Application risk management processes for deposits has remained relatively unchanged for decades. Typically, it involves credit bureau data and a secondary check of “debit bureau” data. A “debit bureau” typically gathers information regarding known fraud and compiles a fraud database of perpetrators. Every applicant who passes the credit risk strategies is checked against this database. The challenge is that this process can be very expensive. Among a new class of fraud best practices is the idea of applying fraud models/fraud analytics as a filter upstream from the debit bureau’s fraud database. This practice enables deposit institutions to still identify known fraud and minimize fraud losses on those applicants that carry the highest risk. At the same time, costs are reduced by removing low risk accounts from the debit bureau check.    In addition to reducing costs, these revised acquisition strategies help reduce fraud referral rates while ensuring that application fraud does not increase. As deposit institutions look for ways to significantly reduce costs without suffering additional application fraud, look for the continued emergence of fraud analytics among 2011’s fraud best practices.

Consumer information is at the center of our economy. It connects us to the right products and services, helps companies innovate and expand, and allows consumers to make smarter choices throughout their lives. While the use of consumer information is becoming more important to businesses and consumers, there is a growing concern among policy makers that the laws governing consumer privacy are not keeping up. Over the last year, the FTC and the Department of Commerce have been studying these issues and each released preliminary reports looking at the changing privacy landscape. Although much of the discussion has focused on online data, the reports take a broader look at the privacy practices of organizations both online and offline, offering a number of recommendations that challenge policy makers and companies to better protect consumer information. As regulatory agencies and Congress continue to examine business practices around consumer privacy, I thought it might be helpful to take a look at recent comments Experian filed with the FTC and highlight a few areas that will be important for policy makers to consider going forward. A flexible and adaptive regulatory system is essential to an innovative economy Consumer privacy expectations are continuing to evolve and, as a result, standards must not be rigid. Along with existing regulations, new challenges should be dealt with robust and evolving self-regulation – not new laws – to ensure consumers are protected now and in the future. Consumer privacy should be viewed from multiple perspectives The recent debate around commercial information sharing has centered on consumer privacy; however there are other viewpoints that should be considered. For example, how are businesses using information in a responsible manner to innovate and increase productivity or how does the overall economy benefit from consumer information that makes us more competitive in a global marketplace.   Incorporating consumer privacy into all aspects of a business is a powerful consumer benefit The FTC report recommends a “privacy by design” framework – meaning that companies incorporate privacy into every aspect of their business operations. This framework could potentially evolve into a useful tool for companies to evaluate their privacy and data security policies. In the coming months, we’ll likely see a number of Congressional hearings as federal regulators craft a final privacy report. And in future posts, we’ll explore how the new proposals impact your business.  

Next week (Feb 22-23), several Experian credit and collections experts will have the privilege of sharing their expertise with TRMA conference goers. Leading up to this year’s Conference, I thought I’d briefly introduce you to each of these speakers and provide a sneak preview of his or her presentation. Session: TRMA Learning Lab (Tuesday, 2/22/11, 8 a.m. to 12 p.m.) Topic: The SimTel Business Game for Account Management Experian Presenter: Jim Nowell Business Training Consultant Follow up Session (Game results): Wednesday, 2/23/11, 10:45 a.m. to 11:15 a.m. —– KM: Today, we welcome Experian’s Jim Nowell. How are you doing, Jim? JN: I’m doing great, Kathy. Really looking forward to sharing the SimTel Business Game with folks at TRMA. KM: Two sessions, right? JN: Yes, the Game is on Tuesday. We present the results on Wednesday. KM: Before we hear about the Game, can you briefly describe what you do at Experian? JN: Sure, I’m a Business Training Consultant. My job is to train our clients’ analysts in setting strategies using Strategy Management systems. It’s not so much about how to use the software but what to look for and what to do (or not do) to address the problems. I do this through a 2½-day “SimRisk” Business Game courses. KM: 2½-days? I thought this was 4 hours! JN:The Business Game that we’ll run at TRMA is actually an abbreviated version of our regular analyst training course. Of course, in the full version there’s more time to spend discussing teams’ proposed strategies and possible outcomes. KM: Tell us a little bit about the SimTel Game itself, including why you do it and what players come away with? JN: The SimTel Business Game for Account Management is a realistic risk simulation exercise in which Risk Managers work in small teams to solve credit problems for a fictitious Telco portfolio. We offer it at conferences so people can show off their “credit chops,” while learning new ways to refine corporate credit strategy. KM: That sounds fun, is SimTel new? JN: We’ve actually been running the Originations version of SimTel for a few years now, but there was a lot of demand for an Account Management version, so we developed this last year. When we tested it out in the UK, players really got into it. KM: So how does the game work? JN: Before the session, participants receive a set of simulated reports showing the portfolio performance over the last 24 months. Using Strategy Management Software, they get three opportunities to amend their strategies for: Collections, Credit Limit Assignment and the “Ongoing Bundle.” After each set of changes, the portfolio is run forward by 3 months and a new set of reports is created to reflect the updated results.   KM: Why do people like the SimTel game so much? JN: First of all, it’s fun! And, it provides a great opportunity to work side-by-side with industry peers to solve a realistic business-credit problem. There’s also the thrill of competition. Even though the data is simulated, people approach it as if it were real. During the session, players gain a real appreciation for how changes to one element of a strategy, say credit limit assignment, directly affects other areas, collections for example. KM: So true. What happens on Wednesday? JN: That’s when I’ll deliver the games results … and most importantly, the winners! We finish up by summarizing how people can use the Strategy Management Software to develop their own winning strategies, and with a quick Q&A, so it should be fun. KM: Sound great, Jim, I can’t wait. JN: Thanks, Kathy. Hope to see you there. Stay in the know Follow Experian from the TRMA conference on Twitter (@experiancredit), and check this blog regularly to learn about the latest trends, tools and tips—including credit and collection best practices and emerging legislation.