Over the past 10 years, some of America's most venerable industries have found themselves threatened -- if not put on virtual life support -- by aggressive Web-based "disrupters." Traditional hotels and motels now face stiff competition from AirBnB. Old school taxi companies are losing riders to fast and nimble ride-sharing services like Uber and Lyft. Blockbuster Video? Killed by Netflix, Hulu and Amazon Prime. The Yellow Pages? All but killed by Google. And anyone who's been following the brick-and-mortar retail industry knows that Amazon and its digital brethren are in the process of making retail department stores -- along with the shopping malls they anchor -- as quaint as hydrogen-filled balloons. So what's the next industry likely to find itself up-ended by digital disruptors? It may very well be debt collection. Granted, the words “Debt Collection” will sometimes send a shiver through your spine. But past-due accounts are a serious problem for the affected businesses. Not to mention being a drag on the economy as a whole. In an April 27, 2017 article in Forbes, contributing writer Robert J. Sczcerba offers the following statistics: At any given time, there is an estimated $12 trillion in outstanding consumer debt, with $672 billion of that debt being at some stage of delinquency. At least 7,000,000 small businesses in the U.S. have trouble collecting payments from customers. Of these 7,000,000 small businesses, 49% of them had to write off bad debt in the past year and 43% have customers who are more than 90 days late on payments. So, yes, the collection of outstanding debt is a big deal. Which is why the debt collection industry has to innovate. While many hotel chains, retail stores and transportation services have at least tried to keep pace with technological advances -- and customer expectations -- the debt collection industry has remained relatively unchanged for decades. As quoted in the same Forbes article, Christoph Bene, Managing Director at Brock Capital Group, describes it this way: "Fifty years ago, debt collections agencies relied on annoying phone calls and form letters sent through the mail to encourage people to pay their past due accounts. Today, with the ubiquitous use of smart phones, texting, e-mail and social media, the debt collection industry -- yep, you guessed it -- still mainly relies on annoying phone calls and form letters." Which is where Artificial Intelligence (AI) comes into play. AI has the potential to revolutionize debt collection by reaching out to debtors via the media they use, speaking to them in a language they understand, and developing customized solutions based on each person's individual circumstances. For example: The Medium is the Message. There is a growing cultural divide between generations. A business that tries to communicate with recent college graduates the same way they do with retired Baby Boomers isn't going to be in business for long. The choice of communications media -- be it email, text message, live phone call, printed letter -- depends largely on the character of the recipient. And when an agency is dealing with hundreds -- perhaps thousands -- of delinquent customers, it takes a very "smart" application to choose the channel best suited for each message. Context is King. You don't speak to an employer the same way you speak to a sibling -- or a police officer. Similarly, a collection agency can't use the same language when reaching out to a top-earning corporate executive as they do when trying to collect from a single mother of five who's holding down two jobs. With AI, companies will be able to communicate with the tone, vocabulary and incentives most likely to engage the individual recipient -- automatically. Staying Within the Lines. There are myriad state and federal regulations designed to prevent abuses by over-zealous debt collectors. Unfortunately, the industry remains notorious for its use of off-hour phone calls, intimidating language, and other aggressive techniques to try and pry money out of resistant hands. Using sophisticated rules engines, collections agencies can now make sure that they stay on the right side of the law while still disseminating strong, effective communications. Personalized Solutions. If there is one industry where "one size fits all" makes no sense, it's debt collection. Every situation is different. Every debtor has his/her unique set of challenges. Counselors, working one-on-one with customers, may be able to work out win-win payment solutions, but this takes time, talent, training, sensitivity, creativity and money. For many companies, it's just not worth the investment. AI can make this ideal a practical reality. A truly "smart" tool can analyze and weigh literally thousands of payment scenarios in a second, offering up a solution perfectly tailored to the customer's cash flow and competing obligations. Learn as You Earn. Perhaps the biggest selling point about Artificial Intelligence is that it is, well, intelligent. AI does not more than blindly follow a set of instructions. It learns. It adapts. It grows. It improves. Each failure is a lesson. Each success is an insight. As AI becomes increasingly common in the debt collection industry, expect its efficacy to improve by the month. That not only means more cash in the hands of the companies to which it is owed, but also happier, more satisfied customers. Companies such as Intellaegis with their masterQueue product, have been working to streamline the skip tracing space for the past six years taking a smarter BigData approach to vehicle recovery and debt collection. And Experian, always a leader in financial risk and credit management, recently released two advanced tools designed to help businesses improve their collections results. eResolve is the first self-service platform to help consumers negotiate and resolve past due obligations. PowerCurve Collections brings together data, decisions, and the collections workflow in a single, unified system. These are just the first steps in what promises to be a genuine revolution for business collections as artificial intelligence, Big Data analysis, and predictive analytics combine to create automated workflows that work to the benefit of the creditor and the debtor. Businesses will receive more of the money they're owed. Customers will have less debt to manage. And best of all, no more of those annoying dinner-time phone calls.  

One of the world's largest financial institutions, Citi is determined to keep pace with rapid changes in international commerce. As detailed in the April 2017 issue of PYMNTS.com's B2B API Tracker Citi believes APIs – Application Programing Interfaces – are the key to getting international businesses the financial information they need to prosper. "We realized [our] clients were getting into newer business models which require faster access to payments [and] faster access to information," Mayank Mishra, managing director and global head of channel services for Citi treasury and trade solutions, told B2B API Tracker. "We had to go with a standard that was well-accepted by clients so they wouldn’t have to go through massive infrastructure changes." He noted the company's heavy investments in APIs will give its customers "the flexibility they're looking for to access the relevant information they want." Like Citi, Experian is eager to serve clients in a nimble, open fashion. To address this need Experian has created an API Developer Hub. Found at developer.experian.com, the Experian API Developer Hub is poised to expose the company's deep and detailed data on businesses and consumers, in addition to Experian’s automotive, health, and decisioning services in both the US and across the globe to the developer community. The API Bonanza Although they have been around for years, APIs have recently garnered lots of attention from companies of all types and sizes. "APIs are a technology exposed over the web that allow applications (software programs) to talk to one another," explained Mike Myers, Experian's Senior Director of Product Marketing. "APIs provide software developers with instructions on how to easily access and integrate data that can help fast track new ideas, partnerships, and innovation." Myers leads a team that creates business information APIs for the API Developer Hub, giving developers easy access to Experian's business information to use as they see fit. Laid out simply and intuitively, the Developer Hub serves as an easy-to-use "window" through which users can see: The depth and breadth of information Experian can provide to them How to acquire this information in a form most useful to their company How this information can be easily requested and consumed Serving Both Established Core Customers and Aggressive Start-Ups Myers explained that there are two principal markets for the new API Developer Hub: Mike Myers Experian AgileWorks "The first is our core customers, mainly financial institutions, insurance companies, trade credit, credit managers – basically the user who needs to integrate Experian data to determine their customers’ status, needs to reduce friction and minimize risk when making credit decisions as well as satisfy compliance regulations. This use case has been our bread and butter for decades," Myers said. "They need to manage risk. They must ensure their operations are in compliance. And, perhaps most importantly, when issuing credit, the likelihood that they’re going to get paid. That’s really the bottom line and is a key issue our API developer portal is designed to address." The second use case is designed for the developer community. “Developers are working for companies of all types and sizes that have yet to experience the power Experian’s data assets can deliver. They may share similar needs to our core users, but they most likely also have completely different market problems which Experian data can help solve. Maybe it’s a subset of our data applied to a new use case or maybe it’s combining our data with other data in new and innovative ways.” Experian designed the API Developer Hub to be as user-friendly as possible. New accounts can be setup in minutes. "It's taken a historically offline process and converted it to real-time” Myers said. Developers can explore a host of options, including access to APIs for Business Search, Business Credit, Commercial Public Records and Business Compliance Insight. We don't know what new apps or offerings will appear because of this new venture, but with the amount of energy, imagination and innovation driving today's tech world, we suspect that through APIs, developers will enhance the power of companies -- and consumers -- in ways we can't yet even imagine. We are proud -- and thrilled -- to be contributing to this ongoing revolution. Experian Developer Hub

On May 10th we hosted an episode of Business Chat | Live. This episode features an interview with Experian Director of Analytics and Consulting, Peter Bolin. Peter shared highlights from his "State of Small Business Credit" presentation, which he co-presented at our Vision Conference in Orlando with Cristian DeRitis of Moody's Analytics. Gary: Welcome to today's Business Chat Live. I am Gary Stockton with Experian Business Information Services. I'm going to be joined today by Pete Bolin, who's Director of Consulting and Analytics at Experian. Pete just wrapped up his fifth annual State of Small Business Credit at the Vision Conference in Orlando. Peter: Good afternoon Gary, thanks for having me. Gary: Thanks for taking time out of your schedule. I know you guys are busy out there. You just finished the State of Small Business Credit and you presented there with Moody's Analytics. Can you give us some high-level highlights and recap your talk? Peter: Sure, absolutely. I'd love to. One of the things that was presented today in terms of the economic analysis is that we're in very near full employment and they are projecting that the employment numbers are going to start ... the market for employment's going to get really, really tight. One of the other things in addition to that was the real estate market is coming back. He (Cristian DeRitis of Moody's) had some statistics around home prices, particularly on the West Coast rising, so that's good news for real estate market and all the businesses that serve realtors and all the small businesses that serve that space. That's great news for them. I know down here in Florida it's booming. They're experiencing a big boom in real estate as well. This overall opinion on the economy the next 18 months was very bullish. Gary: How about small business and paying their bills? Are they paying down debt, are they taking on new debt, are they taking out loans? Peter: The state of the small business market is pretty stable. Very stable. Delinquencies are down, there is some increase in demand. Some of the utilization ratios are rising, so that's starting to heat up as well. We're also seeing that some of the online market is heating up. Traditional banks are also starting to get back into that small business lending space. Funds are becoming available, the overall economy looks like it's definitely growing, and that's all good signs for a small business market. Gary as you know, small businesses overwhelmingly are the drivers of employment in the United States so all of that bodes well in particular like I said earlier, we already know that Moody's is already predicting a very tight labor market. All of those things are very, very positive for the economy. Gary: Small businesses, they are adding jobs. Are they still confident? Because I heard that their confidence was taking a bit of a dip here in the first quarter. Peter: Actually that's not what we're seeing in the economic data, that small business confidence has slightly ticked up. There was a report in ... CNBC reported just yesterday on their broadcast that they were saying that business optimism was picking up, business owners are really looking forward to the cost savings from Obamacare, so I think that helped as well because we know the Obamacare cost does tend to hit small businesses. They're very optimistic about that, so there is economic data that does suggest that the confidence of small business owners is picking up. Gary: What else did you cover in the talk? What other highlights? Peter: One of the other things that was really interesting is that we tend to say that small business, micro business, are the ones that are driving the employment, and what the data tends to suggest is that's not necessarily the case. It's more in that mid-range business. 50 employees to 100, they are the real, that medium enterprise business, they're the ones that are actually driving that. That was a little surprising to me because I thought entrepreneurs coming in, they're going to employ one, two, three and they are doing that. What the data this time around suggests is that the employment growth is really coming in that 50 to 100 employee space. That surprised me because that was something that I did not expect. Gary: The data that we speak of, this is Experian data right, that we provide to Moody's Analytics, they're the economists that help us with this research. We do this every quarter with them and they produce the Main Street Report which I'm showing up on screen here in case the audience would like to get more information. I'll put a link there. This is commercial data, commercial small business data on credit like payment trends, and also credit scores as well. Peter: That's correct. One of the things that we shared today and one of the things you're going to see in the Main Street Report, is that there are some industries that are starting to recover. For example, one of the things that the data tends to suggest is that the mining industry is coming back. Delinquencies are down, we know from looking at our newly launched in-the-market model, the business credit seeker model, that that industry is looking for credit. They're looking to expand, and given the current climate of Washington and the new administration, there's definitely a strong trend in the mining industry. Their scores are very, very high, the net worth of the owners is relatively high. Delinquencies are down. The report will show that their IPV2 scores are very high. That all bodes well for industry that's going to recover and any one lender out there is looking to target a potential industry, you might want to look at the mining industry. It's starting to come back. Gary: Agriculture as well. I've read the headlines on agriculture, they've had obviously some subsidies there that are helping. That's the one industry that's a real standout right now. Peter: Mining, agriculture is coming back. One of the things the data suggests that Chris was talking about today was he's also bullish on construction. That housing market's picking up, construction traditionally got beat up in the last couple of years. It's starting to come back. Housing's starting to pick up. More construction is starting to pick up. He's really bullish on that one as well. Gary: It sounds like you had a great talk there. I think we'll probably leave it there for now. If folks want more information they can download the latest copy of the Main Street Report and also we'll be covering additional data from the report in a webinar next month, so they can find out about that too. Thanks very much Peter for coming on and spending a few minutes with us. Peter : Thank you for having me Gary. Look forward to having everyone read that report. If you would like to be informed of new episodes of Business Chat | Live be sure to subscribe to our YouTube channel, and follow us on Twitter.    

On May 9th we hosted an episode of Business Chat | Live on our YouTube channel and enjoyed an enlightening discussion with Gavin Harding, Senior Business Consultant with Experian Business Information Services. In our chat, Gavin shared highlights from his marketplace lending panel "Bridging The Gap: Reconnecting Investors with Marketplace Lenders in a Volatile World."   Gary: We'll get started here. Welcome everybody. My name is Gary Stockton and I'm with Experian Business Information Services and we're gonna do a Business Chat Live today focusing on marketplace lending. I'm happy to be joined by Gavin Harding, and he's a senior business consultant with our business information services team on the global consulting side of the business. And Gavin is out at the Experian Vision Conference, so good morning, Gavin, or good afternoon, I should say. Gavin: Well, it's a little of both. It's morning for you and afternoon form me. Hi, Gary. Gary: So you had hosted a panel discussion yesterday called Bridging the Gap: Reconnecting Marketplace Investors with Marketplace Lenders in a Volatile World. Who was on the panel with you? Gavin: Well we had a really good industry cross section. We had Nat Hoopes who is the executive director of the Marketplace Lending Association. We had Frank Rotman who is the founding partner of QED Investors. And we had Peter Renton, who is the co-founder of LendIt, probably the biggest online marketplace lending conference worldwide. Gary: Peter Renton, he has worked on the LendIt Conference, but also Lend Academy, right? That's a resource for marketplace lending. I listen to his podcast. Gavin: That's right. Gary: We've spoken to Pete a number of times, so he's quite the expert in that field. There's been, in terms of marketplace lending and the news, there has been some negative news around the industry in recent past. Is that something that came up? Gavin: Indeed it did. Over the last 12 to 18 months, there has been a spate of negative publicity. The industry in general, the media has in a way turned on the industry on the basis of a couple of events related to specific companies in the space. The good news is that while that negative publicity had a negative impact last year, it seems that the industry has rebounded. It seems that it was a watershed moment where the industry recommitted to transparency, where they enhanced their whole approach to risk, improved their approach to operations. So if we characterize last year as perhaps a low point, the general theme of the panel was that the industry's really poised for growth, has grown up a lot over the last year. And you know, we talked a lot about credibility and trust and so on, and Nat, from the Marketplace Lending Association, you know, obviously that group started about a year ago and it has now grown to 19 members, so pretty rapid growth. When we think about the 19 members, we estimated that that covers about 90-95% of the total volume of loans and credit facilities in the space. So Nat and his team worked hard on transparency, disclosure, harmonizing standards and so forth, so it was really good to have him on the panel. Gary: And Experian, are we a member of the MLA? Gavin: We are a proud associate member, yes we are. Gary: Excellent. So let's talk a little bit about bank partnerships and what are the kinds of things you were talking about related to bank partnerships? I'm sure that was a big part of the discussion. Gavin: It was. About 24, 36 months ago is when this topic became pretty hot. Lots of conversation between banks and players in the industry. Those conversations in some very high profile ways result in partnerships. We think about Chase, we think about OnDeck. As the year has progressed, what's started to happen is, the mood within the industry has changed. Banks now expect partners in this space to speak their language in terms of risk, to be fully compliant, to understand all the rules and regulations. So the short statement is that in the last year, within the online lending space, compliance has become a competitive advantage. Compliance and operational discipline has become a selling point. So again, that's part of the ongoing theme of the industry and the sector growing up and maturing, so really positive. The one comment that I believe Frank had was as we think about partnerships with the banks, be prepared to hear no a lot before you get to yes. Be prepared to translate between the two very distinct audiences. So in terms of working with banks, use their language, understand the regulations, understand what pressures and demands are on them, and the outcome of that will be a much higher success rate and much more positive, productive conversations. Gary: Excellent. How about the sector performance overall? Is it a growing sector? The banks, I would imagine they've expressed a lot of interest in that. Are we seeing growth in that sector? Gavin: Interesting question. We talked about some of the negative publicity last year. Some of that related to some practices in parts of the industry over the last two to three years, so what's happening now is, because of a refocus and redirection towards credit risk management putting out more and better loans for appropriate returns and so forth, we're seeing the whole industry performance has really been elevated. A lot of the perhaps substandard loans or facilities have now run off, run off meaning they've matured and have been paid off. And the new business that's been put on is more sustainable. It's a more disciplined approach. So yes, overall the sector has improved significantly in terms of performance over the last year. Gary: Excellent. And so, obviously you're meeting with plenty of Experian clients there at the conference. What is this, your third or fourth Vision? Gavin: This is my third and we are here with, I think it's a little over 500 of Experian's clients globally. Many of clients from Europe, Asia, and so on so it's a really great experience. Gary: Yeah, and I saw you had Steve Wozniak, co-founder of Apple Computer as one of your keynote speakers. Gavin: That's right, that's right. On Monday morning for our breakfast presentation, we had the Woz and the big news on that, Gary, is, I know this will probably startle any listeners, that apparently Steve Jobs was not always a very nice person. So that's a newsflash there. Gary: Brilliant guy, though. You can tell I'm a customer. Gavin: Fantastic. The innovation, the dynamism was just radiating from him. He talked about some of his rules of life and he said he was never interested in money, he was interested in thinking and creating things and making things work. Somebody said, "Steve, what motivated you when you were an employee at Hewlett Packard and how does that maybe translate into what we should be doing with employees?" And Steve Wozniak said the major attraction for him at Hewlett Packard was that they let him go into their stores, their inventory, and take whatever electronic parts and components he wanted to create his own products at night. So he would talk about going home, having dinner, and going back, going into the stores, grabbing the components, and then making the products. And some of the original pre-Apple I computers were made from Hewlett Packard parts in Steve Wozniak's - he said didn't actually have a garage. It was more of a basement, but in his house. So really an interesting presentation. A really dynamic guy. We were lucky to have him. Gary: And you also had, an economic presentation by Diane Swonk I think I saw. Gavin: Diane Swonk this morning, really interesting presentation. A little bit of a different perspective than what we often see in terms of the high-level economic factors like just raw unemployment versus full employment and so on. She dug a little bit deeper but beyond that she had a couple of key messages. One of the messages is that we are almost at, depending on definition, full employment. Wages have increased over the historical averages over the last couple of years. So while the broad improvement in the economy was visible, it's only now hitting our pocketbooks. It's only now coming through in consumer spending. So that was pretty positive. She has worked a lot with both the current and past administration in terms of economic advisors and committees and so on, done a lot of work in Washington, DC. She is very much taking a wait-and-see cautious approach in terms of what the administration is saying. She confirmed that the intent or the goal investing heavily in infrastructure should have a dramatic effect on the economy overall, so she was supportive of that. The one question she had, and actually what she said was that her son on the way to school in the morning on the back of a napkin should be able to work out what the plan is to spend and at the same time reduce taxes without the other side of the equation is, to be charitable, going to require further definition. Gary: Wow, sounds like quite a conference. I'm quite envious that I'm not there to enjoy it with you this time, but maybe next time. Gavin, I really appreciate you taking time out. I know that there's a lot of people that you should be meeting with there, so I'm gonna go ahead and maybe end it right there for now. Maybe we can schedule another business chat soon. I know something's coming up with Moody's Analytics and yourself in June and the next release of the Main Street Report for Q1, so I'm excited to maybe talk about that in further detail with you very soon. Gavin: I look forward to it. Thank you very much, Gary. Gary: All right. Thank you very much.   If you would like to be informed of new episodes of Business Chat | Live be sure to subscribe to our YouTube channel, and follow us on Twitter.    

Experian has released the latest quarterly report on business credit conditions and things are looking very positive. According to the Experian/Moody’s Analytics Main Street Report, credit utilization rates expanded strongly in the first quarter of 2017. Results from the latest Experian/Moody’s Analytics Main Street Report, were presented today during Experian’s Vision Conference. The latest report shows small-business confidence levels eroding however; even though the data reveals their credit performance is going well, with steady declines in delinquencies and increases in credit balances, limits and utilization rates. Latest Experian/Moody's Analytics Main Street Report Reveals Strong Business Credit Conditions - Click to Tweet   According to the economists at Moody's, small businesses started the year on a positive note with a decline in early delinquencies (less than 30 days past due) and severe delinquencies (more than 90 days past due). We also saw single-digit gains in credit balances (up 8.8 percent) driven by strong credit utilization rates, while credit limits increased by 4.5 percent. “The market performance data and insights on trends help our small businesses and lenders make more informed decisions,” said Gavin Harding, senior business consultant for Experian. “So while we see that delinquencies are declining and credit limits and utilization rates among small-businesses owners are increasing, we also understand that small businesses don’t have adequate credit to expand at their desired pace. If economic conditions continue to improve this year, we should see financial institutions start to increase credit availability for small-business owners.” Agriculture stands out as an industry bright point, despite four years of declining income for farmers. Performance in the manufacturing, transportation and public administration industries, however, wasn’t as strong. Other sections in the Q1 2017 report include a detailed analysis of: Small-business risk assessment strategies States ranked by their rate of severe delinquency Potential impacts from policy changes Credit quality in different industries A forecasted outlook for the coming months        

Today Experian released the Q4 2016 Experian/Moody's Analytics Main Street Report. The report offers deep insight into the overall financial well-being of the small-business landscape, as well as providing commentary around what certain trends mean for credit grantors and the small-business community as a whole. Delinquency Rates Decline Sharply Small business delinquency rates fell throughout 2016 at a slower pace compared to 2015. Q4 saw a sharp decline in delinquency across multiple industry sectors. Oil pricing may be what's drivingThis was likely due in part to OPEC's announcement to cut supply over the next several months. Small Businesses Feeling Confident as Balances Increase Q4 loan balances increasing 7.7 percent from the third quarter and 10.3 percent from last year. Despite this activity, utilization remains below 40 percent, leaving plenty of capacity for businesses to expand using available credit. Business sentiment among business owners remains positive with the National Federation of Independent Business Owners reporting a sharp increase in small-business owner confidence in November and December. Nevada Roars Back Nevada was particularly hard-hit during the Great Recession. Small businesses in the state have struggled with credit ever since. In the fourth quarter Nevada's severe delinquency rate fell to 8.94 percent, the lowest level observed in the available history for the state. Eight of eleven industries in Nevada saw delinquency rates decline from the third quarter of 2016. Experian has published the contents of our report in an interactive web page, complete with interactive charts and graphs.      

Loan stacking is a small but serious problem for Online Marketplace Lenders (OMLs). Often invisible to the issuers of commercial capital, businesses that engage in this insidious practice are significantly more likely to become delinquent on their payments and even default entirely on their obligations. If you manage a company that issues commercial credit, you need to be diligent in weeding out these bad players to protect not only yourself but your industry as a whole. What is Loan Stacking? Simply put, loan stacking is the opening of multiple credit lines within a short period of time. (Sometimes as little as 24 or 48 hours.) Because there is a natural lag in credit reporting, the lenders involved usually are unaware that other companies are transacting with the same customer. On the personal credit side, loan stacking is a potential problem for borrowers who run their multiple credit lines near – or up to – their maximums and then find they can no longer meet all of their monthly obligations. However, it’s not uncommon for individuals to carry multiple credit cards, and most credit card companies already have reliable systems in place to ensure borrowers don’t get more credit than their incomes justify. Things are different on the commercial side. Today, a lot of short-term borrowing occurs online through Merchant Cash Advances (MCAs). Repayment takes the form of weekly or even daily debits against the businesses’ cash receipts pulled directly from the borrower's checking account. For example, a restaurant may take out a $10,000 cash advance, the lender then taking five percent of that restaurant’s daily receipts until the advance is repaid – with interest. MCAs  are not technically considered “loans,” and thus are not subject to the same regulations and oversight as traditional commercial lending.  Such advances usually cover a period of four to eight months. Some can go as long as 12 months, but rarely do they go longer. MCAs are most popular among retail stores and have helped many small businesses get funding when needed. However, problems arise when a business takes out several cash advances at the same time. Instead of paying, say, 5 percent of daily receipts to a single lender, the restaurant loses perhaps 20 percent to four lenders simultaneously. At this rate, the business becomes unsustainable and defaults. Not only is commercial loan stacking a risky practice, it can be legally problematic. Many MCA providers are now placing anti-stacking language in their contracts that require borrowers to pledge not to promise their receipts to any other companies. Stacking loans violates this provision and thus may be tantamount to fraud. How common is commercial loan stacking? Based on our research and analysis, we believe that between five and six percent of all merchant cash advances are stacked. In 2013, the MCA market accounted for about $3 billion in transactions. By December 2016, that number had probably doubled. That means that between $150 million and $360 million in commercial loans are stacked. Granted, that's a drop in the bucket for the $1.9 trillion commercial lending industry, but for a small company just getting in the business of making such credit advances, it could be a serious threat to their portfolio's health. Why loan stacking occurs Why do MCA lenders allow themselves to be pitted against each other in this fashion?  Blame the internet. The same internet that gives us the benefits of virtually instantaneous credit applications, reviews and approvals also makes it possible for businesses to easily make multiple applications within a 24- or 48-hour period. Many commercial credit reporting companies may provide updates as quick as 24 hours in some cases, a commercial MCA lender receiving a cash advance application may experience a slight delay in knowing if other lenders are working with the same customer. As for borrowers, most don't stack because they are not intending to commit fraud or otherwise game the system. They're doing so because, at the time, they believe they have no choice. Running a small business is difficult. Businesses often operate on thin margins and owners may, at times, struggle to make payroll. If there's a sudden setback or cash flow suddenly stalls, an owner may need a sizeable cash infusion just to keep the doors open. Being an optimistic lot, most owners who get multiple MCA loans do so in the belief they can quickly get over the hump, recover their losses, rapidly pay back what they owe and no one will be any the wiser. Sometimes, this strategy works. But too often, it does not. And that's when things get nasty. How to avoid loan stacking customers If you are an MCA lender and wish to avoid loan stacking customers, you have three tools at your disposal: Before making a cash advance, ask to see a full year of checking account activity. If you see a pattern of weekly or daily debits in a similar dollar range, this could be a sign that the business already has an MCA in place. If the business is relatively new, check their credit report for a high number of UCC (Uniform Commercial Code) filings. A large number of hard credit inquiries often indicates the owner is doing a lot of loan shopping, and this can indicate loan stacking. Sign up for Experian's custom short-term industry specific risk model consulting services. Signs of loan stacking, particularly in young companies with excessive UCC filings, can often be spotted using this service. For MCAs and all other forms of commercial lending to work, all parties have to play by the rules. Discouraging loan stacking not only benefits lenders, but also the borrowers who depend on the services these lenders provide.  

This year’s Marketplace Lending and Investing Conference explored issues of transparency, partnership, consistency and sustainability.  There was healthy debate on each of these topics and the audience, presenters and panelists frequently returned to the theme of the relationship between Marketplace Lenders, Fintech, Banks and Investors.  As the conference unfolded I thought about the role of small businesses in the relationship between these stakeholders.  How do mom and pop small businesses fit into these complex, rapidly evolving relationships? In mid-2015 The Federal Reserve of Cleveland published a report.  The title was “Alternative Lending Through The Eyes of ‘Mom & Pop’ Small-Business Owners: Findings from Online Focus Groups”.  The report found that the small business owners participating in the online focus groups had a number of common concerns: Marketplace Lenders’ sites are attractive … but how secure? How private is the information the small business provides? It is difficult to compare product offerings, features and pricing The small business owners bank is a source of advice but is not necessarily considered as an option for funding There are some clear parallels with the conference’s focus on transparency, partnership and sustainability.  See if any of these sound familiar: Regulators at the federal and state level are researching the Marketplace Lending industry and exploring ways and means of regulating the space. They are particularly focusing on issues of disclosure, fairness, privacy and governance.  The CFPB – Consumer Financial Protection Bureau has been particularly active.  There are two recent examples that illustrate increasing protection for small businesses. Dwolla was hit with a $100,000 fine in March of 2016, directly related to data security practices.  Then, in late September LendUp was fined $3.5 million for deceiving its customers.  The list of lenders who have strayed from fair and transparent business practices is long and growing.  Fortunately, regulatory supervision of the online marketplace is here to stay. Banks largely abandoned the small business segment post 2008. Lack of profitability is most often cited as the reason for the exodus.  Marketplace Lenders entered the space, delivered a wide range of product offerings, high levels of responsiveness and a relatively painless customer experience.   Now, eight years later, banks and Marketplace Lenders are partnering to make the most of their relative strengths – deep customer relationships and the capability to deliver exceptional customer choice and experience, through technology. Leaders in the various stakeholder organizations are still focused on surviving, meeting goals for growth, managing risk and optimizing returns.  In the past these may have conflicted with the small business owners interests.    In late 2016, they are in alignment … and that is good news for small business owners throughout the US economy. If you would like to hear more of what I learned at Marketplace Lending and Investing, check out the Live Marketplace Lending & Investing Q&A I recorded from the conference.          

Reporting business data to Experian is an important and essential part of the credit ecosystem. Data provides a more complete credit history and in turn helps small businesses grow. Small businesses that have limited tradelines can sometimes face difficulty qualifying for loans and getting access to capital, so lenders and commercial trade partners who report data to Experian are giving small businesses the credit they deserve. How to report data to Experian You can start the process of reporting data to Experian by following a simple 8-step process outlined in this video. Our data acquisition specialists are standing by to help onboard new business data contributors and can answer questions to make it a seamless onboarding experience. You can also find more information on our data reporting page experian.com/datareportingbusiness. We have also created a handy Infographic which describes how to contribute both consumer and small business data. Get Started Reporting to Experian