenges. Consumers simply aren’t answering their phones. If they think a bill collector is calling, they don’t pick up. It’s that simple. In fact, here is a breakdown by age group that Gallup published in 2015, highlighting the weakness of traditional phone-dialing. The Present: Hello payment portal. With the ability to get the consumer on the phone to negotiate a payment on the wane, the logical next step is to go digital and use the Internet or text messaging to reach the consumer. With 71 percent of consumers now using smartphones and virtually everyone having an Internet connection, this can be a cost-effective approach. Some companies have already implemented an electronic payment portal whereby a consumer can make a payment using his or her PC or smartphone. Usually this is prompted by a collection letter, or if permitted by consumer consent, a text message to their smartphone. The Future: Virtual negotiation. But what if the consumer wants to negotiate different terms or payment plans? What if they want to try and settle for less than the full amount? In the past – and for most companies operating today – this translates into a series of emails or letters being exchanged, or the consumer must actually speak to a debt collector on the phone. And let’s be honest, the consumer generally does not want to speak to a collector on the phone. Fortunately, there is a new technology involving a virtual negotiator approach coming into the market now. It works like this: The credit grantor or agency contacts the consumer by letter, email, or text reminding them of their debt and offering them a link to visit a website to negotiate their debt without a human being involved. The consumer logs onto the site, negotiates with the site and hopefully comes to terms with what is an acceptable payment plan and amount. In advance, the site would have been fed the terms by which the virtual negotiator would have been allowed to use. Finally, the consumer provides his payment information, receives back a recap of what he has agreed to and the process is complete. This is the future of collections, especially when you consider the younger generations rarely wanting to talk on the phone. They want to handle the majority of their matters digitally, on their own terms and at their own preferred times. The collections process can obviously be uncomfortable, but the thought is the virtual negotiator approach will make it less burdensome and more consumer-friendly. Learn more about virtual negotiation.
Knowing where e-commerce fraud takes place matters We recently hosted a Webinar with Mike Gross, Risk Strategy Director at Experian and Julie Conroy, Research Director at Aite Research Group, looking at the current state of card-not-present fraud, and what to prepare for in the coming year. Our biannual analysis of fraud attacks, served as a backdrop for the trends we’ve been seeing. I wanted to share some observations from the Webinar. Of course, if you prefer to hear it firsthand, you can download the archive recording here. I’ll start with the current landscape of card-not-present fraud. Julie shared 5 key trends her firm has identified regarding e-commerce fraud: Rising account take-over fraud Loyalty points targeted Increasingly global transactions Frustrating false declines Increasingly mobile consumers One particularly interesting note that Julie made was regarding consumer frustration levels towards forgotten passwords. While consumers are more frustrated when they’re locked out of access to their banking accounts (makes sense, it’s their money), forgotten passwords are more detrimental to e-commerce retailers since consumers are likely to go to another site. This equates to a frustrated consumer, and lost revenue for the business. Next, Mike went through the findings from our 2016 e-commerce fraud attack analysis. Fraud attack rates show the attempted fraudulent e-commerce transactions against the population of overall e-commerce orders. Overall, e-commerce attack rates spiked 33% in 2016. The biggest trends we saw included: Increased EMV adoption is driving a shift from counterfeit to card-not-present fraud 2B breached records disclosed in 2016, more than 3x any previous year Consumers reporting credit card fraud jumped from 15% in 2015 to over 32% in 2016 Attackers shifting locations slightly and international orders rely on freight forwarders 10 states saw an increase of over 100% in fraudulent orders Over 70 of the top 100 riskiest postal codes were not in last year’s list So, what will 2017 bring? Be prepared for more attacks, more global rings, more losses for businesses, and the emergence of IoT fraud. Businesses need to anticipate an increase of fraud over time and to be prepared. The value of employing a multi-layered approach to fraud prevention especially when it comes to authenticating consumers to validate transactions cannot be understated. By looking at all the points of the customer journey, businesses can better protect themselves from fraud, while maintaining a good consumer experience. Most importantly, having the right fraud solution in place can help businesses prevent losses both in dollars and reputation.
Turns out, Americans still don’t know much about CyberSecurity. That’s according to new research from the Pew Data Center, which conducted a cybersecurity knowledge quiz. The 13 question quiz was designed to test American’s knowledge on a number of cybersecurity issues and terms. A majority of online adults can identify a strong password and recognize the dangers of using public Wi-Fi. However, many struggle with more technical cybersecurity concepts, such as how to identify true two-factor authentication or determine if a webpage they are using is encrypted. As we in the industry know, cybersecurity is a complicated and diverse subject, but given the pervasiveness of news around cybersecurity, I was still a little surprised by the lack of knowledge. The typical (median) respondent answered only five of the 13 questions correctly (with a mean of 5.5 correct answers). 20% answered more than eight questions accurately, and just 1% received a “perfect score” by correctly answering all 13 questions. The study showed that public knowledge of cybersecurity is low on some relatively technical issues, like identifying the correct example of multi-factor authentication, understanding how VPNs minimize risk and knowing what a botnet is. On the flip side, the two questions that the majority of respondents answered correctly included identifying the strongest password from a list of four options and understanding that public Wi-Fi networks have risk even when they are password protected. Given the median scores, I was proud of missing only one question – guess I have more reading to do on Botnets. As an industry, it is our duty to not only create systems and securities to improve the tactical effectiveness of fraud prevention, but to educate consumers on many of these topics as well. They often are the first line of defense in stopping fraud and reducing the threat of breaches.
Newest technology doesn’t mean best when it comes to stopping fraud I recently attended the Merchant Risk Conference in Las Vegas, which brings together online merchants and industry vendors including payment service providers and fraud detection solution providers. The conference continues to grow year to year – similar to the fraud and risk challenges within the industry. In fact, we just released analysis, that we’ve seen fraud rates spike to 33% in the past year. This year, the exhibit hall was full of new names on the scene – evidence that there is a growing market for controlling risk and fraud in the e-commerce space. I heard from a few merchants at the conference that there were some “cool” new technologies out to help combat fraud. Things like machine learning, selfies and other two-factor authentication tools were all discussed as the latest in the fight against fraud. The problem is, many of these “cool” new technologies aren’t yet efficient enough at identifying and stopping fraud. Cool, yes. Effective, no. Sure, you can ask your customer to take a selfie and send it to you for facial recognition scanning. But, can you imagine your mother-in-law trying to manage this process? Machine Learning, while very promising, still has some room to grow in truly identifying fraud while minimizing the false positives. Many of these “anomaly detection” systems look for just that – anomalies. The problem is, we’re fighting motivated and creative fraudsters who are experts at avoiding detection and can beat anomaly detection. I do not doubt that you can stop fraud if you introduce some of these new technologies. The problem is, at what cost? The trick is stopping fraud with efficiency – to stop the fraud and not disrupt the customer experience. Companies, now more than ever, are competing based on customer experience. Adding any amount of friction to the buying process puts your revenue at risk. Consider these tips when evaluating and deploying fraud detection solutions for your online business. Evaluate solutions based on all metrics What is the fraud detection rate? What impact will it have on approvals? What is the false positive rate and impact on investigations? Does the attack rate decline after implementing the solution? Is the process detectable by fraudsters? What friction is introduced to the process? Use all available data at your disposal to make a decision Does the consumer exist? Can we validate the person’s identity? Is the web-session and user-entered data consistent with this consumer? Step up authentication but limit customer friction Is the technology appropriate for your audience (i.e. a selfie, text-messaging, document verification, etc...)? Are you using jargon in your process? In the end, any solution can stop 100% of the fraud – but at what cost. It’s a balance - a balance between detection and friction. Think about customer friction and the impact on customer satisfaction and revenue.
Has the EMV liability shift caused e-commerce fraud to increase 33% in 2016? According to Experian data, CNP fraud increased with Florida, Delaware, Oregon and New York ranked as the riskiest states. Miami accounted for the most fraudulent ZIP™ Codes in the US for shipping and billing fraud.
Knowing a consumer’s credit information at a single point in time only tells part of the story. I often hear one of our Experian leaders share the example of two horses, running neck-in-neck, at the races. Who will win? Well, if you had multiple insights into those two horses – and could see the race in segments – you might notice one horse losing steam, and the other making great strides. In the world of credit consumers, the same metaphor can ring true. You might have two consumers with identical credit scores, but Consumer A has been making minimum payments for months and showing some payment stress, while Consumer B has been aggressively making larger pay-offs. Trended data adds that color to the story, and suddenly there is more intel on who to market to for future offers. To understand the whole story, lenders need the ability to assess a consumer’s credit behavior over time. Understanding how a consumer uses credit or pays back debt over time can help lenders: Offer the right products & terms to increase response rates Determine up sell and cross sell opportunities Prevent attrition Identify profitable customers Avoid consumers with payment stress Limit loss exposure The challenge with trended data, however, is finding a way to sort through the payment patterns in the midst of huge datasets. At the singular level, one consumer might have 10 trades. Trended data in turn reveals five historical payment fields and then you multiple all of this by 24 months and you suddenly have 1,200 data points. But let’s be real … a lender is not going to look at just one consumer as they consider their marketing or retention campaigns. They may look at 100,000 consumers. And on that scale you are now looking at sorting through 120M data points. So while a lender may think they need trended data – and there is definitely value in accessing it – they likely also need a solution to help them wade through it all, assessing and decisioning on those 120M data points. Tapping into something like Credit3D, which bundles in propensity scores, profitability models and trended attributes, is the solution that truly unveils the value of trended data insights. By layering in these solutions, lenders can clearly answer questions like: Who is likely to respond to an offer? How does a consumer use credit? How can I identify revolvers, transactors and consolidators? Is there a better way to understand risk or to conduct swap set analysis? How can I acquire profitable consumers? How do I increase wallet share and usage? Trended data sounds like a “no-brainer” and it definitely has the ability to shed light on that consumer credit horse race. Lenders, however, also need to have the appropriate analytics and systems to assess on the huge volume of data points. Need more information on Trended Data and Credit 3D? Contact Us
Direct mail is not dead, but it\'s 2017. Financial services companies need to acknowledge there might be other ways to deliver credit offers and capture consumer eyeballs. There are multiple screens competing for our attention, including one of the originals - TV. Advertising and TV have been married forever, but addressable TV allows marketers to target on a much more sophisticated level. Welcome to credit marketing in the digital age. To help financial services companies understand the addressable TV channel, Experian marketing expert Brienna Pinnow answered the following questions in a short interview. What is addressable TV? Addressable TV is an amazing 1-to-1 direct marketing capability. To put it simply, addressable TV is the ability for an advertiser to deliver a TV ad to a specific household. From a consumer perspective, that means even if you and your next door neighbor are watching the latest episode of The Voice, you may see an ad for a mini-van while your neighbor sees an ad for upcoming one-day sale from their favorite retailer. With addressable TV, brands can define their target audience based on 1st, 2nd or 3rd party data (like Experian’s). With the help of satellite and cable companies, they can deliver a personalized, measurable experience. This is an exciting departure from the way that TV advertising has been planned and targeted for nearly 70 years. Instead of focusing on the program, marketers can now focus on the person. Addressable TV makes reaching a precise audience – the same way you would with a direct mail piece or an email – a marketing reality. How long have marketers been leveraging addressable TV? Experian has been an pivotal player in the development of the addressable TV space. Since the first addressable TV trials back in 2004, nearly 13 years ago, Experian has provided the audience targeting data and privacy-compliant matching capabilities that make addressable TV possible. The past 3 years, however, have demonstrated unprecedented, hockey-stick growth in addressable TV. In 2016 alone, the volume of addressable campaigns doubled from the previous year accounting for nearly $300 million spend. That trajectory remains the same in 2017 and beyond. So why are we seeing this growth now? Here are a few reasons addressable TV is continuing to grow… Scale: Millions of households can now be targeted using addressable technology, and the footprint continues to grow with smart TVs and additional cable operators. Data: As organizations put data at the heart of their business, addressable TV enables them to infuse their most important customer information into the targeting. Education: Agencies, data providers, and TV providers have invested time educating brands on the process and power of addressable TV. And now, advertisers are becoming more experienced at making this a consistent part of their marketing plan. Accountability: You’ll be hard pressed to find a marketer that doesn’t have to demonstrate ROI on their marketing campaigns. The measurement capabilities that addressable TV provides adds a layer of accountability and insight that was not previously possible. Technology: Experian has developed an audience management platform, the Audience Engine, which makes addressable TV possible in a matter of clicks. In the past year alone, our platform has distributed over 1,800 audiences for addressable advertising campaigns. What types of companies have been utilizing addressable TV? Have you seen many financial services companies test this channel? The early adopters of addressable TV were primarily automotive advertisers. Compared to other verticals, auto advertisers still spend the largest proportion of their budgets across TV. For that reason, they know it’s a necessity to see if their dollars are actually driving sales for their big-ticket items. Addressable TV solves that problem for auto advertisers. In a DIRECTV campaign leveraging Experian’s automotive data for audience targeting and post-campaign sales reporting, one major auto OEM saw a 26.2% lift in sales for the advertised model compared to the control group. In the past few years, Experian has worked closely with advertisers across verticals – from retail to travel to finance – to launch addressable campaigns. Financial services clients particularly find Experian’s financial related segments, such as income or net worth, to be accurate and powerful in creating qualified target audiences that improve campaign performance. I’ve read that millennials are abandoning cable and TV providers in favor of services like Hulu and Netflix. Does this mean the market for addressable TV will shrink in the coming years? There is a segment of consumers who are abandoning traditional cable services. However, this doesn’t mean they are abandoning content. In fact, content consumption is at an all-time high with offerings from Roku, Hulu, Netflix, Sling TV, CBS, and beyond. All this shift in behavior means is that the definition of TV is becoming more fluid. “TV” doesn’t have to be a big screen sitting in your living room; it can be a laptop on a red-eye flight. And from a marketing perspective, the concept of addressable, 1-to-1 targeting is already moving into some of these products and services. The footprint of addressable TV will only continue to rise as consumers stay connected to the content they love. How can companies measure the success of utilizing addressable TV as a channel? Not only does addressable TV provide laser-targeted ad delivery, but it also opens up measurement capabilities that were never possible for TV advertisers in the past. Traditionally, TV audience measurement has focused simply on eyeballs and not revenue impact, with little insight into how TV advertising converts into sales. The primary source for audience measurement in the TV world has been program ratings and expensive brand studies. With addressable TV, that story is changing. With companies that collect second-by-second viewership data linked to households, marketers now have the ability to tie this data back to their online and offline sales. Experian is pivotal in making closed-loop TV reporting possible. As a data and matching safe-haven, we link together the viewing information from the target audience with the sales data provided by the advertiser. The end result is a privacy compliant report that clearly demonstrates the impact of the campaign on the target audience. Did the targeted audience visit a bank location? Email customer service? Sign up for a new account? Spend a certain amount? These are all questions our TV attribution reporting answers for clients. If a company wants to begin marketing in addressable TV, what is required in terms of set-up? Addressable TV may sound new, exciting or even complex. But it doesn’t have to be. Getting started is as simple as defining the target audience. Decide whether you would like to leverage your own CRM data, a custom model, third-party data or a combination of these data sources. If you’re still not sure where to start, ask yourself a very simple question, “Who am I sending a direct mail piece or email to in the next month?” There’s your audience. Better yet, you will be amplifying your message, reaching the customer with a consistent message and meeting them wherever they are. After you’ve determined who you want to target, a matching partner like Experian can work with you to show you the reach of your audience across TV providers. You’ll finalize your budget, creative and media plan while Experian distributes your audience to the selected media destinations. Before you know it, your campaign will be live, and reaching your target audience whether they’re watching Shark Tank or Sharknado. When the campaign wraps, you’ll be on your way to measuring results like never before. Are there any additional trends you see emerging in the addressable TV space? The future of addressable TV is related to both the targeting and measurement capabilities. More advertisers are working with Experian, for example, to launch coordinated campaigns. That doesn’t just mean launching a digital campaign and TV campaign at the same time. It really means targeting the same exact people for the digital and TV campaign. We like to consider this a \"surround sound\" approach where the customer or prospect experiences a consistent message across channels. As for measurement, Experian is working closely with advertisers to explore the power of mobile data. Recently, Experian partnered with Ninth Decimal and DIRECTV to incorporate mobile location data into the post-campaign measurement process for Toyota. The results proved a 19% lift in dealership visits for those exposed to the campaign. This is an exciting development because this approach can translate well for any other advertiser who wants to measure metrics like location visitation. If you’d like to learn more, check out our Addressable TV whitepaper.
As lenders seek to enhance their credit marketing strategies this year, they are increasingly questioning how to split their budgets between digital, direct mail and beyond. What is the ideal media mix to reach consumers in 2017? And is the solution different in the financial services space? Scott Gordon, Experian\'s senior director of digital credit marketing, recently tackled some of the tough questions financial services marketers are posing. Here are his responses: Q: We live in a world where consumers are receiving hundreds of messages and offers on a daily basis. How can financial services companies stand out and capture the attention of the customers they wish to engage with relevant offers? A: When it comes to the optimal marketing media mix, there is no “silver bullet.” It varies from product to product. The current post-campaign analysis is showing us that consumers react positively to coordinated multi-channel messaging. We’ve seen studies showing that marketers can see up to a 30% lift in sales by combining email with social media, for example. This makes sense, when you look at how consumers engage through devices. We are no longer a single channel culture; we check Facebook while watching TV, listen to podcasts while checking our email, etc. Consequently, marketers have had to adapt their campaign strategies accordingly – and this starts with the organizational structure. Far too often we see silo’ed groups responsible for disparate media verticals. For example, a company may have a direct mail group and a digital marketing team, and then (in extreme cases) outsource television to one agency group and social media to another. Aligning these groups and breaking down the barriers between the groups is a critical first step toward building a true multi-channel campaign strategy. This includes addressing budget concerns that are inherent with a culture where the size of a budget is tied to job security and corporate status. Aligning campaigns and finding the perfect cross channel market mix is much easier once you’ve broken down internal barriers and encouraged marketing collaboration. Q: What are some of the new best practices financial companies must embrace in 2017 in order to improve their marketing efforts? A: Thanks to tremendous efforts from industry leaders, we can now utilize regulated data with the same proficiency that they’ve been executing campaigns using non-regulated data. This presents unique challenges, as the industry races to get up-to-speed on new capabilities, take best-in-breed practices and apply them to the world of regulated campaigns. We’re seeing tremendous demand to combine programmatic advertising with people-based advertising, with cross-channel campaigns spanning mobile, video, social, and addressable TV. Measurement and analytics must play a large part in these strategies. While the industry hasn’t achieved true cross-channel measurement to identify a consumer’s path to purchase across multiple devices, it’s getting closer, thanks to technology advances. Q: Is direct mail dead? How should financial marketers be using direct mail in 2017? How can it best be combined with digital? A: Direct mail is certainly not dead. It has its place among a media mix that continues to grow as new advertising technologies come to market and are adopted by consumers. Will direct mail’s influence diminish in the future? Possibly. At Experian, we are focused on making sure that our advertisers can reach consumers where they spend time, when they are most receptive to receiving messages, and most importantly in a cost-effective manner. So no matter where consumers shift their focus in the future, we’ll be able to support comprehensive targeted advertising campaigns. How can digital be best combined with direct mail? We’ve seen encouraging results in retargeting direct mail with digital credit marketing like email and display. With that said, we haven’t seen a silver bullet solution, and we’re still advising our clients to put a heavy focus toward “test and learn” in concert with comprehensive campaign measurement and analytics protocols. Q: What are the advantages to serving up a firm offer of credit to a consumer in a digital format? Are consumers ready to embrace this type of delivery in the financial services space? A: The advantages of serving up a firm offer of credit to a consumer in a digital format are similar to those benefits for “traditional” digital marketing. Lower cost, more measurement capabilities, and greater flexibility to optimize campaigns are just some of the benefits. Early indications show that consumers are very receptive to digital credit marketing offers. It provides them with offers in the channels in which they spend time, in a consumer friendly manner which offers them numerous paths in which they can have a voice in the messages that they receive. Q: Some say digital credit marketing should largely be directed to Millennials? Do you think other generations are ready to embrace this type of digital messaging? A: We don’t view digital credit marketing as an exclusive offering just for Millennials. It is a holistic consumer offering – applicable to all generations as our parents and grandparents make the move to new channels such as addressable TV and social media. Need more info on Digital Credit Marketing? Learn More
Prescreen, prequalification and preapproval. The terms sound similar, but lenders beware. These credit solutions are quite different and regulations vary depending on which product is utilized. Let’s break it down … What’s involved with a Prescreen? Prescreen is a behind-the-scenes process that screens consumers for a firm offer of credit without their knowledge. Typically, a Credit Reporting Agency, like Experian, will compile a list of consumers who meet specific credit criteria, and then provide the list to a lending institution. Consumers then see messaging like, “You have been approved for a new credit card.” Sometimes, marketing offers use the phrase “You have been preapproved,” but, by definition, these are prescreened offers and have specific notice and screening requirements. This solution is often used to help credit grantors reduce the overall cost of direct mail solicitations by eliminating unqualified prospects, reducing high-risk accounts and targeting the best prospects more effectively before mailing. A firm offer of credit and inquiry posting is required. And, it’s important to note that prescreened offers are governed by the Fair Credit Reporting Act (FCRA). Specifically, the FCRA requires lenders initiating a prescreen to: Provide special notices to consumers offered credit based on the prescreened list; Extend firm offers of credit to consumers who passed the prescreening, but allows lenders to limit the offers to those who passed the prescreening; Maintain records regarding the prescreened lists; and Allow for consumers to opt-out of prescreened offers. Lenders and the Consumer Reporting Agencies must scrub the list against the opt-outs. Finally, it is important to note that a soft inquiry is always logged to the consumer’s credit file during the prescreen process. What’s involved with a Prequalification? Prequalification, on the other hand, is a consumer consent-based credit screening tool where the consumer opts-in to see which credit products they may be qualified for in real time at the point of contact. Unlike a prescreen which is initiated by the lender, the prequalification is initiated by the consumer. In this instance, envision a consumer visiting a bank and inquiring about whether or not they would qualify for a credit card. During a prequalification, the lender can actually explore if the consumer would be eligible for multiple credit products – perhaps a personal loan or HELOC as well. The consumer can then decide if they would like to proceed with the offer(s). A soft inquiry is always logged to the consumer’s credit file, and the consumer can be presented with multiple credit options for qualification. No firm offer of credit is required, but adverse action may be required, and it is up to the client’s legal counsel to determine the manner, content, and timing of adverse action. When the consumer is ready to apply, a hard inquiry must be logged to the consumer’s file for the underwriting process. How will a prequalification or prescreen invitation/offer impact a consumer’s credit report? Inquiries generated by prequalification offers will appear on a consumer’s credit report, but can only be seen by the consumer when they specifically request a report from the credit bureaus. Soft inquiries are never included in credit score calculations. For “soft” inquiries, in both prescreen and prequalification instances, there is no impact to the consumer’s credit score. However, once the consumer elects to proceed with officially applying for and/or accepting a new line of credit, the hard inquiry will be noted in the consumer’s report, and the credit score may be impacted. Typically, a hard inquiry subtracts a few points from a consumer’s credit score, but only for a year, depending on the scoring model. --- Each of these product solutions have their place among lenders. Just be careful about using the terms interchangeably and ensure you understand the regulatory compliance mandates attached to each. More info on Prequalification More Info on Prescreen
There has been a lot of discussion around the auto loan market regarding delinquency rates in the past year. It is a topic Experian is asked about frequently from clients in regard to what particular economic market behaviors mean for the overall consumer lending. To understand this issue more clearly, I ran a deeper dive on the data from our Q3 Experian-Oliver Wyman Market Intelligence report. There are some interesting, and perhaps concerning, trends in the data for automotive loans and leases. Want Insights on the latest consumer credit trends? Register for our 2016 year-end review webinar. Register now Auto loan delinquency rates are at their highest mark since 2008 The findings indicate that the performance of the most recent loans opened from Q4 2015 are now performing as poorly as the loans from the credit crisis back in 2008. In fact, you have to go back to 2008, and in some cases, 2007, to see loan default rates as poorly as the Q4 2015 auto loans originated in the last year. Below we have the auto loan vintage performance for loans originated in Q4 of the last 8 years — going back to 2008. The lines on the chart each represent 60 days late or more (60+) delinquency rates over specific time period grades. For these charts, I analyzed the first three, six, and nine months from the loan origination date. As you can see, the rates of delinquency have steadily increased in recent years, with the increase in the Q4 2015 loans opened equaling or even surpassing 2008 levels. The above chart reflects all credit grades, so one might think that this change is a result of the change in the credit origination mix. By digging a little deeper into the data, we can control for the VantageScore at the loan opening, or origination date, and review performance by looking at two different score segments separately. Is there concern for Superprime and Prime consumers auto loans? In the chart immediately below, the same analysis as above has been conducted, but only for trades originated by Superprime and Prime consumers at the time of origination. You can see that although the trend is not as pronounced as when all grades are considered, even these tiers of consumers are showing significant increases in their 60+ days past due (DPD) rates in recent vintages. Separately, looking at the Subprime and Deep Subprime segments, you can really see the dramatic changes that have occurred in the performance of recent auto vintages. Holding score segments constant, the data indicates a rate of credit deterioration in the Subprime and Deep Subprime segments that we have not observed since at least 2008 — back to when we started tracking this data. What’s concerning here is not only the absolute values of the vintage delinquencies but also the trend, which is moving upward for all three time periods. Where does the risk fall? Now that we see the evidence of the deterioration of credit performance across the credit spectrum, one might ask – who is bearing the risk in these recent vintages? Taking a closer look at the chart below, you can see the significant increase in the volumes of loans across lender type, but particularly interesting to me is the increase in 2016 for the Captive Auto lenders and Credit Unions, who are hitting highs in their lending volumes in recent quarters. If the above trend holds and the trajectory continues, this suggests exposure issues for those lenders with higher volumes in recent months. What does this mean for your business? Speak to Experian\'s global consulting practice to learn more. Learn more Just to be thorough, let\'s continue and look at the relative amounts of loans going to the different score segments by each of the lender types. Comparing the lender type and the score segments (below) reveals that finance lenders have a greater than average exposure to the Subprime and Deep Subprime segments. To summarize, although auto lending has recently been viewed as a segment where loan performance is good, relative to historical levels, I believe, the above data signals a striking change in that perspective. Recent loan performance has weakened to a point where comparing the 2008 vintage with 2015 vintage, one might not be able to distinguish between the two. // <![CDATA[ var elems={'winWidth':window.innerWidth,'winTol':600,'rotTol':800,'hgtTol':1500}, updRes=function(){var xAxislabelSize=function(){if(elems.winWidth<elems.winTol){return'12px'}else{return'14px'}},xAxislabelRotation=function(){if(elems.winWidth<elems.rotTol){return-90}else{return 0}},seriesLabelSize=function(){if(elems.winWidth<elems.winTol){return'12px'}else{return'16px'}},legenLabelSize=function(){if(elems.winWidth<elems.winTol){return'12px'}else{return'16px'}},chartHeight=function(){if(elems.winWidth<elems.rotTol){return 600}else{return 400}},labelInside=function(){if(elems.winWidth<elems.rotTol){return false}else{return true}},chartStack=function(){if(elems.winWidth<elems.rotTol){return null}else{return'normal'}};this.sourceRef=function(){return['Source: Experian.com']};this.seriesColor=function(){return['#982881','#0d6eb6','#26478D','#d72b80','#575756','#b02383']};this.chartFontFamily=function(){return'"Roboto",Helvetica,Arial,sans-serif'};this.xAxislabelSize=function(){return xAxislabelSize()};this.xAxislabelOverflow=function(){return'none'};this.xAxislabelRotation=function(){return xAxislabelRotation()};this.seriesLabelSize=function(){return seriesLabelSize()};this.legenLabelSize=function(){return legenLabelSize()};this.chartHeight=function(){return chartHeight()};this.labelInside=function(){return labelInside()};this.chartStack=function(){return chartStack()}}(), updY=function(chart){var points=chart.series[0].points;for(var i=0;i elems.rotTol){if(thisWidth<20){var y=points[i].dataLabel.y;y-=10;points[i].dataLabel.css({color:'#575756'}).attr({y:y-thisWidth})}}}},updX=function(chart){var points=chart.series[0].points;for(var i=0;i elems.rotTol){if(thisWidth
Personal loans have been booming for the past couple of years with double-digit growth year-over-year. But the party can’t last forever, right? In a recent Experian webinar, experts noted they have seen originations leveling off. In fact, numbers indicate it’s gone from leveled off to a slight year-over-year decline. They projected the first quarter of calendar year 2017 may also be down, but then we’ll see a peak again in the second quarter, which is typical with the seasonality often associated with personal loans. The landscape is changing. A recent data pull revealed a 9-point shift in the average VantageScore® for originations from Q3 to Q4 of 2016. Lenders are digging deeper in order to keep their loan volumes up, and it is definitely a more competitive marketplace. The days where lenders were once able to grow their personal loan business with little effort are gone. Kelley Motley, Experian’s director of analytics, noted some of the personal loan origination volume shifts may be due to the rebound in the housing market and increased housing values, enabling super-prime and prime consumers to now also consider home equity loans and lines of credit, in lieu of personal loans. Still, the personal loan market is healthy. Lenders just need to be smart about their marketing efforts and utilize data to improve their response rates, expand their risk criteria to identify consumers trending upward in the credit ranks, and then retain them as their cash-flow and financial situations evolve. In the presentation, experts revealed a few interesting stats: 67% of those that open a personal installment loan had a revolving trade with a balance >$0 5% of consumer that close a personal loan reopen another within a few months of the original loan closure 68% of consumers that re-open a new personal loan within a short timeframe of closing another personal loan do so with the same company Together, these stats illustrate that individuals are largely leveraging personal loans to consolidate debt or perhaps fund an expense like a vacation or an unexpected event. Once the consumer comes into cash, they’ll pay off the loan, but consider revisiting a personal loan again if their financial situation warrants it. The calendar year Q2 peak has been consistent since the Great Recession. For many consumers, after racking up holiday debt and end-of-year expenses, the bills start coming in during the first quarter. With the high APRs often attached to revolving cards, there is a sense of urgency to consolidate and lock in a more reasonable rate. Others utilize the personal loan to fund weddings, vacations and home improvement projects. Kyle Matthies, a senior product manager for Experian, reminded participants that most people don’t need your product, so it’s essential to leverage data find those that do. Utilizing propensity score and attributes, as well as tools to dig into ability-to-pay metrics and offer alignment can really fine-tune both an organization’s marketing and retention strategies. To learn more about the current state of personal loans, access our free webinar How lenders can capitalize on the growth in personal loans.
When you think of criteria for prescreen credit marketing, what comes to mind? Most people will immediately discuss the risk criteria used to ensure consumers receiving the mailing will qualify for the product offered. Others mention targeting criteria to increase response rates and ROI. But if this is all you’re looking at, chances are you’re not seeing the whole picture. When it comes to building campaigns, marketers should consider the entire customer lifecycle, not just response rates. Yes, response rates drive ROI and can usually be measured within a couple months of the campaign drop. But what happens after the accounts get booked? Traditionally, marketers view what happens after origination as the responsibility of other teams. Managing delinquencies, attrition, and loyalty are fringe issues for the marketing manager, not the main focus. But more and more, marketers must expand their role in the organization by taking a comprehensive approach to credit marketing. In fact, truly successful campaigns will target consumers that build lasting relationships with the institution by using the three pillars of comprehensive credit marketing. Pillar #1: Maximize Response Rates At any point in time, most consumers have no interest in your products. You don’t have to look far to prove this out. Many marketing campaigns are lucky to achieve greater than a 1% response rate. As a result, marketers frequently leverage propensity to open models to improve results. These scores are highly effective at identifying consumers who are most likely to be receptive to your offer, while saving those that are not for future efforts. However, many stop with this single dimension. The fact is no propensity tool can pick out 100% of responders. Layering just a couple credit attributes to a propensity score allows you to swap in new consumers. Simultaneously, credit attributes can identify consumers with high propensity scores that are actually unlikely to open a new account. The net effect is even higher response rates than can be achieved by using a propensity score alone. Pillar #2: Risk Expansion Credit criteria are usually set using a risk score with some additional attributes. For example, a lender may target consumers with a credit score greater than 700 and no derogatory or delinquent accounts reported in the past 12 months. But, most of this data is based on a “snapshot” of the credit profile and ignores trends in the consumer’s use of credit. Consider a consumer who currently has a 690 credit score and has spent the past six months paying down debt. During that time, utilization has dropped from 66% to 41%, they’ve paid off and closed two trades, and balances have reduced from $21,000 to $13,000. However, if you only target consumers with a score greater than 700, this consumer would never appear on your prescreen list. Trended data helps spot how consumers use data over time. Using swap set analysis, you can expand your approval criteria without taking on the incremental risk. Being there when a consumer needs you is the first step in building long-term relationships. Pillar #3: Customer profitability and early attrition There’s more to profitability than just originating loans. What happens to your profitability assumptions when a consumer opens a loan and closes it within a few months? According to recent research by Experian, as many as 26% of prime and super-prime consumers, and 38% of near-prime consumers had closed a personal loan trade within nine months of opening. Further, nearly 32% of consumers who closed a loan early opened a new personal loan trade within a few months. Segmentation can help identify consumers who are likely to close a personal loan early, giving account management teams a head start to try and retain them. As it turns out, many consumers use personal loans as a form of revolving debt. These consumers occasionally close existing trades and open new trades to get access to more cash. Anticipating who is likely to close a loan early allows your retention team to focus on understanding their needs. If you don’t, you’re competition will take advantage through their marketing efforts. Building the strategy Building a comprehensive strategy is an iterative process. It’s critical for organizations to understand each campaign is an opportunity to learn and refine the methodology. Consistently leveraging control and test groups and new data assets will allow the process to become more efficient over time. Importantly, marketers should work closely across the organization to understand broader objectives and pain points. Credit data can be used to predict a range of future behaviors. As such, marketing managers should play a greater role as the gatekeepers to the organization’s growth.
