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By: Reggie Whitley After spending years working in bank fraud, one of the most difficult conversations to have with a consumer is “We can no longer successfully protect your accounts.” Identity theft is shockingly easy to commit.  In most cases consumers are able to recover successfully from compromises thanks to the diligence of their financial institutions, the cooperation of retailers, and credit reporting services that assist in recovery from compromises. Problems arise when you have consumers who become attractive targets for various reasons – these could be relationships to others, high net worth, extensive products, or business ownership.  These targets aren’t ‘one and done’ consumers for an identity criminal.  For these consumers identity thieves will continue accessing their identities for months or even years.  These consumers are often forced to migrate from banks or credit card companies because the identity crimes follow them and they become too expensive to protect.  For these consumers, identity theft is a true nightmare. In the past year, fraud protection strategies and tools have emerged that will begin to reduce the risk of continued compromise these consumers face.  Real time identity alerting tools have emerged to offer consumers a way to receive notification when their identities are being used, not just at a single institution, but across the financial landscape. Consumers now have the ability to receive SMS, Email, or Web notifications whenever their identity has been verified.  If the consumer receives an alert on an banking account they just opened, they simply move on, no action is required.  In the event that the alert is NOT something they generated, the consumer calls in, discusses with a fraud specialist and is connected to the generating bank or retailer to file a fraud report. Obviously, this service benefits any consumer who would like to monitor usage of their identity and detect fraud, but knowing first hand the horror stories extensively compromised consumers get caught in, tools like start to open a level of REAL TIME protection that hasn’t before existed. The benefit is truly across the board.  Banks and retailers begin to realize savings when consumers engage them within minutes of fraud.  This reduces the success of identity thieves, discouraging additional attempts.  Finally, detecting this fraud reduces the extensive efforts needed to help a consumer clear up credit reports and file fraud reports. Perhaps in the near future instead of turning high risk consumers away, we can provide them with the ability to protect themselves and the industry from the nightmare situations that are still too frequent today.

The $478 billion in Q2 2013 mortgage originations is a 10 percent increase over a year ago ($436 billion) but a 7 percent decrease from the previous quarter ($515 billion) — primarily as a result of the slowdown in refinancing activity.

The June release of the S&P/Experian Consumer Credit Default Indices showed default rates continued to fall across all categories. The national composite* and the first mortgage default rate both hit new post-recession lows (1.34 percent and 1.23 percent, respectively). The table below summarizes the June 2013 results for the S&P/Experian Consumer Credit Default Indices.

The desire to return to portfolio growth is a clear trend in mature credit markets, such as the US and Canada. Historically, credit unions and banks have driven portfolio growth with aggressive out-bound marketing offers designed to attract new customers and members through loan acquisitions. These offers were typically aligned to a particular product with no strategy alignment between multiple divisions within the organization.  Further, when existing customers submitted a new request for credit, they were treated the same as incoming new customers with no reference to the overall value of the existing relationship. Today, however, financial institutions are looking to create more value from existing customer relationships to drive sustained portfolio growth by increasing customer retention, loyalty and wallet share. Let’s consider this idea further. By identifying the needs of existing customers and matching them to individual credit risk and affordability, effective cross-sell strategies that link the needs of the individual to risk and affordability can ensure that portfolio growth can be achieved while simultaneously increasing customer satisfaction and promoting loyalty. The need to optimize customer touch-points and provide the best possible customer experience is paramount to future performance, as measured by market share and long-term customer profitability. By also responding rapidly to changing customer credit needs, you can further build trust, increase wallet share and profitably grow your loan portfolios.  In the simplest sense, the more of your products a customer uses, the less likely the customer is to leave you for the competition. With these objectives in mind, financial organizations are turning towards the practice of setting holistic, customer-level credit lending parameters. These parameters often referred to as umbrella, or customer lending, limits. The challenges Although the benefits for enhancing existing relationships are clear, there are a number of challenges that bear to mind some important questions to consider: ·     How do you balance the competing objectives of portfolio loan growth while managing future losses? ·     How do you know how much your customer can afford? ·     How do you ensure that customers have access to the products they need when they need them ·     What is the appropriate communication method to position the offer? Few credit unions or banks have lending strategies that differentiate between new and existing customers.  In the most cases, new credit requests are processed identically for both customer groups. The problem with this approach is that it fails to capture and use the power of existing customer data, which will inevitably lead  to suboptimal decisions. Similarly, financial institutions frequently provide inconsistent lending messages to their clients. The following scenarios can potentially arise when institutions fail to look across all relationships to support their core lending and collections processes: 1.     Customer is refused for additional credit on the facility of their choice, whilst simultaneously offered an increase in their credit line on another. 2.     Customer is extended credit on a new facility whilst being seriously delinquent on another. 3.     Customer receives marketing solicitation for three different products from the same institution, in the same week, through three different channels. Essentials for customer lending limits and successful cross-selling By evaluating existing customers on a periodic (monthly) basis, financial institutions can assess holistically the customer’s existing exposure, risk and affordability. By setting customer level lending limits in accordance with these parameters, core lending processes can be rendered more efficient, with superior results and enhanced customer satisfaction. This approach can be extended to consider a fast-track application process for existing relationships with high value, low risk customers. Traditionally, business processes have not identified loan applications from such individuals to provide preferential treatment. The core fundamentals of the approach necessary for the setting of holistic customer lending (umbrella) limits include: ·     The accurate evaluation of credit and default risk ·     The calculation of additional lending capacity and affordability ·     Appropriate product offerings for cross-sell ·     Operational deployment Follow my blog series over the next few months as we explore the essentials for customer lending limits and successful cross-selling.

Despite the improving real-estate market, financial institutions are concerned about lending to consumers who have pursued strategic defaults. In a recent VantageScore Solutions survey, 85 percent of respondents believe that consumers who have pursued strategic defaults pose increased risk, even if they meet the institution’s other lending criteria. More than half of those surveyed said they are not likely to approve strategic defaulters for a mortgage loan in the next 12 months. Source: The Score: Short sales and foreclosures make lenders wary VantageScore® is a registered trademark of VantageScore Solutions, LLC.

Providing more evidence of a housing recovery, Q1 2013 mortgage originations increased 16 percent year over year to $471 billion. The Midwest region delivered the strongest annual gain, with a 29 percent increase over the previous year.

By: Lloyd Parker Another Experian Vision Conference comes to a close today but not without a full morning of breakout sessions with compelling speakers and experts sharing real-world strategies for real opportunity and real growth.  The conference concluded with an entertaining and thought-provoking speaker, Sir Ken Robinson, Ph.D., author of The Element: How Finding Your Passion Changes Everything and Out of our Minds: Learning to Be Creative, who shared with us ideas on how to cultivate innovation and change within organizations in order to grow with their environments and continue to thrive. We’d like to thank you for making this year’s event one of the best.  And thank you for the confidence you give us all year round.  We know the great responsibility that goes along with that and we are committed to helping your business succeed. Top Tweets of the Week #Vision2013 the slowest growing loan segment (actually it is negative) is HELOC @cumagazine@dougbenzine at -8% YOY.#engage — Mike Horrocks (@mikehorrocks) May 8, 2013 #vision2013 great credit union discussion at experian conference! — Doug Benzine (@DougBenzine) May 8, 2013 #Vision2013 @sirkenrobinson (1) we are living in a time of revolution (2) we have to think differently about talents (3) then act different — Mike Horrocks (@mikehorrocks) May 8, 2013 'Most adults don't know what their true aptitudes are' Sir Ken Robinson #vision2013 — Michele Raneri (@MLRaneri) May 8, 2013 #Vision2013 @sirkenrobinson Our kids are not trains, they are rockets ready to explore and we need to help them only light the fuse. #engage — Mike Horrocks (@mikehorrocks) May 8, 2013

By: Lloyd Parker James W. Paulsen, Ph.D., Chief Investment Strategist at Wells Capital Management kicked off day two at the Experian Vision 2013 Conference with an upbeat economic outlook for 2013 and what it means longer term, for the next generation. Paulsen is nationally recognized for his views on the economy and publishes his own commentary assessing economic and market trends through his newsletter, Economic and Market Perspective. Today he demonstrated to conference attendees how the United States is in a “gear” year and that the “new normal” has been going on for the past 25 years.  His optimism predicts that for the next 10 years we’ll see an estimated 3% GDP growth.  As mentioned by some on Twitter, “he makes statistics fun.” The morning was followed by more insightful breakout sessions and the launch of a new session format called, “Viewpoints” – fast paced, quick-hitting sessions that highlight new innovations, forward-thinking solutions and product demonstrations designed to satisfy the attendee’s desire to learn more. Networking activities filled the afternoon, and at the time of post the winners of the golf tournament had not yet been announced. Other highlights from the day Viewpoint: The art of portfolio analysis Maintaining a strong commercial portfolio starts with knowledge. In this session, new concepts are introduced and old concepts were questioned as we shared validated intelligence on which commercial triggers are best suited for effective portfolio management. Viewpoint: A 900% return on small-business marketing Here proven approaches were reviewed for targeting existing small-business customers and prospects for deposits and loans using available firmographic data, business credit scores and response models. Viewpoint: Transaction data signals – challenges and opportunities Experian’s R&D Data Lab shared team insights into how underutilized transaction data might be leveraged as well as how to overcome some of the technical and business challenges that arise. Viewpoint: Find time and money in your credit authorization process Attendees learned how to improve decision making and productivity by bringing together multiple sources of credit authorization information in Baker Hill Advisor®. Viewpoint: Commercial fraud – An ounce of prevention is worth a pound of cure Protecting personal identities is commonplace for most businesses. Commercial fraud may not be a primary concern, but one “rare” occurrence could mean a big loss to profits and reputation.  Attendees learned how BizID can prevent fraud in business portfolios and help ensure that appropriate preventive measures are taken. Viewpoint: SaaS for intelligent customer decisioning – separating the hype from the reality A stroll down memory lane highlighted the hype and reality of technology over the last several decades and looked at the realities we face that make this space so difficult to predict.  Attendees looked at criteria to help them decipher what’s working, what they can do about it and the critical points to focus on when looking at SaaS solutions. Top tweets: "USA is in a GEAR Year" expects 3% growth this year. #vision2013 #finserv — Patricia Hines (@PJHines) May 7, 2013 #Vision2013 @aitegroup 32% of mobile users think mobile is secure & 55% think it is somewhat secure. Banks need to #engage mobile banking. — Mike Horrocks (@mikehorrocks) May 7, 2013 @experianvision "Growth may surpass expectations this year. Confidence is being upwardly adjusted." Dr. James W. Paulsen. #vision2013 — Martha Staten (@Sauconyandsuds) May 7, 2013

By: Lloyd Parker There aren’t many things that energize me more than seeing our clients arrive for the Experian Vision 2013 Conference.  Industry leaders from all over the world have joined us in Southern California to kick-off a full day of insightful topics.  This year’s event sold out in record time and we have many first time attendees taking advantage of the opportunities to network and learn from industry peers. Today began with a welcome from Steve Wagner, President of Consumer Information Services followed by Victor Nichols, Chief Executive Officer, Experian North America and myself, Lloyd Parker, Group President Credit Services.  We launched our key theme of Real Strategies, Real Growth, Real Opportunities, discussing the concept of “reality checks.” Reality check #1: Micro-targeting is required Identify market differences Understand your customer segments Adapt to specific needs of your empowered consumers Reality check #2: Managing risk   Protect against risks that follow success Keep your door open for good business Focus on operational efficiencies Reality check #3: Optimizing engagement Utilize all the data of each customer Understand all of your customer touch points Manage customer strategies holistically A key theme of the day was the economic, regulatory and political changes impacting our economy and your customers. We had a conversation with Timothy F. Geithner, 75th U.S. Secretary of the Treasury, who shared his experiences as the principal architect of the President’s strategy to avert economic collapse and to reform the financial system.  He also discussed international economic challenges and gave us his personal outlook on the economy. The afternoon featured many great speakers and industry experts across many topics that included hearing from many of our regulators on the topic of banking regulations; experts in the area of mobile payments and banking; along with many of our clients who shared their successful programs and experiences working across consumer and commercial portfolios and the customer lifecycle. Other highlights from the day Things overheard at the Roundtable Sessions: “You don’t need extensive touches for small loans, but let go of Excel,” Community bank topics “Loans are milk, deposits are steak,” Issues and opportunities within commercial risk management roles topic “Pent up demand will lead to overall positive auto market conditions near term,” Automotive hot topics “Keeping various systems in synch; Spend time early on implementation to define biz requirements,” Overcoming system operation challenges topic “Marketing to the underserved remains a challenge,” Issues and opportunities in consumer risk management roles topic “Using mobile to go paperless in commercial lending to improve convenience,” Mobile tools for business lending topic Top tweets: #vision2013 "Be relentlessly skeptical. Be humble about what you don't know." Former Secretary Timothy Geithner. — Martha Staten (@Sauconyandsuds) May 6, 2013 Experian CEO to Us bankers on current reg environment. "we have to get in compliance. We have to grow in compliance".#vision2013 — eric haller (@erichaller2) May 6, 2013 Great description of the current environment - "Economic Pinball" Victor Nichols #vision2013 #finserv — Patricia Hines (@PJHines) May 6, 2013 #vision2013.@experiancredit data lab is the "most unique initiative in the industry". The lab lets you #engage w/ untraditional data. — Mike Horrocks (@mikehorrocks) May 6, 2013 Only take risks you can understand, measure, and monitor. CRO round table. #vision2013 — alissa (@adh314) May 6, 2013 The phone is the new wallet. Apps are the new cards. #engage #vision2013 — Andrew Beddoes (@beddoesa712) May 6, 2013  

A recent analysis by Experian Automotive found that, overall, consumers purchasing a hybrid have significantly higher credit scores than those purchasing another type of new vehicle. The average credit score for a loan on a new hybrid was 790, compared with the national average credit score of 755 for a loan on any new vehicle.

Findings from Experian's latest State of the Automotive Finance Market analysis showed the average loan term for a new vehicle jumped to an all-time high of 65 months in Q4 2012, up from 63 months in Q4 2011. More consumers also are opting for leases, with the lease share of new auto financing increasing to 24.79 percent, up from 10.45 percent in Q4 2011.

The most recent release of the S&P/Experian Consumer Credit Default Indices showed national credit default rates decreased in February. The national composite* moved from 1.63 percent in January to 1.55 percent in February. First mortgage and bankcard default rates followed a similar pattern. These trends are consistent with other economic news, such as improvements in employment and continuing gains in housing.

Experian Automotive's Q4 2012 credit trends analysis found that 60-day delinquencies rose from 0.72 percent in Q4 2011 to 0.74 percent in Q4 2012. It was the first time in three years that 60-day delinquencies experienced a year-over-year increase.

To learn the status of Americans' current credit card spending, Credit.com recently compiled a list of the states with the highest average bankcard balance per consumer in the third quarter of 2012. While several Northeastern states dominated the list, Alaska took first place, with an average bankcard balance per consumer of $5,572. On the other end of the spectrum, North Dakota and Iowa had the lowest bankcard balances, at $3,595 and $3,624, respectively.

Findings from Experian's latest State of the Automotive Finance Market analysis showed market share for nonprime, subprime and deep subprime automotive loans for new vehicles grew by 13.6 percent and new vehicle leasing increased by 7.53 percent year over year in Q3 2012. Thirty-day delinquencies fell slightly from 2.78 percent in Q3 2011 to 2.67 percent in Q3 2012 and 60 day delinquencies fell from 0.71 percent in Q3 2011 to 0.69 percent in Q3 2012.