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

In what has been an unprecedented year, marked by a global pandemic and a number of economic and personal challenges for both businesses and consumers, Americans are maintaining healthy credit profiles during the COVID-19 pandemic. Experian released the 11th annual State of Credit report, which provides a comprehensive look at the credit performance of consumers across America by highlighting consumer credit scores and borrowing behaviors. This year’s report provided an extended view into how consumers are managing and repaying their debts; showing most Americans are practicing responsible credit management by reducing utilization rates, credit card balances and late payments. Even in light of the pandemic, data on American consumers across all generations shows responsible credit management including reduced utilization rates, credit card balances and late payments. “While it’s difficult to predict when the economy will return to pre-pandemic levels, we are seeing promising signs of responsible credit management, especially among younger consumers,” said Alex Lintner, group president Experian Consumer Information Services. Highlights of Experian’s State of Credit report: 2020 State of Credit Report 2019 2020 Average VantageScore® credit score [1,2] 682 688 Average number of credit cards 3.07 3.0 Average credit card balance $6,629 $5,897 Average revolving utilization rate 30% 26% Average number of retail credit cards 2.51 2.42 Average retail credit card balance $1,942 $2,044 Average nonmortgage debt [3] $25,386 $25,483 Average mortgage debt $213,599 $215,655 Average 30 - 59 days past due delinquency rates 3.9% 2.4% Average 60 - 89 days past due delinquency rates 1.9% 1.3% Average 90 - 180 days past due delinquency rates 6.8% 3.8%   Though not the same, some consumers are experiencing a second economic downturn. The economic fallout stemming from COVID-19 coming after the Great Recession of 2009, which took place in the not too distant past. Silent, Boomer, Gen X and Gen Z Americans are managing responsible credit utilization rates and holding credit cards below the recommended maximum. Are the older generations more credit responsible? Average VantageScore® credit score follows rank order from oldest to youngest – though contributed to by length of time possessing credit, number of lines of credit, and other factors that drive credit score – with the Silent Generation having the highest score (729), then Boomers (716), followed by Gen X (676), Gen Y (658) and Gen Z (654). Gen X consumers have the highest average credit card balance at $7,718 and utilization at 32%, while Gen Z has the lowest average credit card balance at $2,197 and the Silent Generation has the lowest utilization at 13%. Year over year data shows positive results driven by younger borrowers. While average utilization rates dropped for every generation, the most significant decreases were seen in Gen Z borrowers who saw a 6 percent reduction in their use of available credit, followed by Millennials who saw a 5% decrease year-over-year.  While Gen Z and Gen Y are carrying more credit cards than they were in 2020, their credit card balances decreased year-over-year. These factors fueled a 13-point increase in average credit scores for Gen Z and an 11-point increase for Millennials. When spliced by state, the data Minnesota had the highest credit score, while Mississippi had the lowest credit score. While the future is still uncertain, perhaps consumers can find comfort in knowing there is much they can do to improve their financial health – including their credit scores – and that there are numerous resources for them to access during these unprecedented times. “As the consumer’s bureau, we are committed to informing, guiding, and protecting consumers. Educating Americans about the factors included in their credit profile and how to manage these responsibly is of critical importance, especially on the road to economic recovery from the COVID-19 pandemic,” said Lintner. In an effort to encourage consumers to regularly monitor and understand the information in their credit reports, Experian joined forces with the other U.S. credit reporting agencies, to offer free weekly credit reports to all Americans through April 2021 via AnnualCreditReport.com.  In addition to the free weekly credit report at AnnualCreditReport.com, Experian also offers consumers free access to their credit report and ongoing credit monitoring at Experian.com. Additional credit education resources and tools Experian’s #CreditChat: Hosted by @Experian on Twitter with financial experts every Wednesday at 3 p.m. Eastern time The Ask Experian blog: Find answers to common questions, advice and education about credit Experian Boost: Add positive telecom and utility payments to your Experian credit report for an opportunity to improve your credit scores experian.com/consumer-education-content/ experian.com/coronavirus   1VantageScore® is a registered trademark of VantageScore Solutions, LLC. 2VantageScore® credit score range is 300 to 850.

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.

Changing consumer behaviors caused by the COVID-19 pandemic have made it difficult for businesses to make good lending decisions. Maintaining a consistent lending portfolio and differentiating good customers who are facing financial struggles from bad actors with criminal intent is getting more difficult, highlighting the need for effective decisioning tools. As part of our ongoing Q&A perspective series, Jim Bander, Experian’s Market Lead, Analytics and Optimization, discusses the importance of automated decisions in today’s uncertain lending environment. Check out what he had to say: Q: What trends and challenges have emerged in the decisioning space since March? JB: In the age of COVID-19, many businesses are facing several challenges simultaneously. First, customers have moved online, and there is a critical need to provide a seamless digital-first experience. Second, there are operational challenges as employees have moved to work from home; IT departments in particular have to place increase priority on agility, security, and cost-control. Note that all of these priorities are well-served by a cloud-first approach to decisioning. Third, the pandemic has led to changes in customer behavior and credit reporting practices. Q: Are automated decisioning tools still effective, given the changes in consumer behaviors and spending? JB: Many businesses are finding automated decisioning tools more important than ever. For example, there are up-sell and cross-sell opportunities when an at-home bank employee speaks with a customer over the phone that simply were not happening in the branch environment. Automated prequalification and instant credit decisions empower these employees to meet consumer needs. Some financial institutions are ready to attract new customers but they have tight marketing budgets. They can make the most of their budget by combining predictive models with automated prescreen decisioning to provide the right customers with the right offers. And, of course, decisioning is a key part of a debt management strategy. As consumers show signs of distress and become delinquent on some of their accounts, lenders need data-driven decisioning systems to treat those customers fairly and effectively. Q: How does automated decisioning differentiate customers who may have missed a payment due to COVID-19 from those with a history of missed payments? JB: Using a variety of credit attributes in an automated decision is the key to understanding a consumer’s financial situation. We have been helping businesses understand that during a downturn, it is important for a decisioning system to look at a consumer through several different lenses to identify financially stressed consumers with early-warning indicators, respond quickly to change, predict future customer behavior, and deliver the best treatment at the right time based on customer specific situations or behaviors.  In addition to traditional credit attributes that reflect a consumer’s credit behavior at a single point in time, trended attributes can highlight changes in a consumer’s behavior. Furthermore, Experian was the first lender to release new attributes specifically created to address new challenges that have arisen since the onset of COVID. These attributes help lenders gain a broader view of each consumer in the current environment to better support them. For example, lenders can use decisioning to proactively identify consumers who may need assistance. Q: What should financial institutions do next? JB: Financial institutions have rarely faced so much uncertainty, but they are generally rising to the occasion. Some had already adopted the CECL accounting standard, and all financial institutions were planning for it. That regulation has encouraged them to set aside loss reserves so they will be in better financial shape during and after the COVID-19 Recession than they were during the Great Recession. The best lenders are making smart investments now—in cloud technology, automated decisioning, and even Ethical and Explainable Artificial Intelligence—that will allow them to survive the COVID Recession and to be even more competitive during an eventual recovery. Financial institutions should also look for tools like Experian’s In the Market Model and Trended 3D Attributes to maximize efficiency and decisioning tactics – helping good customers remain that way while protecting the bottom line. In the Market Models Trended 3D Attributes  About our Expert: [avatar user="jim.bander" /] Jim Bander, PhD, Market Lead, Analytics and Optimization, Experian Decision Analytics Jim joined Experian in April 2018 and is responsible for solutions and value propositions applying analytics for financial institutions and other Experian business-to-business clients throughout North America. He has over 20 years of analytics, software, engineering and risk management experience across a variety of industries and disciplines. Jim has applied decision science to many industries, including banking, transportation and the public sector.

As subprime originations decrease, some think that subprime consumers are being locked out of the automotive finance market, but that’s not the whole story.

This is the fourth in a series of blog posts highlighting optimization, artificial intelligence, predictive analytics, and decisioning for lending operations in times of extreme uncertainty. The first post dealt with optimization under uncertainty, the second with predicting consumer payment behavior, and the third with validating consumer credit scores. This post describes some specific Experian solutions that are especially timely for lenders strategizing their response to the COVID Recession. Will the US economy recover from the pandemic recession?  Certainly yes. When will the economy recover? There is a lot more uncertainty around that question. Many people are encouraged by positive indicators, such as the initial rebound of the stock market, a return of many of the jobs lost at the beginning of the pandemic, and a significant increase in housing starts. August’s retail spending and homebuilder confidence are very encouraging economic indicators. Other experts doubt that the “V-shaped” recovery can survive flare-ups of the virus in various parts of the US and the world, and are calling for a “W-shaped” recovery.  Employment indicators are alarming: many people remain out of work, some job losses are permanent, and there are more initial jobless claims each week now than at the height of the Great Recession. Serious hurdles to economic recovery may remain until a vaccine is widely available: childcare, urban transportation, and global trade, for example. I’m encouraged by the resilience of many of our country’s consumer lenders. They are generally responding well to these challenges. If past recessions are a guide, some lenders will not survive these turbulent times. This time, many lenders—whether or not they have already adopted the CECL accounting standards—have been increasing allowances for their anticipated credit losses. At least one rating agency believes major banks are prepared to absorb those losses from earnings.  The lenders who are most prepared for the eventual recovery will be those that make good decisions during these volatile times and take action to put themselves in the best position in anticipation of the recovery that will certainly follow. The best lenders are making smart investments now to be prepared to capitalize on future opportunities. Experian’s analytics and consulting experts are continuously improving our suite of solutions that help consumer lenders and others assess consumer behavior and respond quickly to the rapidly fluctuating market conditions as well as changing regulations and credit reporting practices. Our newly announced Economic Response and Recovery Suite includes the ABCD’s that lenders need to be resilient and competitive now and to prepare to thrive during the eventual recovery: A – Analytics. As I’ve written about in prior blog posts, data is a prerequisite to making good business decisions, but data alone is not enough. To make wise, insightful decisions, lenders need to use the most appropriate analytical techniques, whether that means more meaningful attributes, more predictive and compliant credit scores, more accurate and defensible loss forecasting solutions, or optimization systems that help develop strategies in a world where budgets, regulations, and other constraints are changing. For example, Experian has released a set of Spotlight 2020 Attributes that help consumer lenders create a positive experience for customers who have received an accommodation during the pandemic. In many cases motivated by the new race to improve customer experience online, and in other cases as a reaction to new and creative fraud schemes, some clients are using this period as an opportunity to explore or deploy ethical and explainable Artificial Intelligence. B – Business Intelligence. Credit bureaus like Experian are uniquely situated to understand the impact of the COVID recession on America’s consumers. With impact reports, dashboards, and custom business intelligence solutions, lenders are working during the recession to gain an even better understanding of their current and prospective customers. We’re helping many of them to proactively help consumers when they need it most. For example, lenders have turned to us to understand their customer’s payment hierarchy—which bills they pay first when times are tough. Our free COVID-19 US Business Risk Index helps make lending options available to the businesses who need them most. And we’ve armed lenders with recommendations for which of our pre-existing attributes and scores are most helpful during trying times. Additional reporting tools such as the Auto Market Tracker, Ascend Market Insights Dashboard, and the weekly economic update video provide businesses with information on new market trends—information that helps them respond during the recession and promises to help them grow during the eventual recovery. C – Consulting. It’s good to turn data into information and information into insight, but how do these lenders incorporate these insights in their business strategies? Lenders and other businesses have been turning to Experian’s analytics and Advisory services consultants to unlock the information hidden in credit and other data sources—finding ways to make their business processes more efficient and more effective while developing quick response plans and more long-term recovery strategies. D – Delivery.  Decision science is the practice of using advanced analytics, artificial intelligence, and other techniques to determine the best decision based on available data and resources. But putting those decisions into action can be a challenge. (Organizations like IBM and Gartner estimate that a great majority of data science projects are never put into production.) Experian technologies—from our analytics platform to our attribute integration and decision management solutions ensure that data-driven decisions can be quickly implemented to make a real difference. Treating each customer optimally has a number of benefits—whether you are trying to responsibly grow your portfolio, reduce credit losses and allowances, control servicing costs, or simply staying in compliance during dynamic times. In the age of COVID, IT departments have placed increased priority on agility, security, customer experience, and cost control, and appreciate cloud-first approach to deploying analytics. It’s too early to know how long this period of extreme uncertainty will last. But one thing is certain: it will come to an end, and the economy will recover someday. I predict that many of the companies that make the best use of data now will be the ones who do the best during the recovery. To hear more ways your organization can navigate this downturn and the recovery to follow, please watch our on-demand webinar and check out our Economic Response and Recovery Suite. Watch the Webinar

Since the start of the COVID-19 health crisis, gross domestic product (GDP) has continued to fall in the U.S. In fact, the GDP collapsed at a 32.9% annualized rate last quarter, which is the deepest decline since 1947. But as some states throughout the U.S. begin to relax their stay-at-home orders and start to reopen businesses, economists are taking note of how this will affect the nation’s recovery as a whole. When it comes to tracking the nation’s economic recovery, economists and policymakers need to account for all of the factors that will influence the outcome. This includes tracking the performance of individual states and understanding each state’s trajectory and recovery prospects. There are many factors that will impact each state’s trajectory for recovery. One example, in particular, can be seen in a state’s preparedness level and rainy day fund that’s set aside for emergencies. At the onset of the pandemic, many states were unprepared for the financial crisis. The Government Finance Officers Association recommends that states set aside at least two months of operating expenses in their rainy day funds – or roughly 16% of their general fund. However, although some states had set aside some budget to prepare for a recession, it was simply not enough. Only a few states were able to fulfill this requirement. Other factors that will impact each state’s recovery include: the efficiency of its unemployment program, state lockdown measures, and the concentration of jobs in vulnerable industries. Our new white paper, featuring key insights from Joseph Mayans, Principal Economist with Advantage Economics, provides a deep dive on: The economic landscape at the onset of the pandemic Statewide discrepancies for unemployment programs, lockdown measures, and labor markets Underlying factors that determine a state’s recovery prospects Why tracking state-level economies is critical for national recovery Listen in as he describes the importance of having a different perspective when tracking the national economy and download the white paper for greater insights. Download White Paper Now