Credit Lending
The holidays can be a stressful time for consumers — and an important time for lenders to anticipate the aftermath of big credit card spending. According to our recent study with Edelman Intelligence: 56% of respondents said holiday shopping puts a strain on their finances. 43% said the stress of holiday shopping makes it difficult to enjoy the season. With the holiday shopping season over, those hefty credit card statements are coming soon. Now is the time for lenders to prepare for the January and February consolidations. Want to know more?
Using digital technology like a big bank How was your holiday? Are the chargebacks rolling in yet? It’s no secret - digital technology like mobile device usage has increased significantly over the years, making it a breeding ground for fraudsters. As credit unions continue to grow their membership, their fraud security treatments need to grow as well. Bigger banks are constantly updating their fraud tools and strategies to fight against cybercrime and, therefore, fraudsters are setting their eyes on credit unions. Even as I write this, fraudsters are searching and targeting credit unions that don’t have their mobile channel secured. They attempt to capitalize on any weakness or opportunity: Registering stolen cards to mobile wallets Taking over an account via mobile banking apps Using a retailers’ mobile app to make fraudulent payments Disabling the SIM card in the victim’s phone and diverting the one-time password sent through text message to their own phones These are clever ways to commit fraud. But credit unions are becoming wise to these new threats and are serious about protecting their members. They are incorporating device intelligence with a solid identity authentication service. This multi-layered approach is essential to securing mobile channels, and protecting your Credit Union from chargebacks. To learn more about our fraud solutions, click here.
Experian shares five trends and twists coming over the next 12 months, that could push new boundaries and in many cases improve the customer experience as it pertains to the world of credit and finance.
You know what I love getting in the mail? Holiday cards, magazines, the occasional picturesque catalog. What I don’t open? Credit card offers, invitations to apply for loans and other financial advertisements. Sorry lenders, but these generally go straight into my shredder. Your well-intentioned efforts were a waste in postage, printing and fulfillment costs, and I’m guessing my mail consumption habits are likely shared by millions of other Americans. I’m a cusper, straddling the X and Millennial generations, and it’s no secret people like me have grown accustomed to living on our mobile devices, shopping online and managing our financial lives digitally. While many retailers have wised up to the trends and shifted marketing dollars heavily into the digital space, the financial services industry has been slow to follow. I’m hoping 2017 will be the year they adapt, because solutions are emerging to help lenders deliver firm offers of credit via email, display, retargeting and even social media platforms. There are multiple reasons to make the shift to digital credit marketing. It’s trackable. The beauty of digital marketing is that it can be tracked much more efficiently over direct mail efforts. You can see if offer emails are opened, if banners are clicked, if forms are completed and how quickly all of this takes place. In short, there are more touchpoints to measure and track, and more insights made available to help with marketing and offer optimization. It’s efficient. A solid digital campaign means you now have more flexibility. And once those assets start to deploy and you begin tracking the results, you can additionally optimize on the fly. Subject line not getting the open rate you want? Test a new one. Banners not getting clicked? Change the creative. A portion of your target audience not responding? Capture that feedback sooner rather than later, and strategize again. With direct mail, the lag time is long. With digital, the intelligence gathering begins immediately. It’s what many consumers want. They are spending 25% of their time on mobile devices. Research has found they check their phones and average 46 times per day. They are bouncing from screen to screen, engaging on desktops, tablets, smartphones, wearables and smart TVs. If you want to capture the eyeballs and mindshare of consumers, financial marketers must embrace the delivery of digital offers. Consumer behaviors have evolved, so must lenders. Sure, there is still a place for direct mail efforts, but it would be wasteful to not embrace the world of digital credit marketing and find the right balance between offline and online. It’s a digital world. It’s time financial institutions join the masses and communicate accordingly.
Looking to score more consumers, but worried about increased risk? A recent VantageScore LLC study found that consumers rendered “unscoreable” by commonly used credit scoring models are nearly identical in their financial and credit behavior to scoreable consumers. To get a more detailed financial portrait of the “expanded” population, credit files were supplemented with demographic and economic data. The study found: Consumers who scored above 620 using the VantageScore 3.0 model exhibited profiles of sufficient quality to justify mortgage loans on par with those of conventionally scoreable consumers. 3 to 2.5 million – a majority of the 3.4 million consumers categorized as potentially eligible for mortgages – demonstrated sufficient income to support a mortgage in their geographic areas. The findings demonstrate that VantageScore is a scalable solution to expanding mortgage credit without relaxing credit standards should the FHFA and GSEs accept VantageScore 3.0. Want to know more?
Technology sharing can unlock a more effective strategy in fighting fraud. Experian’s multi-layered and risk-based approach to fraud management is discussed as many businesses are learning that combining data and technology to strengthen their fraud risk strategies can help reduce losses. Evolving fraud schemes, changes in regulatory requirements and the advent of new digital initiatives make it difficult for businesses to manage all of the tools needed to keep up with the relentless pace of change.
Let’s play word association. When I say holiday season, what’s the first thing that comes to mind? Childhood memories. Connecting with family. A special dish mom used to make. Or perhaps it’s budgeting, debt and credit card spend. The holidays can be a stressful time of year for consumers, and also an important time for lenders to anticipate the aftermath of big credit card spend. According to a recent study by Experian and Edelman Intelligence: 48 percent of respondents felt thoughtful when thinking about the season 30 percent felt stressed 24 percent felt overwhelmed. Positive emotions are up across the board this year, which may be a good sign for retailers and bankcard lenders. And if emotion is an indicator of spending, 2016 is looking good. But while the holly-jolly sentiment is high, 56 percent of consumers say holiday shopping puts a strain on their finances. And, 43 percent of respondents said the stress of holiday shopping makes it difficult to enjoy the season. Regardless of stress, consumers are seeking ways to spend. Nearly half of respondents plan to use a major credit card to finance at least a portion of their holiday spending, second only to cash. With 44 percent of consumers saying they feel obligated to spend more than they can afford, it’s easy to see why credit cards are so important this time of year. Bankcard originations have fully rebounded from the recession, exceeding $104 billion in the third quarter of 2016, the highest level since the fourth quarter of 2007. While originations have rebounded, delinquency rates have remained at historic lows. The availability of credit is giving consumers more purchasing power to fund their holiday spending. But what happens next? As it turns out, many consumers resolve to consolidate all that holiday debt in the new year. Experian research shows that balance transfer activity reaches annual highs during the first quarter as consumers seek to simplify repayment and take advantage of lower interest rates. Proactive lenders can take advantage of this activity by making timely offers to consumers in need. At the same time, reactive lenders may feel the pain as balances transfer out of their portfolio. By identifying consumers who are most likely to engage in a card-to-card balance transfers, lenders can anticipate these consumer bankcard trends. The insights can then be used to acquire new customers and balances through prescreen campaigns, while protecting existing balances before they transfer out of an existing lender portfolio. With Black Friday and Cyber Monday behind us, the card balances are likely already rising. Now is the time for lenders to prepare for the January and February consolidations. Those hefty credit card statements are coming soon.
Happy holidays! It’s the holiday season and a festive time of year. Colorful lights, comfort food and holiday songs – all of these things contribute to the celebratory atmosphere which causes many people to let their guards down and many businesses to focus more on service than on risk. Unfortunately, fraudsters and other criminals can make one of the busiest shopping times of the year, a miserable one for their victims. The nature of the stolen data has the potential to create long-term headaches for the organization and tens of millions of individuals. Unlike a retailer or financial breach, where stolen payment cards can be deactivated and new ones issued, the theft of permanent identity information is, well, not easily corrected. You can’t simply reissue Social Security numbers, birth dates, names and addresses. For individuals, we need to internalize this fact: our data has likely been breached, and we need to become vigilant and defend ourselves. Sign-up for a credit monitoring service to be alerted if your data or ID is being used in ways that indicate fraud. Include your children, as well. A child’s identity is far more valuable to a fraudster as they know it can be several years before their stolen identity is detected. The good news is, in addition to the credit bureau, many banks and auto clubs now offer this as a service to their customers. For organizations, the focus should be on two fronts: data protection and fraud prevention. Not just to prevent financial theft, but to preserve trust — trust between organizations and consumers, as well as widespread consumer trust. Organizations must strive to evolve data protection controls and fraud prevention skills to minimize the damage caused by stolen identity data. There are dozens of tools in the industry for identifying that a consumer is who they say they are – and these products are an important part of any anti-fraud strategy. These options may tell you that the combination of elements is the consumer, but do you know that it is the REAL consumer presenting them? The smart solution is to use a broad data set for not only identity verification, but also to check linkage and velocity of use. For example: Is the name linking to other addresses being presented in the past week? Is the phone number showing up to other addresses and names over the past 30 days? Has the SSN matched to other names over the past 90 days? Since yesterday the address matches to four phone numbers and two names – is this a problem? And it must be done in ways that reinforce the trust between consumers and organizations, enhance the customer experience, and frustrate criminals. Click here to learn more about Experian’s products and services that can help. As we go walking in the winter wonderland, remember, the holiday season is a time for cheer… and vigilance!
Which part of the country has bragging rights when it comes to sporting the best consumer credit scores? Drum roll please … Honors go to the Midwest. In fact, eight of the 10 cities with the highest consumer credit scores heralded from Minnesota and Wisconsin. Mankato, Minn., earned the highest ranking with an average credit score of 708 and Greenwood, Miss., placed last with an average credit score of 622. Even better news is that the nation’s average credit score is up four points; 669 to 673 from last year and is only six points away from the 2007 average of 679, which is a promising sign as the economy continues to rebound. Experian’s annual study ranks American cities by credit score and reveals which cities are the best and worst at managing their credit, along with a glimpse at how the nation and each generation is faring. “All credit indicators suggest consumers are not as ‘credit stressed’ — credit card balances and average debt are up while utilization rates remained consistent at 30 percent,” said Michele Raneri, vice president of analytics and new business development at Experian. As for the generational victors, the Silents have an average 730, Boomers come in with 700, Gen X with 655 and Gen Y with 634. We’re also starting to see Gen Z emerge for the first time in the credit ranks with an average score of 631. Couple this news with other favorable economic indicators and it appears the country is humming along in a positive direction. The stock market reached record highs post-election. Bankcard originations and balances continue to grow, dominated by the prime borrower. And the housing market is healthy with boomerang borrowers re-emerging. An estimated 2.5 million Americans will see a foreclosure fall of their credit report between June 2016 and June 2017, creating a new pool of potential buyers with improved credit profiles. More than 12 percent who foreclosed back in the Great Recession have already boomeranged to become homeowners again, while 29 percent who experienced a short sale during that same time have also recently taken on a mortgage. “We are seeing the positive effects of economic recovery with the rise in income and low unemployment reflected in how Americans are managing their credit,” said Raneri. Which means all is good in the world of credit. Of course there is always room for improvement, but this year’s 7th annual state of credit reveals there is much to be thankful for in 2016.
2017 data breach landscape Experian Data Breach Resolution releases its fourth annual Data Breach Industry Forecast report with five key predictions What will the 2017 data breach landscape look like? While many companies have data breach preparedness on their radar, it takes constant vigilance to stay ahead of emerging threats and increasingly sophisticated cybercriminals. To learn more about what risks may lie ahead, Experian Data Breach Resolution released its fourth annual Data Breach Industry Forecast white paper. The industry predictions in the report are rooted in Experian\'s history helping companies navigate more than 17,000 breaches over the last decade and almost 4,000 breaches in 2016 alone. The anticipated issues include nation-state cyberattacks possibly moving from espionage to full-scale cyber conflicts and new attacks targeting the healthcare industry. \"Preparing for a data breach has become much more complex over the last few years,\" said Michael Bruemmer, vice president at Experian Data Breach Resolution. \"Organizations must keep an eye on the many new and constantly evolving threats and address these threats in their incident response plans. Our report sheds a light on a few areas that could be troublesome in 2017 and beyond.\" \"Experian\'s annual Data Breach Forecast has proven to be great insight for cyber and risk management professionals, particularly in the healthcare sector as the industry adopts emerging technology at a record pace, creating an ever wider cyber-attack surface, adds Ann Patterson, senior vice president, Medical Identity Fraud Alliance (MIFA). \"The consequences of a medical data breach are wide-ranging, with devastating effects across the board - from the breached entity to consumers who may experience medical ID fraud to the healthcare industry as a whole. There is no silver bullet for cybersecurity, however, making good use of trends and analysis to keep evolving our cyber protections along with forecasted threats is vital.\" \"The 72 hour notice requirement to EU authorities under the GDPR is going to put U.S.-based organizations in a difficult situation, said Dominic Paluzzi, co-chair of the Data Privacy & Cybersecurity Practice at McDonald Hopkins. \"The upcoming EU law may just have the effect of expediting breach notification globally, although 72 hour notice from discovery will be extremely difficult to comply with in many breaches. Organizations\' incident response plans should certainly be updated to account for these new laws set to go in effect in 2017.\" Omer Tene, Vice President of Research and Education for International Association of Privacy Professionals, added \"Clearly, the biggest challenge for businesses in 2017 will be preparing for the entry into force of the GDPR, a massive regulatory framework with implications for budget and staff, carrying stiff fines and penalties in an unprecedented amount. Against a backdrop of escalating cyber events, such as the recent attack on Internet backbone orchestrated through IoT devices, companies will need to train, educate and certify their staff to mitigate personal data risks.\" Download Whitepaper: Fourth Annual 2017 Data Breach Industry Forecast Learn more about the five industry predictions, and issues such as ransomware and international breach notice laws in our the complimentary white paper. Click here to learn more about our fraud products, find additional data breach resources, including webinars, white papers and videos.
How will the FinCEN revisions impact your business? (Part 2) I recently discussed the new FinCEN requirements to Customer Due Diligence. This time, I’d like to focus on the recent FinCEN advisory regarding “email-compromise fraud.” This new advisory sheds additional light on the dual threats of both Email Account Compromise impacting the general public and Business Email Compromise that targets businesses. FinCEN has rightly identified and communicated several high-risk conditions common to the perpetration of scams such as varied languages, slight alterations in email addresses, out-of-norm account and transaction information, and social engineering in the form of follow-up requests for additional transfers. In addition to introducing operational standards to detect such conditions, institutions also would benefit from these other tactics and focal points as they respond to email requests for financial transfers: Email validation and verification — use of third-party vendor services that can deliver a measurable level of confidence in the association of an email address to an actual, true identity. Multifactor authentication — use of dual-step or out-of-band verification of the requested transaction using alternate channels such as phone. Robust KYC/CIP at application and account opening to ensure that name, address, date of birth and Social Security number are verified and positively and consistently linked to a single identity, as well as augmented with phone and email verification and association for use in customer communications and multifactor authentications. Customer transactional monitoring in the form of establishing typical or normal transfer activity and thresholds for outlying variations of concern. Known and suspected fraud databases updated in real time or near real time for establishing blacklist emails to be segmented as high risk or declines upon receipt. Identity application and transactional link analysis to monitor for and detect the use of shared and manipulated email addresses across multiple transaction requests for disparate identities. Access to device intelligence and risk assessment to ensure consistent association of a true customer with one or more trusted devices and to detect variance in those trusted associations. Which of these 7 tactics are you using to stop email-compromise fraud?
In order to compete for consumers and to enable lender growth, creating operational efficiencies such as automated decisioning is a must. Unfortunately, somewhere along the way, automated decisioning unfairly earned a reputation for being difficult to implement, expensive and time consuming. But don’t let that discourage you from experiencing its benefits. Let’s take a look at the most popular myths about auto decisioning. Myth #1: Our system isn’t coded. If your system is already calling out for Experian credit reporting data, a very simple change in the inquiry logic will allow your system to access Decisioning as a ServiceSM. Myth #2: We don’t have enough IT resources. Decisioning is typically hosted and embedded within an existing software that most credit unions currently use – thus eliminating or minimizing the need for IT. A good system will allow configuration changes at any time by a business administrator and should not require assistance from a host of IT staff, so the demand on IT resources should decrease. Decisioning as a Service solutions are designed to be user friendly to shorten the learning curve and implementation time. Myth #3: It’s too expensive. Sure, there are highly customized products out there that come with hefty price tags, but there are also automated solutions available that suit your budget. Configuring a product to meet your needs and leaving off any extra bells and whistles that aren’t useful to your organization will help you stick to your allotted budget. Myth #4: Low ROI. Oh contraire…Clients can realize significant return-on-investment with automated decisioning by booking more accounts … 10 percent increase or more in booked accounts is typical. Even more, clients typically realize a 10 percent reduction in bad debt and manual review costs, respectively. Simply estimating the value of each of these things can help populate an ROI for the solution. Myth #5: The timeline to implement is too long. It’s true, automation can involve a lot of functions and tasks – especially if you take it on yourself. By calling out to a hosted environment, Experian’s Decisioning as a Service can take as few as six weeks to implement since it simply augments a current system and does not replace a large piece of software. Myth #6: Manual decisions give a better member experience. Actually, manual decisions are made by people with their own points of view, who have good days and bad days and let recent experiences affect new decisions. Automated decisioning returns a consistent response, every time. Regulators love this! Myth #7: We don’t use Experian data. Experian’s Decisioning as a Service is data agnostic and has the ability to call out to many third-party data sources and configure them to be used in decisioning. --- These myth busters make a great case for implementing automated decisioning in your loan origination system instead of a reason to avoid it. Learn more about Decisioning as a Service and how it can be leveraged to either augment or overhaul your current decisioning platforms.
Reinventing Identity for the Digital Age Electronic Signature & Records Association (ESRA) conference I recently had the opportunity to speak at the Electronic Signature & Records Association (ESRA) conference in Washington D.C. I was part of a fantastic panel delving into the topic, ‘Reinventing Identity for the Digital Age.’ While certainly hard to do in just an hour, we gave it a go and the dialogue was engaging, healthy in debate, and a conversation that will continue on for years to come. The entirety of the discussion could be summarized as: An attempt to directionally define a digital identity today The future of ownership and potential monetization of trusted identities And the management of identities as they reside behind credentials or the foundations of block chain Again, big questions deserving of big answers. What I will suggest, however, is a definition of a digital identity to debate, embrace, or even deride. Digital identities, at a minimum, should now be considered as a triad of 1) verified personally identifiable information, 2) the collective set of devices through which that identity transacts, and 3) the transactional (monetary or non-monetary) history of that identity. Understanding all three components of an identity can allow institutions to engage with their customers with a more holistic view that will enable the establishment of omni-channel communications and accounts, trusted access credentials, and customer vs. account-level risk assessment and decisioning. In tandem with advances in credentialing and transactional authorization such as biometrics, block chain, and e-signatures, focus should also remain on what we at Experian consider the three pillars of identity relationship management: Identity proofing (verification that the person is who they claim to be at a specific point in time) Authentication (ongoing verification of a person’s identity) Identity management (ongoing monitoring of a person’s identity) As stronger credentialing facilitates more trust and open functionality in non-face-to-face transactions, more risk is inherently added to those credentials. Therefore, it becomes vital that a single snapshot approach to traditionally transaction-based authentication is replaced with a notion of identity relationship management that drives more contextual authentication. The context thus expands to triangulate previous identity proofing results, current transactional characteristics (risk and reward), and any updated risk attributes associated with the identity that can be gleaned. The bottom line is that identity risk changes over time. Some identities become more trustworthy … some become less so. Better credentials and more secure transactional rails improve our experiences as consumers and better protect our personal information. They cannot, however, replace the need to know what’s going on with the real person who owns those credentials or transacts on those rails. Consumers will continue to become more owners of their digital identity as they grant access to it across multiple applications. Institutions are already engaged in strategies to monetize trusted and shareable identities across markets. Realizing the dynamic nature of identity risk, and implementing methods to measure that risk over time, will better enable those two initiatives. Click here to read more about Identity Relationship Management.
How will the FinCEN revisions impact your business? (Part 1) Some recently published FinCEN revisions and advisories are causing a stir. First, let’s look at revisions to Customer Due Diligence that require compliance by May 2018. Under the updated requirements for Customer Due Diligence, covered financial institutions must expand programs, including Customer Identification Programs (CIP), to include Beneficial Owners of Legal Entity customers. Under the new rule, financial institutions must collect and verify identity information (name, address, date of birth, Social Security number or passport number for foreign individuals): For each Natural Person with at least 25% ownership in the Legal entity and For an individual with significant responsibility for managing or controlling the business — for example, a chief executive officer, a chief financial officer, a chief operating officer, a managing member, a general partner, a president, a vice president or a treasurer The U.S. Treasury estimates that illicit proceeds generated in the United States alone total $400 billion annually. These requirements are intended to prevent anonymous access to financial systems through shielded or minority ownership. While the effort to stem the tide of illicit proceeds is laudable, the impact to business may be significant. Most organizations will need to audit their data collection practices, and many will need to make changes to either data collection or workflow processes to ensure compliance. While quite simple and straightforward on paper, the standardization of additional CIP policies and procedures tend to create substantive impact to the customer experience as well as operational resource allocations and utilization. Covered financial institutions should already be discussing with their current or prospective fraud risk and identity management vendors to ensure that: There is a clear path to altering both data collection and verification of these additional identity elements. Clear and accurate benchmarking around expected verification rates is available ahead of the compliance date to allow for operational workflow design to accommodate both ‘verifications’ and ‘referrals stemming from lack of full verification.’ Service providers are granting access to best-in-class data assets and search & match logic related to identity element verification and risk assessment, along with multi-layered options to reconcile those initial verification ‘fails.’ Full business reviews and strategy design sessions are underway or being scheduled to align and document overall objectives of the program, benchmarking of leading industry practices, current and future state gaps, near- and long-term initiatives and a prioritized roadmap, a viable business case toward additional investment in services and resources, and a plan of execution. Will this impact your business? Will you need to make any changes? Click here to read part two - FinCEN and email-compromise fraud.
Lenders are looking for ways to accurately score more consumers and grow their applicant pool without increasing risk. And it looks like more and more are turning to VantageScore® to help achieve their goals. So, who’s using VantageScore? 9 of the top 10 financial institutions. 18 of the top 25 credit card issuers. 21 of the top 25 credit unions. VantageScore leverages the collective experience of the industry’s leading experts on credit data, modeling and analytics to provide a more consistent and highly predictive credit score. >>Want to know more?
Learn More Image
