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Enterprise Security Magazine recently named Experian a Top 10 Fraud and Breach Protection Solutions Provider for 2020.   Accelerating trends in the digital economy--stemming from stay-at-home orders and rapid increases in e-commerce and government funding--have created an attractive environment for fraudsters. At the same time, there’s been an uptick in the amount of personally identifiable information (PII) available on the dark web. This combination makes innovative fraud and breach solutions more crucial than ever.   Enterprise Security Magazine met with Kathleen Peters, Experian’s Chief Innovation Officer, and Michael Bruemmer, Vice President of Global Data Breach and Consumer Protection, to discuss COVID-19 digital trends, the need for robust fraud protection, and how Experian’s end-to-end breach protection services help businesses protect consumers from fraud.   According to the magazine, “With Experian’s best in class analytics, clients can rapidly respond to ever-changing environments by utilizing offerings such as CrossCore® and Sure ProfileTM to identify and prevent fraud.”   In addition to our commitment to develop new products to combat the rising threat of fraud, Experian is focused on helping businesses minimize the consequences of a data breach. The magazine noted that, “To serve as a one-stop-shop for data breach protection, Experian offers a wide range of auxiliary services such as incident management, data breach notification, identity protection, and call center support.”   We are continuously working to create and integrate innovative and robust solutions to prevent and manage different types of data breaches and fraud. Read the full article Contact us

The shift created by the COVID-19 pandemic is still being realized. One thing that we know for sure is that North American consumers’ expectations continue to rise, with a focus on online security and their digital experience.   In mid-September of this year, Experian surveyed 3,000 consumers and 900 businesses worldwide—with 300 consumers and 90 businesses in the U.S.—to explore the shifts in consumer behavior and business strategy pre- and post-COVID-19.   More than half of consumers surveyed continue to expect more security steps when online, including more visible security measures in place on websites and more knowledge about how their data is being protected and stored. However, those same consumers aren’t willing to wait more than 60 seconds to complete an online transaction making it more important than ever to align your security and experience strategies.   While U.S. consumers are optimistic about the economy’s recovery, they are still dealing with financial challenges and their behaviors have changed. Future business plans should take into account consumers’:   High expectations of their online experience Increases in online spending Difficulty paying bills Reduction in discretionary spending   Moving forward, businesses are focusing on use of AI, online security, and digital engagement. They are emphasizing revenue generation while looking into the future of online security. Nearly 70% of businesses also plan to increase their fraud management budgets in the next 6 months.   Download the full North America Insights Report to get all of the insights into North American business and consumer needs and priorities and keep visiting the Insights blog in the coming weeks for a look at how trends have changed from early in the pandemic. North America Insights Report Global Insights Report

In the wake of unprecedented unemployment fraud since the start of COVID-19, Experian announced it was selected as the exclusive partner for identity and fraud verification for the Unemployment Insurance (UI) Integrity Center’s centralized Identity Verification (IDV) capability. IDV is available to state agencies at no cost through UI Integrity Center, which is operated by the National Association of Workforce Agencies (NASWA) in partnership with the U.S. Department of Labor.   With the Federal Bureau of Investigations (FBI) reporting a spike in fraudulent unemployment insurance claims complaints related to COVID-19, it’s more important than ever for state agencies to use innovative solutions to verify identities that are applying for unemployment insurance to protect consumers. If improper unemployment insurance payments are made to fraudsters, the efforts of the CARES Act could be largely wasted.   The IDV capability leverages Experian’s Precise IDTM to provide a centralized identity verification and proofing solution. Precise ID combines identity analytics with advanced fraud risk models to distinguish various types of fraud, which can help state agencies maximize time and resources. When state agencies submit claims, the IDV solution will return ID theft scoring and associated cause codes, enabling them to assess whether a claim may be fraudulent.   “Due to the COVID-19 health crisis, unemployment is high, with over roughly 60 million Americans filing for unemployment since March,” said Robert Boxberger, president of Experian’s Decision Analytics in North America. “At Experian, we’re proud to have a strong culture dedicated to continuous innovation that helps protect consumers’ financial health. We’re taking that same consumer focus and helping make the unemployment insurance application process more efficient and safer for constituents.”   The Integrity Data Hub (IDH) is a robust, multi-state data system that contains a continuously expanding set of sources to provide advanced cross-matching and analytic capabilities to states. It is designed to be easily implemented by any state Unemployment Insurance agency, regardless of claim volume, technology, or access to internal resources. The IDH was designed and built using the latest National Institute of Standards and Technology IT security standards, including the use of asymmetric encryption and other techniques to ensure the security of sensitive data.   “We’re excited to partner with Experian and utilize its Precise ID solution to assist states in mitigating fraud during these unprecedented times,” said Scott Sanders, NASWA Executive Director. “States are finding this to be a very valuable tool and we are pleased that we can offer this solution to states through our partnership with the U.S. Department of Labor.” Read Press Release Learn More About Precise ID

No one can deny that the mortgage and real estate industries have been uniquely affected by COVID-19. Social distancing mandates have hindered open house formats and schedules. Meanwhile, historically low-interest rates, pent-up demand and low housing inventory created a frenzied sellers’ market with multiple offers, usually over-asking. Added to this are the increased scrutiny of how much borrowers will qualify and get approved for with tightened investor guidelines, and the need to verify continued employment to ensure a buyer maintains qualifying status through closing. As someone who’s spent more than 15 years in the industry and worked on all sides of the transaction (as a realtor and for direct lenders), I’ve lived through the efforts to revamp and digitize the process. However, it wasn’t until recently that I purchased my first home and experienced the mortgage process as a consumer. And it was clear that, for most lenders, the pandemic has only served to shine a light on a still somewhat fragmented mortgage process and clunky consumer experience. Here are three key components missing from a truly modernized mortgage experience: Operational efficiency Knowing that the industry had made moves toward a digital mortgage process, I hoped for a more streamlined and seamless flow of documents, loan deliverables and communication with the lender. However, the process I experienced was more manual than expected and disjointed at times. Looking at a purchase transaction from end to end, there are at least nine parties involved: buyer, seller, realtors, lender, home inspectors/inspection vendors, appraiser, escrow company and notary. With all those touchpoints in play, it takes a concerted effort between all parties and no unforeseen issues for a loan to be originated faster than 30 days. Meanwhile, the opposite has been happening, with the average time to close a loan increasing to 49 days since the beginning of the pandemic, per Ellie Mae’s Origination Insights Report. Faster access to fresher data can reduce the time to originate a mortgage. This saves resource hours for the lender, which equates to savings that can ultimately be passed down to the borrower. Digital adoption There are parts of the mortgage process that have been digitized, yes. However, the mortgage process still has points void of digital connectivity for it to truly be called an end-to-end digital process. The borrower is still required to track down various documents from different sources and the paperwork process still feels very “manual.” Printing, signing and scanning documents back to the lender to underwrite the loan add to the manual nature of the process. Unless the borrower always has all documents digitally organized, requirements like obtaining your W-2’s and paystubs, and continuously providing bank and brokerage statements to the lender, make for an awkward process. Modernizing the mortgage end-to-end with the right kind of data and technology reduces the number of manual processes and translates into lower costs to produce a mortgage. Turn times are being pushed out when the opposite could be happening. A streamlined, modernized approach between the lender and consumer not only saves time and money for both parties, it ultimately enables the lender to add value by providing a better consumer experience. Transparency Digital adoption and better digital end-to-end process are not the only keys to a better consumer experience; transparency is another integral part of modernizing the mortgage process. More transparency for the borrower starts with a true understanding of the amount for which one can qualify. This means when the loan is in underwriting, there needs to be a better understanding of the loan status and the ability to better anticipate and be proactive about loan conditions. Additionally, the lender can profit from gaining more transparency and visibility into a borrower’s income streams and assets for a more efficient and holistic picture of their ability to pay upfront. This allows for a more streamlined process and enables the lender to close efficiently without sacrificing quality underwriting. A multitude of factors have come into play since the beginning of the pandemic – social distancing mandates have led to breakdowns in a traditionally face-to-face process of obtaining a mortgage, highlighting areas for improvement. Can it be done faster, more seamlessly? Absolutely. In ideal situations, mortgage originators can consistently close in 30 days or less. Creating operational efficiencies through faster, fresher data can be the key for a lender to more accurately assess a borrower’s ability to pay upfront. At the same time, a digital-first approach enhances the consumer experience so they can have a frictionless, transparent mortgage process. With technology, better data, and the right kind of innovation, there can be a truly end-to-end digital process and a more informed consumer. Learn more

In late September, California announced a new requirement for the sale of all new passenger vehicles to be zero-emission by 2035. While that’s still 15 years away, the executive order created quite a buzz in the automotive industry, reigniting conversations about electric vehicles (EVs) and the current market penetration of the most common zero-emission vehicles. With that in mind, we wanted to take a closer look at the state of EVs—across the country and more specifically, in California—to better understand the EV market and how it’s grown over the past few years. As of Q2 2020, electric vehicles comprised just 0.312% of vehicles in operation (VIO). While EV market share seems small, there has been significant growth since Q2 2015, when they only held 0.0678% of the VIO market—meaning the growth of EVs has more than tripled (3.6x) in the last five years. But even still, other segments, such as CUVs have seen faster growth in the same time period (10% market share in Q2 2020 compared to 6.2% in Q2 2015). California sees faster EV adoption California has seen growth in EV adoption in the last decade, but it has grown exponentially in the last five years. EVs comprised 1.79% of new vehicle registrations 2015, and the percentage grew to 5.32% as of Q2 2020. Much of the growth occurred between 2017 and 2018, when market share jumped from 2.62% to 5.04% year-over-year, with the introduction of the more cost-effective Tesla Model 3. Even with that growth, California new vehicle purchases have a long way to grow to move up to 100% EV. With the popularity of the Model 3, it’s somewhat unsurprising, Tesla holds the lion’s share of the EV market in California, making up 61.9% of EVs on the road within VIO, and nationally at 64.8% share. That could potentially change down the road though. Over the next two years, numerous manufacturers have plans to introduce electric versions of popular models or introduce new EV models altogether. This not only creates competition but could also help continue to drive down vehicle cost, making EVs a more viable option for consumers. Examining costs and other factors Cost is one of the key considerations that industry experts have routinely brought up over the years as a barrier to EV adoption. While some say that maintenance and fuel are cheaper in the long run, purchasing an EV today is typically a more expensive option at the dealership. The average loan amount for an EV in California in 2019 was $40,964, compared to an average vehicle loan amount of $32,373. That said, as EV adoption has seen exponential growth in the last five years, the average price has reduced. The average loan amount for an EV in 2016 was $78,646, dropping more than $35,000 in just five years as the technology continued to mature and vehicle costs lowered. Additionally, tax incentives, particularly in California, have also helped reduce affordability concerns. Though today’s tax incentives may not be in place through 2035, California will likely need to evaluate if economic incentives are required along the way to achieving the zero-emission vehicle deadline. However, even as costs lower, there are additional challenges to be overcome. For instance, infrastructure continues to be a barrier to adoption. In a 2019 AAA study, concern over being able to find a place to charge is the top reason listed as to why respondents are unlikely to purchase an EV in the future. In addition, according to Statisa, in March 2020, the U.S. had almost 25,000 charging stations for plug-in electric vehicles, and approximately 78,500 charging outlets. Of those charging stations, nearly 30% are in California. But with continued growth of EV sales, there will be a critical need for continued infrastructure nationwide—not just in California. In addition to these considerations, many impacts of the new mandate remain unknown. California will have to navigate increased electricity demand—especially during peak hours—and increases in battery scrappage, as EVs wear out. Gas stations will need to manage a loss of revenue, while changes in fuel taxes are likely, and vehicle technicians will require new training. If increased adoption of zero emission vehicles is California’s long-term goal, this could also impact the popularity of used vehicles, which could leave dealers looking for alternative locations to sell their gasoline-powered inventory. Looking toward the future of EVs Realistically, with 15 years until the mandate takes effect, the California mandate won’t have much of an immediate effect on the industry. But it does highlight key considerations for automakers and the aftermarket moving forward. To achieve better adoption rates, automakers need to understand the barriers to success and how they impact consumer behavior. An example of this is how California has seen higher EV adoption rates as the availability of plug-in stations has increased. Continuing to find ways to lower costs and focusing on savings over the lifetime of the vehicle is will help consumers see the value of an EV. At the end of the day, automakers play a large role in moving the country toward EV adoption, so having a clear understanding of the trends can help refine strategies as we move toward an electrified future.

While the automotive industry initially took a hit at the onset of COVID-19, things are beginning to rebound. New vehicle registrations are still down compared to 2019, however, the year-over-year comparisons by month are starting to level out. And, while most of the attention has been paid to new registration figures, we can’t lose sight of the vehicles on the road. Some consumers acted to take advantage of automaker incentives and low interest rates, and others purchased due to newfound needs, but the vast majority have stuck with their current vehicle. That means, despite some bumps over the past few months, opportunity for the aftermarket and dealer service departments to thrive by keeping these vehicles on the road still exists. It starts with understanding what’s on the road. Insight into these vehicles will better position aftermarket suppliers and repairs shops to perform scheduled maintenance and address the needs of drivers. According to Experian’s Q2 2020 Market Trends Review, there were 280.6 million vehicles in operation, up from 278.1 million a year ago. Of those vehicles on the road, light-duty trucks accounted for 56.5%, and passenger cars made up the remaining 43.5%. So, there’s little surprise that the top three segments on the road were full-sized pick-ups (16%), CUVs (10%) and mid-range cars (9.9%). And if we break it down even further, the top three brands were Ford (15.5%), Chevrolet (14.3%) and Toyota (12.1%). But we understand that not all 280.6 million vehicles will need aftermarket parts or service; it’s important for the industry to keep a close eye on the aftermarket “sweet spot”—those vehicles that are six- to 12-years old. Identifying these vehicles and anticipating their maintenance needs will help aftermarket suppliers navigate the recovery. In Q2 2020, 31.2% (87.6 million) of vehicles in operation fell within the “sweet spot”—with a mix nearly 46% domestic and 54% import brands. And while the opportunity today is significant, we expect the “sweet spot” to continue to grow for at least the next four years. To make the most of the opportunity, aftermarket suppliers need to understand where these vehicles are located, what types of vehicles fall within the sweet spot and the most common parts that are used. COVID-19 has shifted the industry for all parties involved. Some consumers may opt to hold onto their vehicles a little bit longer rather than purchase a vehicle; only time will tell. In any event, the more aftermarket suppliers and repair shops understand about the vehicles on the road, the better positioned they will be to address the needs of consumers and grow business. To view Experian’s full Q2 2020 Market Trends Review, click here.

The financial services industry is not always synonymous with innovation and forward-thinking. While there are some exceptions with top-10 banks and some savvy regionals, as a whole, the sector tends to fall on the latter half of the diffusion of innovation curve, usually slotting in the late majority or laggard phase. Conversely, the opposite is true for fintechs who have been an enormously disruptive force of change in financial services over the past 10 years.   For many businesses, the pandemic has created uncertainty and an inability to conduct or generate business. However, the silver lining with COVID-19 might just be that it’s driving digital innovation across industries. Andreesen Horowitz, a venture capital firm, estimates businesses of all kinds are experiencing at least two years’ worth of digitization compressed into the last six months. And while they have been significantly impacted, for fintechs who were already pushing the envelope and challenging existing business models, COVID-19 suddenly accelerated financial services innovation into overdrive. Here are three challenges fintechs are answering in the wake of the COVID-19 health crisis. Digital Banking   The first lockdowns flipped the digital switch in financial services. Seemingly overnight, banking moved digital. In April, new mobile banking registrations increased 200%, while mobile banking traffic rose 85%. Likewise, Deloitte reported online banking activity has increased 35% since the pandemic started. Being mobile-first or digital-only has allowed many fintechs to win in offering presentment, activation, underwriting, and a contextual digital interface, all capabilities that will only become more relevant as the pandemic stretches on. At Square, direct deposit volumes grew by three times from March to April, up to $1.3 billion; Chime saw record signups. Continued social distancing will only serve to accelerate customers’ use of mobile and online platforms to manage their finances.  Contactless Payments  Similar to digital banking as a whole, the health crisis has accelerated the necessity for contactless payments. Whereas convenience and a seamless customer experience may have been drivers for payments innovation in the past, now, many customers may view it as a life or death health concern. Phones, wearables and even connected vehicles are empowering customers to participate in commerce while avoiding handling cash or coming in contact with an infected surface. Through their adoption of IOT-powered contactless payments, fintechs are accelerating this area of financial services to keep customers safe.  Financial Inclusion and Speeding Economic Relief  Any disaster disproportionally affects the underbanked and those living at the poverty line, and COVID-19 is no different. While it will undoubtedly contribute to an increase in unbanked households, the pandemic may also provide an opportunity to innovate through this problem. Financial inclusion was already a focus for many fintechs, who’ve made it their mission to bring equity by offering basic financial services in a transparent way. Unencumbered by legacy systems and business models, fintechs are well positioned to work across the financial ecosystem, from financial services, retail and government to efficiently and more quickly distribute benefits to at-risk groups and impacted businesses.   From their ability to quickly ingest new and novel data sources, to a focus on using a digital-first approach to delight customers, fintechs will continue to harness their strengths to disrupt financial services, even during the pandemic. How is your fintech driving innovation and customer experience during the health crisis?   Learn more

Synthetic identity fraud, otherwise known as SID fraud, is reportedly the fastest-growing type of financial crime. One reason for its rapid growth is the fact that it’s so hard to detect, and thus prevent. This allows the SIDs to embed within business portfolios, building up lines of credit to run up charges or take large loans before “busting out” or disappearing with the funds. In Experian’s recent perspective paper, Preventing synthetic identity fraud, we explore how SID differs from other types of fraud, and the unique steps required to prevent it. The paper also examines the financial risks of SID, including: $15,000 is the average charge-off balance per SID attack Up to 15% of credit card losses are due to SID 18% - the increase in global card losses every year since 2013 SID is unlike any other type of fraud and standard fraud protection isn’t sufficient. Download the paper to learn more about Experian’s new toolset in the fight against SID. Download the paper

The CU Times recently reported on a nationwide synthetic identity fraud ring impacting several major credit unions and banks. Investigators for the Federal and New York governments charged 13 people and three businesses in connection to the nationwide scheme. The members of the crime ring were able to fraudulently obtain more than $1 million in loans and credit cards from 10 credit unions and nine banks. Synthetic Identity Fraud Can’t Be Ignored Fraud was on an upward trend before the pandemic and does not show signs of slowing. Opportunistic criminals have taken advantage of the shift to digital interactions, loosening of some controls in online transactions, and the desire of financial institutions to maintain their portfolios – seeking new ways to perpetrate fraud. At the onset of the COVID-19 pandemic, many financial institutions shifted their attention from existing plans for the year. In some cases they deprioritized plans to review and revise their fraud prevention strategy. Over the last several months, the focus swung to moving processes online, maintaining portfolios, easing customer friction, and dealing with IT resource constraints. While these shifts made sense due to rapidly changing conditions, they may have created a more enticing environment for fraudsters. This recent synthetic identity fraud ring was in place long before COVID-19. That said, it still highlights the need to have a prevention and detection plan in place. Financial institutions want to maintain their portfolios and their customer or member experience. However, they can’t afford to table fraud plans in the meantime. “72% of FI executives surveyed believe synthetic identity fraud to be more challenging than identity theft. This is due to the fact that it is harder to detect—either crime rings nurture accounts for months or years before busting out with six-figure losses, or they are misconstrued as credit losses, and valuable agent time is spent trying to collect from someone who doesn’t exist,” says Julie Conroy, Research Director at Aite Group. Prevention and Detection Putting the fraud strategy discussion on hold—even in the short term—could open up a financial institution to potential risk at time when cost control and portfolio maintenance are watch words. Canny fraudsters are on the lookout for financial institutions with fewer protections. Waiting to implement or update a fraud strategy could open a business up to increased fraud losses. Now is the time to review your synthetic identity fraud prevention and detection strategies, and Experian can help. Our innovative new tool in the fight against synthetic identity fraud helps financial institutions stop fraudsters at the door. Learn more  

As industry experts are still unsure when the economy will fully recover, re-entry into marketing preapproved credit offers seems like a far-off proposal. However, several of the top credit card issuers are already mailing prescreen offers, with many other lenders following suit. When the time comes for organizations to resume, or even expand this type of targeting, odds are that the marketing budget will be tighter than in the past. To make the most of the limited available marketing spend, lenders will need to be more prescriptive with their selection process to increase response rates on fewer delivered offers. Choosing the best candidates to receive these offers, from a credit risk perspective, will be critical. With delinquencies being suppressed due to CARES Act reporting guidelines, identifying consumers with the ability to repay will require additional assessment of recent credit behavior metrics, such as actual payment amounts and balance migration. Along with the presence of explicit indicators of accommodated trades (trades affected by natural disaster, trades with a balance but no scheduled payment amount) on a prospect’s credit file, their recent trends in payments and balance shifts can be integral in determining whether a prospect has been adversely impacted by today’s economic environment. Once risk criteria have been developed using a mix of bureau scores (like the VantageScore® credit score), traditional credit attributes and trended attributes measuring recent activity, additional targeting will be critical for selecting a population that’s most likely to open the relevant trade type. For credit cards and personal installment loans, response performance can be greatly improved by aligning product offers with prospects based on their propensity to revolve, pay in full each month or consolidate balances. Additionally, the process to select final prospects should integrate a propensity to open/respond assessment for the specific offering. While many lenders have custom models developed on previous internal response performance, off-the-shelf propensity to open models are also available to provide an assessment of a prospect’s likelihood to open a particular type of trade in the coming months. These models can act as a fast-start for lenders that intend to develop internal custom models, but don’t have the response performance within a particular product/geography/risk profile. They are also commonly used as a long-term solution for lenders without an internal model development team or budget for an outsourced model. Prescreen selection best practices Identify geography and traditional credit risk assessment of the prospect universe. Overlay attributes measuring accommodated trades and recent payment/balance trends to identify prospects with indications of ability to pay. Segment the prospect universe by recent credit usage to determine products that would resonate. Make final selections using propensity to open model scores to increase response rates by only making offers to consumers who are likely looking for new credit offers. While the best practices listed above don’t represent a risk-free approach in these uncertain times, they do provide a framework for identifying prospects with mitigated repayment risk and insights into the appropriate credit offer to make and when to make it. Learn about in the market models Learn about trended attributes VantageScore® is a registered trademark of VantageScore Solutions, LLC.

Consumer behavior and payment trends are constantly evolving, particularly in a rapidly changing economic environment. Faced with changing demands, including an accelerated shift to digital communications, and new regulatory rules, debt collectors must adapt to advance in the new collections landscape. According to Experian research, as of August, the U.S. unemployment rate was at 8.4%, with numerous states still having employment declines over 10%. These triggers, along with other recent statistics, signal a greater likelihood of consumers falling delinquent on loans and credit card payments. The issue for debt collectors? Many debt collection departments and agencies are not equipped to properly handle the uptick in collection volumes. By refining your process and capabilities to meet today’s demands, you can increase the success rate of your debt collection efforts. Join Denise McKendall, Experian’s Director of Collection Solutions, and Craig Wilson, Senior Director of Decision Analytics, during our live webinar, "Adapting to the New Collections Landscape," on October 21 at 10:00 a.m. PT. Our expert speakers will provide a view of the current collections environment and share insights on how to best adapt. The agenda includes: Meeting today’s collections challenges A Look at the state of the market Devising strategies and solving collections problems across the debt lifecycle Register now

Profitability analysis is one of the most powerful analytics tools in business and strategy development. Yet it’s underrated, deemed too complicated and often ignored. A chief lending officer may state that the goal of strategy development is to increase approvals or to reduce losses. Each one of these goals has an impact generally inversely on each other. That impact may be consequential, and evaluating the effects requires deeper thought and discipline. I propose that the benefits of a profitability analysis in strategy development are worth the additional effort, time and cost. Profitability analysis provides a disciplined framework for making business decisions. For financial companies, a simple profit and loss (P&L) statement will identify interest income, subtract losses and arrive at a risk-adjusted yield. A more robust P&L statement will include interest expense, loss reserves, recovery, fees and other income, operating expenses, other cost per account, and net income. Whether simplified or fully loaded, a P&L analysis used in strategy development must provide a clear and informative representation of key performance metrics and risks. The most important benefit of a profitability analysis is its inherent ability to quantify the trade-offs between risk and rewards. In the P&L terminology, we mean the trade-off between expenses and revenue or losses and interest income. Understanding trade-offs allows companies to make informed decisions and explore serious alternatives. The net income is a concise and elegant metric that captures the impact of various and sometimes competing business objectives. Consider different divisions within a financial organization. Each division has its own specific and measurable objective. Marketing’s goal is to increase loan approvals while Risk is tasked with managing losses. Operations looks to improve efficiencies while IT aims to provide stable, reliable and accurate systems infrastructure. Legal and Compliance ensure regulatory compliance across the entire organization. Each division working to achieve its objectives creates externalities — each division’s actions may not fully incorporate costs imposed on other divisions. For example, targeting highly responsive consumers for a loan product achieves higher loan approvals and may in turn lead to higher credit risk losses. A P&L analysis imposes the discipline for each division to internalize costs and lead to a favorable and efficient outcome for the organization. The challenge with profitability analysis in strategy development is how to develop a good P&L statement. We look to historical data to define assumptions and calibrate inputs to the P&L. There will be uncertainty and concerns regarding the reliability and quality of such data. Organizations don’t regularly conduct test and control experiments or champion and challenger strategies that provide actual performance information on specific areas of studies. Though imperfect, historical data provides a starting foundation for profitability analysis. We augment historical data with predictive credit attributes, industry experience and understanding consumer behavior and incentives. For example, to estimate interest income we may utilize estimated interest rates combined with balance propensity behavior, such as a balance revolver or transactor. To estimate losses on declined population that may be considered for approval, we infer on-us performance using off-us performance with other lenders. Defining assumptions is tedious, hard work and full of uncertainty. This exercise once again imposes the discipline required of organizations to know in detail the characteristics of their products and businesses that make them relevant to consumers. We generate P&L simulations using a set of assumptions, acknowledge the data limitations and evaluate recommendations. A profitability analysis is useful in both times of economic expansion and contraction. A P&L analysis is valuable when evaluating strategies across the customer life cycle. Remember, we live in a world of trade-offs and choices are inevitable. In the prospecting and acquisition life cycle, a P&L analysis provides insights on approval expansion and the consequences of higher credit losses. Alternatively, tighter lending criteria will have a direct impact on balance growth and interest income with lower losses. In account management, a P&L analysis provides estimates on expanded account authorization limits and the effect on activation and usage. In collections, a P&L analysis provides valuation on recoveries and operational costs. These various assessments are quantified in the P&L and allows the organization to identify other mechanisms such as marketing campaigns, customer services or technology investments in support of the organization’s goals and mission. Organizations face a full spectrum of opportunities and risks. We propose a profitability analysis to evaluate business trade-offs, navigate the marketplace, and continue to provide relevant financial products and services to consumers and businesses. Learn more

Consumers are taking advantage of new car incentives, low interest rates and longer-term loans in order to ensure that their vehicle purchase is manageable.

Big data is bringing changes to the way credit scores are reported and making it easier for lenders to find creditworthy consumers, and for consumers to qualify for the financing they need. Since last year’s annual report, alternative credit data1 has continued to gain in popularity. In Experian’s latest 2020 State of Alternative Credit Data report, we take a closer look at why alternative credit data is supplemental and essential to consumer lending and how it’s being adopted by both consumers and financial institutions. While the topic of alternative credit data has become more well known, its capabilities and benefits are still not widely discussed. For instance, did you know that … 89% of lenders agree that alternative credit data allows them to extend credit to more consumers. 96% of lenders agree that in times of economic stress, alternative credit data allows them to more closely evaluate consumer’s creditworthiness and reduce their credit risk exposure. 3 out of 4 consumers believe they are a better borrower than their credit score represents. Not only do consumers believe they’re more financially astute than their credit score depicts – but they’re happy to prove it, with 80% saying they would share various types of financial information with lenders if it meant increased chances for approval or improved interest rates. This year’s report provides a deeper look into lenders’ and consumers’ perceptions of alternative credit data, as well as an overview of the regulatory landscape and how alternative credit data is being used across the lending marketplace. Lenders who incorporate alternative credit data and machine learning techniques into their current processes can harness the data to unlock their portfolio’s growth potential, make smarter lending decisions and mitigate risk. Learn more in the 2020 State of Alternative Credit Data white paper. Download now

Staying ahead of the trends and adjusting will support sales growth, while also supporting consumers as they begin to recover from the impact of COVID-19.