Tag: financial services

Learn the benefits of leveraging alternative credit data to better assess risk at the onset of the loan decisioning process. Read more.

At Experian, we are here to help consumers understand how the credit reporting system and personal finance overall will move forward during the pandemic.

We are excited to announce that Experian has been selected as a Fintech Breakthrough Awards winner in the Consumer Lending Innovation category.

The rapid rate at which fintech challengers are becoming established, is in turn, allowing for greater consumer awareness and adoption of fintech platforms.

As we prepare for the excitement and challenges of a new decade, the same can be true for how we approach the use of alternative data. Read more!

Artificial intelligence (AI) has long been a topic that’s confounding and downright worrisome to financial institutions. Read more!

How are fintechs faring against traditional FIs? Our latest infographic uncovers industry trends and key metrics in unsecured personal installment loans.

Today is National Fintech Day, a day that recognizes the important role that fintech companies play in revolutionizing the financial services landscape.

Experian and Oliver Wyman have joined forces to launch Ascend CECL Forecaster to help financial institutions of all sizes forecast lifetime credit losses.

The next recession is a matter of when, not if. As the economy shifts, so will the priorities for your portfolio, so now is the time to strategize.

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

Marketing for financial institutions is challenging with limited budgets the need to perform better. Investing in technology can help you optimize ROI.

How can fintech companies ensure they’re one step ahead of fraudsters? Kathleen Peters discusses how fintechs can prepare for success in fraud prevention.

CFSI’s Thea Garon talks about a free, open-source tool from the organization to help financial institutions drive consumer financial health.