Financial Solutions

“The White House FinTech Summit” – the intent was to promote a discussion, on what could be done better to progress innovation in financial services,

Definition of first-party versus third-party fraud trends and shared actual case study of a first-party fraud scheme.

As net interest margins tighten and commercial real estate concentrations begin to slowly creep back to 2008 levels, financial institutions should consider looking to their branch networks to drive earnings. Why wouldn’t you, right? The good news is branch networks can embrace that challenge by simply using some of the tools they already have access to – most notably the credit report. Credit reports are generally seen as a tool to assist financial institutions in assessing credit risk. However, if used properly, credit reports can provide a wealth of insight on selling opportunities as well. Typically when a customer’s credit report is pulled, the personal banker or customer service representative is primarily focused on whether or not a loan application is approved based on the institution’s approval parameters. Instead, what if a lender elected to view this customer interaction as an opportunity to deepen the relationship? So, here are three ways to utilize credit reports to generate earnings through retail loan growth: 1. Opportunities to Consolidate Debt  Looking for debt consolidation opportunities is probably the simplest way to mine for opportunities. For example: Personal Banker: “It looks like you also have a card credit with XYZ and ABC Bank. Based on your application, we can consolidate both of those balances into one and give you a lower interest rate.” Be specific. Tell the customer exactly how much money per month they would be able to save and the benefits of consolidation. Not to mention, debt consolidation often reduces a lender’s credit risk and enhances customer loyalty, so this is a win for the institution as well. 2. Opportunities to Provide Additional Credit  Another method would be to “soft pull” a segment of your portfolio to identify customers who qualify for larger credit card balances or refinance opportunities. This strategy is best executed at the portfolio management level, as insight is needed on the bank risk appetite and concentration levels. Layering on a basic prescreen helps qualify and segment your prospect list according to your unique credit criteria. You can also expand the universe with an Experian extract list, identifying new consumers who might be open to new offers. 3. Find Hidden Opportunities Credit scoring models are not perfect. There are times when a person’s credit score does not reflect an applicant’s true risk profile. For example, a person who was temporarily out of work may have missed two to three payments during that period. A deeper scan of the credit report during underwriting may reveal an opportunity to lend to a person rebounding from financial difficulties not yet reflected by their credit score. For example, this individual may have missed two credit card payments but hasn’t missed a mortgage or car payment in 20 years. A score is just one dimension to the story, but trended insights can shine a light on who best to lend to in the future. Conclusion: With the proper tools and training, your retail team can get more out of the basic credit report and find additional opportunities to deepen customer relationships while maintaining your desired risk profile. The credit report can be a workhorse for your team, so why not leverage it for more business. Note: The information above outlines several uses for a credit report.  Separate credit reports are required for each use with the intended permissible purpose. Ancin Cooley is principal with Synergy Bank Consulting, a national credit risk management and strategic planning firm. Synergy provides a rangeof risk management services to financial institutions, which include loan reviews, IT audits, internal audits, and regulatory compliance reviews. As principal, Ancin manages a growing portfolio of clients throughout the United States.

As temperatures climb, so do automotive sales, which often reach annual highs during the warmest months of the year. 

Fraud Solutions Made Easy — solving new fraud problems by Adapting Legacy Solutions 

With the summer home-buying season underway, borrowers and lenders alike can benefit from tools to speed up the loan and escrow process.

Led a session about call center authentication. After introductions and a discussion about existing call center identity authentication techniques...

Dark Web — what it is, how it’s accessed, how criminals are exploiting it to commit fraud and the human impact of the massive global cybercrime problem

False declines are often unwarranted and occur due to lack of customer information Have you ever been shopping online, excited to get your hands on the latest tech gadget, only to be hit with the all-too-common disappointment of a credit card decline? Whom did you blame? The merchant? The issuer? The card associations? The answer is probably all of the above. False declines like the situation described above provoke an onslaught of consumer emotions ranging from shock and dismay to frustration and anger. Of course, consumers aren’t the only ones negatively impacted by false declines. Many times card issuers lose their coveted “top of wallet” position and/or retailers lose revenue when customers abandon the purchase altogether. False declines are unpleasant for everyone, yet consumers struggle with this problem every day — and fraud controls are only getting tighter. How does the industry mutually resolve this growing issue? The first step is to understand why it occurs. Most false declines happen when the merchant or issuer mistakenly declines a legitimate transaction due to perceived high risk. This misperception is usually the result of the merchant or issuer not having enough information to verify the authenticity of the cardholder confidently. For example, the consumer may be a first-time customer or the purchase may be a departure from the card holder’s normal pattern of transaction activity. Research shows that lack of a holistic view and no cross-industry transaction visibility result in approximately $40 billion of e-commerce declines annually. Think about this for a minute — $40 billion in preventable lost revenue due to lack of information. Merchants’ customer information is often limited to their first-hand information and experience with consumers. To solve this growing problem, Experian® developed TrustInsight™, a real-time engine to establish trusted online relationships over time among consumers, merchants and issuers. It works by anonymously leveraging transactional information that merchants and financial institutions already have about consumers to create a crowd-sourced TrustScore™. This score allows first-time online customers to get a VIP experience rather than a brand-damaging decline. Another common challenge for merchants is measuring the scope of the false declines problem. Proactively contacting consumers, directly capturing feedback and quickly verifying transaction details to recoup potential lost sales are best practices, but merchants are often in the dark as to how many good customers are being turned away. The solution — often involving substantial operational expense — is to hold higher-risk orders for manual review rather than outright declining them. With average industry review rates nearing 30 percent of all online orders (according to the latest CyberSource Annual Fraud Benchmark Report: A Balancing Act), this growing level of review is not sustainable. This is where industry collaboration via TrustInsight™ offers such compelling value. TrustInsight can reduce the review population significantly by leveraging consumers’ transactions across the network to establish trust between individuals and their devices to automate more approvals. Thankfully, the industry is taking note. There is a groundswell of focus on the issue of false declines and their impact on good customers. Traditional, operations-heavy approaches are no longer sufficient. A trust-based industry-consortium approach is essential to enhance visibility, recognize consumers and their devices holistically, and ensure that consumers are impacted only when a real threat is present.

James W. Paulsen, Chief Investment Strategist for Wells Capital Management, kicked off the second day of Experian’s Vision 2016, sharing his perspective on the state of the economy and what the future holds for consumers and businesses alike. Paulsen joked this has been “the most successful, disappointing recovery we’ve ever had.” While media and lenders project fear for a coming recession, Paulsen stated it is important to note we are in the 8th year of recovery in the U.S., the third longest in U.S. history, with all signs pointing to this recovery extending for years to come. Based on his indicators – leverage, restored household strength, housing, capital spending and better global growth – there is still capacity to grow. He places recession risk at 20 to 25 percent – and only quotes those numbers due the length of the recovery thus far. “What is the fascination with crisis policies when there is no crisis,” asks Paulsen. “I think we have a good chance of being in the longest recovery in U.S. history.” Other noteworthy topics of the day: Fraud prevention Fraud prevention continues to be a hot topic at this year’s conference. Whether it’s looking at current fraud challenges, such as call-center fraud, or looking to future-proof an organization’s fraud prevention techniques, the need for flexible and innovative strategies is clear. With fraudsters being quick, and regularly ahead of the technology fighting them, the need to easily implement new tools is fundamental for you to protect your businesses and customers. More on Regulatory The Military Lending Act has been enhanced over the past year to strengthen protections for military consumers, and lenders must be ready to meet updated regulations by fall 2016. With 1.46 million active personnel in the U.S., all lenders are working to update processes and documentation associated with how they serve this audience. Alternative Data What is it? How can it be used? And most importantly, can this data predict a consumer’s credit worthiness? Experian is an advocate for getting more entities to report different types of credit data including utility payments, mobile phone data, rental payments and cable payments. Additionally, alternative data can be sourced from prepaid data, liquid assets, full file public records, DDA data, bill payment, check cashing, education data, payroll data and subscription data. Collectively, lenders desire to assess someone’s stability, ability to pay and willingness to repay. If alternative data can answer those questions, it should be considered in order to score more of the U.S. population. Financial Health The Center for Financial Services Innovation revealed insights into the state of American’s financial health. According to a study they conducted, 57 percent of Americans are not financially healthy, which equates to about 138 million people. As they continue to place more metrics around defining financial health, the center has landed on four components: how people plan, spend, save and borrow. And if you think income is a primary factor, think again. One-third of Americans making more than $60k a year are not healthy, while one-third making less than $60k a year are healthy. --- Final Vision 2016 breakouts, as well as a keynote from entertainer Jay Leno, will be delivered on Wednesday.

It’s impossible to capture all of the insights and learnings of 36 breakout sessions and several keynote addresses in one post, but let’s summarize a few of the highlights from the first day of Vision 2016. 1. Who better to speak about the state of our country, specifically some of the threats we are facing than Leon Panetta, former Secretary of Defense and Director of the CIA. While we are at a critical crossroads in the United States, there is room for optimism and his hope that we can be an America in Renaissance. 2. Alex Lintner, Experian President of Consumer Information Services, conveyed how the consumer world has evolved, in large part due to technology: 67 percent of consumers made purchases across multiple channels in the last six months. More than 88M U.S. consumers use their smartphone to do some form of banking. 68 percent of Millennials believe within five years the way we access money will be totally different. 3. Peter Renton of Lend Academy spoke on the future of Online Marketplace Lending, revealing: Banks are recognizing that this industry provides them with a great opportunity and many are partnering with Online Marketplace Lenders to enter the space. Millennials are not the largest consumers in this space today, but they will be in the future. Sustained growth will be key for this industry. The largest platforms have everything they need in place to endure – even through an economic downturn.In other words, Online Marketplace Lenders are here to stay. 4. Tom King, Experian’s Chief Information Security Officer, addressed the crowds on how the world of information security is growing increasingly complex. There are 1.9 million records compromised every day, and sadly that number is expected to rise. What can businesses do?  “We need to make it easier to make the bad guys go somewhere else,” says King. 5. Look at how the housing market has changed from just a few years ago: Inventory continues to be extraordinarily lean. Why? New home building continues to run at recession levels. And, 8.5 percent of homeowners are still underwater on their mortgage, preventing them from placing it on the market. In the world of single-family home originations, 2016 projections show that there will be more purchases, less refinancing and less volume. We may see further growth in HELOC’s. With a dwindling number of mortgages benefiting from refinancing, and with rising interest rates, a HELOC may potentially be the cheapest and easiest way to tap equity. 6. As organizations balance business needs with increasing fraud threats, the important thing to remember is that the customer experience will trump everything else. Top fraud threats in 2015 included: Card Not Present (CNP) First Party Fraud/Synthetic ID Application Fraud Mobile Payment/Deposit Fraud Cross-Channel FraudSo what do the experts believe is essential to fraud prevention in the future? Big Data with smart analytics. 7. The need for Identity Relationship Management can be seen by the dichotomy of “99 percent of companies think having a clear picture of their customers is important for their business; yet only 24 percent actually think they achieve this ideal.” Connecting identities throughout the customer lifecycle is critical to bridging this gap. 8. New technologies continue to bring new challenges to fraud prevention. We’ve seen that post-EMV fraud is moving “upstream” as fraudsters: Apply for new credit cards using stolen ID’s. Provision stolen cards into mobile wallet. Gain access to accounts to make purchases.Then, fraudsters are open to use these new cards everywhere. 9. Several speakers addressed the ever-changing regulatory environment. The Telephone Consumer Protection Act (TCPA) litigation is up 30 percent since the last year. Regulators are increasingly taking notice of Online Marketplace Lenders. It’s critical to consider regulatory requirements when building risk models and implementing business policies. 10. Hispanics and Millennials are a force to be reckoned with, so pay attention: Millennials will be 81 million strong by 2036, and Hispanics are projected to be 133 million strong by 2050. Significant factors for home purchase likelihood for both groups include VantageScore® credit score, age, student debt, credit card debt, auto loans, income, marital status and housing prices. More great insights from Vision coming your way tomorrow!          

Four Experian employees reflect on financial lessons and challenges learned during their time served in the military.

Credit invisibles often want access to credit, but are not easily scored via tradition credit models, and thus fall through the cracks. So how can lenders grow this population?

Fraudsters combine and manipulate real consumer data with fictitious demographic information to create a “new” or “synthetic” identities.

The numbers are staggering: more than $1.2 trillion in outstanding student loan debt, 40 million borrowers, and an average balance of $29,000. In fact, a recent Experian study revealed consumer debt is decreasing in every major consumer lending category with the exception of student loans. Student loans have increased by 84 percent since the recession (from 2008 to 2014) and surpassed home equity loans, home-equity lines of credit (HELOC), credit card debt and automotive debt. While the student loan issue has been looming for years, the magnitude is now taking center stage with each 2016 presidential candidate weighing in on solutions. In an effort to provide deeper insights into the student debt universe, Experian’s Kelley Motley and Holly Deason will share a new analysis at Vision 2016 in a session titled, Get educated – a study in the student lending marketplace. They will be joined by Gordon Cameron, executive vice president of PNC. Among the findings they will share include a snapshot of consumers with student loans from three time periods – Pre-recession (December 2007), Recession (December 2009) and Post-Recession/Current (December 2015). At each of these time periods, they will reveal trends around outstanding debt, delinquencies, originations, and also a compare how consumers with student loans rank when it comes to Vantage Score distribution. Finally, their data will explore opportunities for consolidation, showing segments that might be best suited for  receiving offers from financial institutions based on Vantage Score, debt and total number of trades. Click here to learn more about Vision 2016 and the session on student loans.