Tag: financial services

In today’s rapidly changing economic environment, the looming question of how to reduce portfolio volatility while still meeting consumers' needs is on every lender’s mind. So, how can you better asses risk for unbanked consumers and prime borrowers? Look no further than alternative credit data. In the face of severe financial stress, when borrowers are increasingly being shut out of traditional credit offerings, the adoption of alternative credit data allows lenders to more closely evaluate consumer’s creditworthiness and reduce their credit risk exposure without unnecessarily impacting insensitive or more “resilient” consumers. What is alternative credit data? Millions of consumers lack credit history or have difficulty obtaining credit from mainstream financial institutions. To ease access to credit for “invisible” and subprime consumers, financial institutions have sought ways to both extend and improve the methods by which they evaluate borrowers’ risk. This initiative to effectively score more consumers has involved the use of alternative credit data.1 Alternative credit data is FCRA-regulated data that is typically not included in a traditional credit report and helps lenders paint a fuller picture of a consumer, so borrowers can get better access to the financial services they need and deserve. How can it help during a downturn? The economic environment impacts consumers’ financial behavior. And with more than 100 million consumers already restricted by the traditional scoring methods used today, lenders need to look beyond traditional credit information to make more informed decisions. By pulling in alternative credit data, such as consumer-permissioned data, rental payments and full-file public records, lenders can gain a holistic view of current and future customers. These insights help them expand their credit universe, identify potential fraud and determine an applicant’s ability to pay all while mitigating risk. Plus, many consumers are happy to share additional financial information. According to Experian research, 58% say that having the ability to contribute positive payment history to their credit files makes them feel more empowered. Likewise, many lenders are already expanding their sources for insights, with 65% using information beyond traditional credit report data in their current lending processes to make better decisions. By better assessing risk at the onset of the loan decisioning process, lenders can minimize credit losses while driving greater access to credit for consumers. Learn more 1When we refer to “Alternative Credit Data,” this refers to the use of alternative data and its appropriate use in consumer credit lending decisions, as regulated by the Fair Credit Reporting Act. Hence, the term “Expanded FCRA Data” may also apply in this instance and both can be used interchangeably.

Originally posted by Experian Global News blog At Experian, we have an unwavering commitment to helping consumers and clients manage through this unprecedented period. We are actively working with consumers, lenders, lawmakers and regulators to help mitigate the potential impact on credit scores during times of financial hardship. In response to the urgent and rapid changes associated with COVID-19, we are accelerating and enhancing our financial education programming to help consumers maintain good credit and gain access to the financial services they need. This is in addition to processes and tools the industry has in place to help lenders accommodate situations where consumers are affected by circumstances beyond their control. These processes will be extended to those experiencing financial hardship as a result of COVID-19. As the Consumer’s Credit Bureau, our commitment at Experian is to inform, guide and protect our consumers and customers during uncertain times. With expected delays in bill payments, unprecedented layoffs, hiring freezes and related hardships, we are here to help consumers in understanding how the credit reporting system and personal finance overall will move forward in this landscape. One way we’re doing this is inviting everyone to join our special eight-week series of #CreditChat conversations surrounding COVID-19 on Wednesdays at 3 p.m. ET on Twitter. Our weekly #CreditChat program started in 2012 to help the community learn about credit and important personal finance topics (e.g. saving money, paying down debt, improving credit scores). The next several #CreditChats will be dedicated to discussing ways to manage finances and credit during the pandemic. Topics of these #CreditChats will include methods and strategies for bill repayment, paying down debt, emergency financial assistance and preparing for retirement during COVID-19. “As the consumer’s credit bureau, we are committed to working with consumers, lenders and the financial community during and following the impacts of COVID-19,” says Craig Boundy, Chief Executive Officer of Experian North America. “As part of our nation’s new reality, we are planning for options to help mitigate the potential impact on credit scores due to financial hardships seen nationwide. Our #CreditChat series and supporting resources serve as one of several informational touchpoints with consumers moving forward.” Being fully committed to helping consumers and lenders during this unprecedented period, we’ve created a dedicated blog page, “COVID-19 and Your Credit Report,” with ongoing and updated information on how COVID-19 may impact consumers’ creditworthiness and – ultimately – what people should do to preserve it. The blog will be updated with relevant news as we announce new solutions and tactics. Additionally, our “Ask Experian” blog invites consumers to explore immediate and evolving resources on our COVID-19 Updates page. In addition to this guidance, and with consumer confidence in the economy expected to decline, we will be listening closely to the expert voices in our Consumer Council, a group of leaders from organizations committed to helping consumers on their financial journey. We established a Consumer Council in 2009 to strengthen our relationships and to initiate a dialogue among Experian and consumer advocacy groups, industry experts, academics and other key stakeholders. This is in addition to ongoing collaboration with our regulators. Additionally, our Experian Education Ambassador program enables hundreds of employee volunteers to serve as ambassadors sharing helpful information with consumers, community groups and others. The goal is to help the communities we serve across North America, providing the knowledge consumers need to better manage their credit, protect themselves from fraud and identity theft and lead more successful, financially healthy lives. COVID-19 has impacted all industries and individuals from all walks of life. We want our community to know we are right there with you. Learn more about our weekly #CreditChat and upcoming schedule here. Learn more

There are more than 100 million people in the United States who don’t have a fair chance at access to credit. These people are forced to rely on high-interest credit cards and loans for things most of us take for granted, like financing a family car or getting an apartment. At Experian, we have a fundamental mission to be a champion for the consumer. Our commitment to increasing financial inclusion and helping consumers gain access to the financial services they need is one of the reasons we have been selected as a Fintech Breakthrough Award winner for the third consecutive year. The Fintech Breakthrough Awards is the premier awards program founded to recognize the fintech innovators, leaders and visionaries from around the world. The 2020 Fintech Breakthrough Award program attracted more than 3,750 nominations from across the globe. Last year, Experian took home the award for Best Overall Analytics Platform for our Ascend Analytical Sandbox™, a first-to-market analytics environment that promised to move companies beyond just business intelligence and data visualization to data insights and answers they could use. The year prior, Experian won the Consumer Lending Innovation Award for our Text for Credit™ solution, a powerful tool for providing consumers the convenience to securely bypass the standard-length ‘pen & paper’ or keystroke intensive credit application process while helping lenders make smart, fraud protected lending decisions. This year, we are excited to announce that Experian has been selected once again as a winner in the Consumer Lending Innovation category for Experian Boost™. Experian Boost – with direct, active consumer consent – scans eligible accounts for ‘boostable’ positive payment data (e.g., utility and telecom payments) and provides the means for consumers to add that data to their Experian credit reports. Now, for the very first time, millions of consumers benefit from payments they’ve been making for years but were never reflected on their credit reports. Since launching in March 2019, cumulatively, more than 18 million points have been added to FICO® Scores via Experian Boost. Two-thirds of consumers who completed the Experian Boost process increased their FICO Score and among these, the average score increase has been more than 13 points, and 12% have moved up in credit score category. “Like many fintechs, our goal is to help more consumers gain access to the financial services they need,” said Alex Lintner, Group President of Experian Consumer Information Services. “Experian Boost is an example of our mission brought to life. It is the first and only service to truly put consumers in control of their credit. We’re proud of this recognition from Fintech Breakthrough and the momentum we’ve seen with Experian Boost to date.” Contributing consumer payment history to an Experian credit file allows fintech lenders to make more informed decisions when examining prospective borrowers. Only positive payment histories are aggregated through the platform and consumers can remove the new data at any time. There is no limit to how many times one can use Experian Boost to contribute new data. For more information, visit Experian.com/Boost.  

Fintech is quickly changing. The word itself is synonymous with constant innovation, agile technology structures and being on the cusp of the future of finance. The rapid rate at which fintech challengers are becoming established, is in turn, allowing for greater consumer awareness and adoption of fintech platforms. It would be easy to assume that fintech adoption is predominately driven by millennials. However, according to a recent market trend analysis by Experian, adoption is happening across multiple generational segments. That said, it’s important to note the generational segments that represent the largest adoption rates and growth opportunities for fintechs. Here are a few key stats: Members of Gen Y (between 24-37 years old) account for 34.9% of all fintech personal loans, compared to just 24.9% for traditional financial institutions. A similar trend is seen for Gen Z (between 18-23 years old). This group accounts for 5% of all fintech personal loans as compared to 3.1% for traditional Let’s take a closer look at these generational segments… Gen Y represents approximately 19% of the U.S. population. These consumers, often referred to as “millennials,” can be described as digital-centric, raised on the web and luxury shoppers. In total, millennials spend about $600 billion a year. This group has shown a strong desire to improve their credit standing and are continuously increasing their credit utilization. Gen Z represents approximately 26% of the U.S. population. These consumers can be described as digital centric, raised on the social web and frugal. The Gen Z credit universe is growing, presenting a large opportunity to lenders, as the youngest Gen Zers become credit eligible and the oldest start to enter homeownership. What about the underbanked as a fintech opportunity? The CFPB estimates that up to 45 million people, or 24.2 million households, are “thin-filed” or underbanked, meaning they manage their finances through cash transactions and not through financial services such as checking and savings accounts, credit cards or loans. According to Angela Strange, a general partner at Andreessen Horowitz, traditional financial institutions have done a poor job at serving underbanked consumers affordable products. This has, in turn, created a trillion-dollar market opportunity for fintechs offering low-cost, high-tech financial services. Why does all this matter? Fintechs have a unique opportunity to engage, nurture and grow these market segments early on. As the fintech marketplace heats up and the overall economy begins to soften, diversifying revenue streams, building loyalty and tapping into new markets is a strategic move. But what are the best practices for fintechs looking to build trust, engage and retain these unique consumer groups? Join us for a live webinar on November 12 at 10:00 a.m. PST to hear Experian experts discuss financial inclusion trends shaping the fintech industry and tactical tips to create, convert and extend the value of your ideal customers. Register now

Retailers are already starting to display their Christmas decorations in stores and it’s only early November. Some might think they are putting the cart ahead of the horse, but as I see this happening, I’m reminded of the quote by the New York Yankee’s Yogi Berra who famously said, “It gets late early out there.” It may never be too early to get ready for the next big thing, especially when what’s coming might set the course for years to come. As 2019 comes to an end and we prepare for the excitement and challenges of a new decade, the same can be true for all of us working in the lending and credit space, especially when it comes to how we will approach the use of alternative data in the next decade. Over the last year, alternative data has been a hot topic of discussion. If you typed “alternative data and credit” into a Google search today, you would get more than 200 million results. That’s a lot of conversations, but while nearly everyone seems to be talking about alternative data, we may not have a clear view of how alternative data will be used in the credit economy. How we approach the use of alternative data in the coming decade is going to be one of the most important decisions the lending industry makes. Inaction is not an option, and the time for testing new approaches is starting to run out – as Yogi said, it’s getting late early. And here’s why: millennials. We already know that millennials tend to make up a significant percentage of consumers with so-called “thin-file” credit reports. They “grew up” during the Great Recession and that has had a profound impact on their financial behavior. Unlike their parents, they tend to have only one or two credit cards, they keep a majority of their savings in cash and, in general, they distrust financial institutions. However, they currently account for more than 21 percent of discretionary spend in the U.S. economy, and that percentage is going to expand exponentially in the coming decade. The recession fundamentally changed how lending happens, resulting in more regulation and a snowball effect of other economic challenges. As a result, millennials must work harder to catch up financially and are putting off major life milestones that past generations have historically done earlier in life, such as homeownership. They more often choose to rent and, while they pay their bills, rent and other factors such as utility and phone bill payments are traditionally not calculated in credit scores, ultimately leaving this generation thin-filed or worse, credit invisible. This is not a sustainable scenario as we enter the next decade. One of the biggest market dynamics we can expect to see over the next decade is consumer control. Consumers, especially millennials, want to be in the driver’s seat of their “credit journey” and play an active role in improving their financial situations. We are seeing a greater openness to providing data, which in turn enables lenders to make more informed decisions. This change is disrupting the status quo and bringing new, innovative solutions to the table. At Experian, we have been testing how advanced analytics and machine learning can help accelerate the use of alternative data in credit and lending decisions. And we continue to work to make the process of analyzing this data as simple as possible, making it available to all lenders in all verticals. To help credit invisible and thin-file consumers gain access to fair and affordable credit, we’ve recently announced Experian Lift, a new suite of credit score products that combines exclusive traditional credit, alternative credit and trended data assets to create a more holistic picture of consumer creditworthiness that will be available to lenders in early 2020. This new Experian credit score may improve access to credit for more than 40 million credit invisibles. There are more than 100 million consumers who are restricted by the traditional scoring methods used today. Experian Lift is another step in our commitment to helping improve financial health of consumers everywhere and empowers lenders to identify consumers who may otherwise be excluded from the traditional credit ecosystem. This isn’t just a trend in the United States. Brazil is using positive data to help drive financial inclusion, as are others around the world. As I said, it’s getting late early. Things are moving fast. Already we are seeing technology companies playing a bigger role in the push for alternative data – often powered by fintech startups. At the same time, there also has been a strong uptick in tech companies entering the banking space. Have you signed up for your Apple credit card yet? It will take all of 15 seconds to apply, and that’s expected to continue over the next decade. All of this is changing how the lending and credit industry must approach decision making, while also creating real-time frictionless experiences that empower the consumer. We saw this with the launch of Experian Boost earlier this year. The results speak for themselves: hundreds of thousands of previously thin-file consumers have seen their credit scores instantly increase. We have also empowered millions of consumers to get more control of their credit by using Experian Boost to contribute new, positive phone, cable and utility payment histories. Through Experian Boost, we’re empowering consumers to play an active role in building their credit histories. And, with Experian Lift, we’re empowering lenders to identify consumers who may otherwise be excluded from the traditional credit ecosystem. That’s game-changing. Disruptions like Experian Boost and newly announced Experian Lift are going to define the coming decade in credit and lending. Our industry needs to be ready because while it may seem early, it’s getting late.

It seems like artificial intelligence (AI) has been scaring the general public for years – think Terminator and SkyNet. It’s been a topic that’s all the more confounding and downright worrisome to financial institutions. But for the 30% of financial institutions that have successfully deployed AI into their operations, according to Deloitte, the results have been anything but intimidating. Not only are they seeing improved performance but also a more enhanced, positive customer experience and ultimately strong financial returns. For the 70% of financial institutions who haven’t started, are just beginning their journey or are in the middle of implementing AI into their operations, the task can be daunting. AI, machine learning, deep learning, neural networks—what do they all mean? How do they apply to you and how can they be useful to your business? It’s important to demystify the technology and explain how it can present opportunities to the financial industry as a whole. While AI seems to have only crept into mainstream culture and business vernacular in the last decade, it was first coined by John McCarthy in 1956. A researcher at Dartmouth, McCarthy thought that any aspect of learning or intelligence could be taught to a machine. Broadly, AI can be defined as a machine’s ability to perform cognitive functions we associate with humans, i.e. interacting with an environment, perceiving, learning and solving problems. Machine learning vs. AI Machine learning is not the same thing as AI. Machine learning is the application of systems or algorithms to AI to complete various tasks or solve problems. Machine learning algorithms can process data inputs and new experiences to detect patterns and learn how to make the best predictions and recommendations based on that learning, without explicit programming or directives. Moreover, the algorithms can take that learning and adapt and evolve responses and recommendations based on new inputs to improve performance over time. These algorithms provide organizations with a more efficient path to leveraging advanced analytics. Descriptive, predictive, and prescriptive analytics vary in complexity, sophistication, and their resulting capability. In simplistic terms, descriptive algorithms describe what happened, predictive algorithms anticipate what will happen, and prescriptive algorithms can provide recommendations on what to do based on set goals. The last two are the focus of machine learning initiatives used today. Machine learning components - supervised, unsupervised and reinforcement learning Machine learning can be broken down further into three main categories, in order of complexity: supervised, unsupervised and reinforcement learning. As the name might suggest, supervised learning involves human interaction, where data is loaded and defined and the relationship to inputs and outputs is defined. The algorithm is trained to find the relationship of the input data to the output variable. Once it delivers accurately, training is complete, and the algorithm is then applied to new data. In financial services, supervised learning algorithms have a litany of uses, from predicting likelihood of loan repayment to detecting customer churn. With unsupervised learning, there is no human engagement or defined output variable. The algorithm takes the input data and structures it by grouping it based on similar characteristics or behaviors, without a defined output variable. Unsupervised learning models (like K-means and hierarchical clustering) can be used to better segment or group customers by common characteristics, i.e. age, annual income or card loyalty program. Reinforcement learning allows the algorithm more autonomy in the environment. The algorithm learns to perform a task, i.e. optimizing a credit portfolio strategy, by trying to maximize available rewards. It makes decisions and receives a reward if those actions bring the machine closer to achieving the total available rewards, i.e. the highest acquisition rate in a customer category. Over time, the algorithm optimizes itself by correcting actions for the best outcomes. Even more sophisticated, deep learning is a category of machine learning that involves much more complex architecture where software-based calculators (called neurons) are layered together in a network, called a neural network. This framework allows for much broader, complex data ingestion where each layer of the neural network can learn progressively more complex elements of the data. Object classification is a classic example, where the machine ‘learns’ what a duck looks like and then is able to automatically identify and group images of ducks. As you might imagine, deep learning models have proved to be much more efficient and accurate at facial and voice recognition than traditional machine learning methods. Whether your financial institution is already seeing the returns for its AI transformation or is one of the 61% of companies investing in this data initiative in 2019, having a clear picture of what is available and how it can impact your business is imperative. How do you see AI and machine learning impacting your customer acquisition, underwriting and overall customer experience?

In today’s age of digital transformation, consumers have easy access to a variety of innovative financial products and services. From lending to payments to wealth management and more, there is no shortage in the breadth of financial products gaining popularity with consumers. But one market segment in particular – unsecured personal loans – has grown exceptionally fast. According to a recent Experian study, personal loan originations have increased 97% over the past four years, with fintech share rapidly increasing from 22.4% of total loans originated to 49.4%. Arguably, the rapid acceleration in personal loans is heavily driven by the rise in digital-first lending options, which have grown in popularity due to fintech challengers. Fintechs have earned their position in the market by leveraging data, advanced analytics and technology to disrupt existing financial models. Meanwhile, traditional financial institutions (FIs) have taken notice and are beginning to adopt some of the same methods and alternative credit approaches. With this evolution of technology fused with financial services, how are fintechs faring against traditional FIs? The below infographic uncovers industry trends and key metrics in unsecured personal installment loans: Still curious? Click here to download our latest eBook, which further uncovers emerging trends in personal loans through side-by-side comparisons of fintech and traditional FI market share, portfolio composition, customer profiles and more. Download now  

Today is National Fintech Day – a day that recognizes the ever-important role that fintech companies play in revolutionizing the customer experience and altering the financial services landscape. Fintech. The word itself has become synonymous with constant innovation, agile technology structures and being on the cusp of the future of finance. Fintech challengers are disrupting existing financial models by leveraging data, advanced analytics and technology – both inspiring traditional financial institutions in their digital transformation strategies and giving consumers access to a variety of innovative financial products and services. But to us at Experian, National Fintech Day means more than just financial disruption. National Fintech Day represents the partnerships we have carefully fostered with our fintech clients to drive financial inclusion for millions of people around the globe and provide consumers with greater control and more opportunities to access the quality credit they deserve. “We are actively seeking out unresolved problems and creating products and technologies that will help transform the way businesses operate and consumers thrive in our society. But we know we can’t do it alone,” said Experian North American CEO, Craig Boundy in a recent blog article on Experian’s fintech partnerships. “That’s why over the last year, we have built out an entire team of account executives and other support staff that are fully dedicated to developing and supporting partnerships with leading fintech companies. We’ve made significant strides that will help us pave the way for the next generation of lending while improving the financial health of people around the world.” At Experian, we understand the challenges fintechs face – and our real-world solutions help fintech clients stay ahead of constantly changing market conditions and demands. “Experian’s pace of innovation is very impressive – we are helping both lenders and consumers by delivering technological solutions that make the lending ecosystem more efficient,” said Experian Senior Account Executive Warren Linde. “Financial technology is arguably the most important type of tech out there, it is an honor to be a part of Experian’s fintech team and help to create a better tomorrow.” If you’d like to learn more about Experian’s fintech solutions, visit us at Experian.com/Fintech.

Today, Experian and Oliver Wyman announced the launch of Ascend CECL ForecasterTM, a solution built to help financial institutions of all sizes more quickly and accurately forecast lifetime credit losses. The Financial Accounting Standards Board’s current expected credit loss (CECL) model has been a hot discussion topic throughout the financial services industry - first when it was announced (and considered one of the most significant accounting changes in decades), and most recently with the FASB’s delay for implementation for smaller lenders. As the compliance deadlines approach, Experian and Oliver Wyman have joined forces to help financial institutions adhere their loan portfolios to the new guidelines. Delivered through Experian’s Ascend Technology PlatformTM, Ascend CECL Forecaster is a new user-friendly, web-based application that combines Experian’s vast loan-level data and Premier AttributesSM, third-party macroeconomic data, valuation data and Oliver Wyman’s industry-leading CECL modeling methodology to accurately calculate potential losses over the life of a loan. “Ascend CECL Forecaster is a critical capability needed urgently by all lending and financial institutions,” said Ash Gupta, a Senior Advisor to Oliver Wyman and former Chief Risk Officer for American Express, in a press release. “The collaboration between Experian and Oliver Wyman allows a frictionless synthesis of industry data, capabilities and experience to serve customers in both first and second line of defense.” The premise behind the model, which will need access to more data than that used to calculate reserves under the incurred loss model, Allowance for Loan and Lease Losses (ALLL), is for financial institutions to estimate the expected loss over the life of a loan by using historical information, current conditions and reasonable forecasts. Built using advanced machine learning and statistical techniques, the web-based application maximizes the more than 15 years of historical credit data spanning previous economic cycles to help financial institutions gauge loan portfolio performance under various scenarios. Ascend CECL Forecaster does not require additional data nor does it require a secondary integration from the financial institution and enables organizations to more quickly test their portfolios under different economic factors. Moreover, financial institutions receive guidance from industry experts to assist with implementation and strategy. Additionally, Experian and Oliver Wyman will host a webinar to help financial institutions better understand and prepare for the upcoming CECL standards. Register today! Read the Press Release Register for Webinar

Preparation is key – whether you’re an amateur/professional sports, free-soloing up El Capitan, or business contingency planning as part of a recession readiness strategy. It’s not so much predicting when events will occur, or trying to foresee and pivot for every possible outcome, but rather, acting now so that your business can act faster and smarter in the future. There are certain priorities that have come to be associated with what are widely accepted as the three environments the economy can sustain at any one time: As with recessions throughout the country’s history, those periods have often been characterized by layoffs, charge-offs, delinquencies, and other behaviors as the economy turns to a counter-cycle environment. Rather than wait to implement reactive strategies , the time to manage accounts, plan, stress test and implement contingency plans for when the next economic correction comes, is now. While economists and financial services industry experts argue over when a recession will hit and how severe its implications may be (in comparison with the Great Recession of 2008), there’s a  need to start tactical business discussions now. Even in the face of a strong economy, that has seen high employment levels and increased spending, 45% of Americans (112.5 million) say they do not have enough savings to cover at least three months of living expenses, according to a 2018 survey by the Center for Financial Services Innovation. Regardless of the economic environment – pro-cycle, counter-cycle, and cycle-neutral – those statistics paint an alarming picture of consumers' financial health as a whole. These are four crucial considerations you should be taking now: Create individualized treatments while reducing manual interactions Meet the growing expectation for digital consumer self-service Understand your customer to ensure fair treatment React quickly and effectively to market changes While it may not be on the immediate horizon just yet, it’s important to prepare. For more information, including portfolio mixes, collections considerations and macroeconomic trends, download our latest white paper on recession readiness. Download white paper now  

Financial institutions preparing for the launch of the Financial Accounting Standard Board’s (FASB) new current expected credit loss model, or CECL, may have concerns when it comes to preparedness, implications and overall impact. Gavin Harding, Experian’s Senior Business Consultant and Jose Tagunicar, Director of Product Management, tackled some of the tough questions posed by the new accounting standard. Check out what they had to say: Q: How can financial institutions begin the CECL transition process? JT: To prepare for the CECL transition process, companies should conduct an operational readiness review, which includes: Analyzing your data for existing gaps. Determining important milestones and preparing for implementation with a detailed roadmap. Running different loss methods to compare results. Once losses are calculated, you’ll want to select the best methodology based on your portfolio. Q: What is required to comply with CECL? GH: Complying with CECL may require financial institutions to gather, store and calculate more data than before. To satisfy CECL requirements, financial institutions will need to focus on end-to-end management, determine estimation approaches that will produce reasonable and supportable forecasts and automate their technology and platforms. Additionally, well-documented CECL estimations will require integrated workflows and incremental governance. Q: What should organizations look for in a partner that assists in measuring expected credit losses under CECL? GH: It’s expected that many financial institutions will use third-party vendors to help them implement CECL. Third-party solutions can help institutions prepare for the organization and operation implications by developing an effective data strategy plan and quantifying the impact of various forecasted conditions. The right third-party partner will deliver an integrated framework that empowers clients to optimize their data, enhance their modeling expertise and ensure policies and procedures supporting model governance are regulatory compliant. Q: What is CECL’s impact on financial institutions? How does the impact for credit unions/smaller lenders differ (if at all)? GH: CECL will have a significant effect on financial institutions’ accounting, modeling and forecasting. It also heavily impacts their allowance for credit losses and financial statements. Financial institutions must educate their investors and shareholders about how CECL-driven disclosure and reporting changes could potentially alter their bottom line. CECL’s requirements entail data that most credit unions and smaller lenders haven’t been actively storing and saving, leaving them with historical data that may not have been recorded or will be inaccessible when it’s needed for a CECL calculation. Q: How can Experian help with CECL compliance? JT: At Experian, we have one simple goal in mind when it comes to CECL compliance: how can we make it easier for our clients? Our Ascend CECL ForecasterTM, in partnership with Oliver Wyman, allows our clients to create CECL forecasts in a fraction of the time it normally takes, using a simple, configurable application that accurately predicts expected losses. The Ascend CECL Forecaster enables you to: Fulfill data requirements: We don’t ask you to gather, prepare or submit any data. The application is comprised of Experian’s extensive historical data, delivered via the Ascend Technology PlatformTM, economic data from Oxford Economics, as well as the auto and home valuation data needed to generate CECL forecasts for each unsecured and secured lending product in your portfolio. Leverage innovative technology: The application uses advanced machine learning models built on 15 years of industry-leading credit data using high-quality Oliver Wyman loan level models. Simplify processes: One of the biggest challenges our clients face is the amount of time and analytical effort it takes to create one CECL forecast, much less several that can be compared for optimal results. With the Ascend CECL Forecaster, creating a forecast is a simple process that can be delivered quickly and accurately. Q: What are immediate next steps? JT: As mentioned, complying with CECL may require you to gather, store and calculate more data than before. Therefore, it’s important that companies act now to better prepare. Immediate next steps include: Establishing your loss forecast methodology: CECL will require a new methodology, making it essential to take advantage of advanced statistical techniques and third-party solutions. Making additional reserves available: It’s imperative to understand how CECL impacts both revenue and profit. According to some estimates, banks will need to increase their reserves by up to 50% to comply with CECL requirements. Preparing your board and investors: Make sure key stakeholders are aware of the potential costs and profit impacts that these changes will have on your bottom line. Speak with an expert

What is CECL? CECL (Current Expected Credit Loss) is a new credit loss model, to be leveraged by financial institutions, that estimates the expected loss over the life of a loan by using historical information, current conditions and reasonable forecasts. According to AccountingToday, CECL is considered one of the most significant accounting changes in decades to affect entities that borrow and lend money. To comply with CECL by the assigned deadline, financial institutions will need to access much more data than they’re currently using to calculate their reserves under the incurred loss model, Allowance for Loan and Lease Losses (ALLL). How does it impact your business? CECL introduces uncertainty into accounting and growth calculations, as it represents a significant change in the way credit losses are currently estimated. The new standard allows financial institutions to calculate allowances in a variety of ways, including discounted cash flow, loss rates, roll-rates and probability of default analyses. “Large banks with historically good loss performance are projecting increased reserve requirements in the billions of dollars,” says Experian Advisory Services Senior Business Consultant, Gavin Harding. Here are a few changes that you should expect: Larger allowances will be required for most products As allowances will increase, pricing of the products will change to reflect higher capital cost Losses modeling will change, impacting both data collection and modeling methodology There will be a lower return on equity, especially in products with a longer life expectancy How can you prepare? “CECL compliance is a journey, rather than a destination,” says Gavin. “The key is to develop a thoughtful, data-driven approach that is tested and refined over time.” Financial institutions who start preparing for CECL now will ultimately set their organizations up for success. Here are a few ways to begin to assess your readiness: Create a roadmap and initiative prioritization plan Calculate the impact of CECL on your bottom line Run altered scenarios based on new lending policy and credit decision rules Understand the impact CECL will have on your profitability Evaluate current portfolios based on CECL methodology Run different loss methods and compare results Additionally, there is required data to capture, including quarterly or monthly loan-level account performance metrics, multiple year data based on loan product type and historical data for the life of the loan. How much time do you have? Like most accounting standards, CECL has different effective dates based on the type of reporting entity. Public business entities that file financial statements with the Security and Exchange Commission will have to comply by 2020, non-public entity banks must comply by 2022 and non-SEC registered companies have until 2023 to adopt the new standard. How can we help: Complying with CECL may require you to gather, store and calculate more data than before. Experian can help you comply with CECL guidelines including data needs, consulting and loan loss calculation. Experian industry experts will help update your current strategies and establish an appropriate timeline to meet compliance dates. Leveraging our best-in-class industry data, we will help you gain CECL compliance quickly and effectively, understand the impacts to your business and use these findings to improve overall profitability. Learn more

Do more with less. Once the mantra of the life-hacking movement, it seems to be the charge given to marketers across the globe. Reduce waste; increase conversion rates; customize messages at a customer level; and do it all faster and more efficiently (read cheaper) than you did last quarter. The marketing challenges facing all companies seem to be more pronounced for financial institutions – not surprising for an industry with a reputation for late adoption. But doing more with less is not just a catchphrase thrown around by lean-obsessed consultants, it’s a response to key changes and challenges in the market. Here are 3 of the top marketing challenges creating business problems for financial institutions today. Budget constraints and misalignment As someone charged with the marketing remit in your firm, this probably comes as no surprise to you. Marketing budgets are stagnant, if not shrinking. Based on a 2018 report from CMO Survey, marketing budgets represent just over 11% of firm expenditures, a level which has remained largely constant over the last six years.Meanwhile, budgets at many financial firms appear to be out-of-touch with today’s ever-evolving market. In this Financial Brand report, virtually no financial institution committed more than 40% of their budget to mobile marketing, a stat unchanged from the prior two years. More channels mean even more segmentation Gone are the days where a company can rely heavily on traditional media to reach targets and clients. Now more than ever, your customers have access to a compounding amount of media on a proliferating number of channels. Some examples: In 2018, the Pew Research Center found most Americans (68%) get their news from social media. Cable companies recently followed streaming services to offer seamless service and experience across TV, desktop and mobile. Apple and Disney are two of several media juggernauts who are throwing their new streaming services and networks into the ring.This level of access is driving a shift in customers’ expectations for how, when and where they consume content. They want custom messages delivered in a seamless experience across the various channels they use. Shorter campaign cycles According to a recent study by Microsoft, humans now have shorter attention spans, at 8 seconds, than goldfish at 9 seconds. This isn’t surprising considering the levels of digital reach and access your customers are presented with. But this is also forcing a shortening of content and campaign cycles in response.   Marketers are now expected to plan, launch and analyze engaging campaigns to meet and stay ahead of customer need and expectation. Ironically, while there’s an intentional shortening of campaign cycles, there’s also a corporate focus to prolong and grow the customer relationship. It’s clear, competing in today’s world requires transforming your organization to address rapidly increasing complexity while containing costs. Competing against stagnant marketing budgets, proliferating media channels and shorter campaign cycles while delivering results is a formidable task, especially if your financial institution is not effectively leveraging data and analytics as differentiators. CMOs and their marketing teams must invest in new technologies and revisit product and channel strategies that reflect the expectations of their customers. How is your bank or credit union responding to these financial marketing challenges? Download Customer Acquisition eBook

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With delinquencies on the rise, financial institutions are looking for new tools to evaluate and improve the financial lives of customers and members. As the consumer’s bureau, Experian is also committed to improving the financial well-being of consumers. As part of that commitment, Experian supports the mission of the Center for Financial Services Innovation (CFSI), an organization focused on improving the financial health of Americans, especially the underserved, through innovative financial products and services.    Experian recently spoke with CFSI’s Thea Garon, a Director on CFSI’s Program Team to learn more about a new free, open-source tool the organization will be launching in June to help financial institutions drive consumer financial health. Here are some insights she shared about the new tool. Can you provide an overview of the CFSI Financial Health Score™ and how it is calculated? The CFSI Financial Health Score™ is designed to help financial service providers, employers, and other organizations diagnose and measure the financial health of their customers, clients, and employees. The framework provides a holistic, moment-in-time snapshot of an individual’s financial health based on eight multiple-choice questions that align with CFSI’s eight indicators of financial health. It includes one Financial Health Score and four sub-scores (Spend, Save, Borrow, and Plan). A set of nationally representative benchmarks offers comparisons across peer groups. CFSI has designed the framework to be free, open-source, simple, and easy-to-use. It’s intended to be a starting point; a proof point that financial health can be quantified, measured, and ultimately improved. Why did CFSI decide to develop this framework? At CFSI, we believe, and have recently released research to support the concept that financial institutions have a business incentive to help their customers lead financially healthy lives. Financial health comes about when your daily financial systems allow you to be resilient and pursue opportunities over time. As a financial service provider, you can help your customers lead financially healthy lives by helping them spend wisely, build savings, borrow responsibly, and plan for the future. To do this, you need a measurement framework to understand and track your customers’ financial health over time. The CFSI Financial Health Score™ is one way to do this. You can use the methodology to diagnose your customers’ financial needs and use these insights to develop products, programs, and solutions to help them improve their financial health over time. You can also share financial health scores directly with your customers to help them understand the actions they can take to improve their own financial health. Ongoing tracking will allow you to assess whether your company is making a meaningful difference in your customers’ lives over time. Can you provide any early examples of how CFSI Health Network members have adopted and incorporated this framework? Approximately 100 financial service providers have downloaded the framework, representing a diverse range of companies, including banks, credit unions, fintechs, non-profits, payment networks, and B2B technology providers. At least 14 companies are actively using the Financial Health Score to measure and track their customers’ financial health and have committed to sharing data and insights with us through CFSI’s Financial Health Leaders program. Some companies, are using the framework to assess their customers’ financial health for strategic planning purposes. Other companies, such as Wright-Patt Credit Union, are using the financial health score to engage their customers in a dialogue about financial health. The credit union has incorporated the framework into their MoneyMagnifier program, a financial coaching program designed to provide free, one-on-one advice and guidance to members in a judgment-free environment. Financial coaches have been trained to use the framework to start a conversation with members to help them improve their spending, saving, borrowing, and planning behaviors. Coaches help members set goals and develop personalized action plans to achieve those goals toward a better financial future, following up with them after six months to measure improvement and advance the conversation. What have you learned from companies who have started measuring and improving their customers’ financial health with the CFSI Financial Health Score™? While interest in advice is high, uptake can be slow. Making the interaction quick and easy, whether online or in person, is critical. The health check lengthens the interaction, so conducting the health check by appointment rather than with walk-in customers, can help set customer expectations for a lengthier interaction, but may reduce the number of potential participants. Enabling customers to expedite the session by taking the survey online can be helpful, but requires development resources to implement. Many companies are exploring the pros and cons of sharing customers’ scores with them. A single score can help motivate individuals to take action that will improve their financial well-being. However, sharing a low score can also be demoralizing to some, and focusing on the number itself can divert attention from behavioral changes and action steps. Some organizations are choosing to use customers’ response patterns to drive recommendations without sharing the score. Others are opting for a middle ground, sharing an indicator (such as green, yellow, red) instead of a specific number. The most effective measurement and improvement strategies go beyond the CFSI Financial Health Score™. While the framework can help you get started identifying high-level needs, targeted recommendations often require a more nuanced understanding of behaviors and challenges. Combining survey data with account or transaction data can provide a more holistic view into a customer’s full financial life. Each organization must find a balance between the comprehensiveness required to provide meaningful advice and the simplicity required to engage both customers and staff. How can interested companies start using the CFSI Financial Health Score™? We will be publicly releasing the CFSI Financial Health Score™ at the EMERGE: Financial Health Forum (June 6 -8 in Los Angeles). The score will be easy to download and completely free to use. 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