By: Matt Sifferlen I recently read interesting articles on the Knowledge@Wharton and CNNMoney sites covering the land grab that's taking place among financial services startups that are trying to use a consumer's social media activity and data to make lending decisions.  Each of these companies are looking at ways to take the mountains of social media data that sites such as Twitter, Facebook, and LinkedIn generate in order to create new and improved algorithms that will help lenders target potential creditworthy individuals.  What are they looking at specifically?  Some criteria could be: History of typing in ALL CAPS or all lower case letters Frequent usage of inappropriate comments Number of senior level connections on LinkedIn The quantity of posts containing cats or annoying  self-portraits (aka "selfies") Okay, I made that last one up. The point is that these companies are scouring through the data that individuals are creating on social sites and trying to find useful ways to slice and dice it in order to evaluate and target consumers better. On the consumer banking side of the house, there are benefits for tracking down individuals for marketing and collections purposes. A simple search could yield a person's Facebook, Twitter, or LinkedIn profile. The behaviorial information can then be leveraged as a part of more targeted multi-channel and contact strategies. On the commercial banking side, utilizing social site info can help to supplement any traditional underwriting practices. Reviewing the history of a company's reviews on Yelp or Angie's List could share some insight into how a business is perceived and reveal whether there is any meaningful trend in the level of negative feedback being posted or potential growth outlook of the company. There are some challenges involved with leveraging social media data for these purposes. 1. Easily manipulated information 2. Irrelevant information that doesn't represent actual likes, thoughts or relevant behaviors 3. Regulations From a Fraud perspective, most online information can easily and frequently be manipulated which can create a constantly moving target for these providers to monitor and link to the right customer.  Fake Facebook and Twitter pages, false connections and referrals on LinkedIn, and fabricated positive online reviews of a business can all be accomplished in a matter of minutes. And commercial fraudsters are likely creating false business social media accounts today for shelf company fraud schemes that they plan on hatching months or years down the road.  As B2B review websites continue to make it easier to get customers signed up to use their services, the downside is  there will be even more unusable information being created since there are less and less hurdles for commercial fraudsters to clear, particularly for sites that offer their services for free. For now, the larger lenders are more likely to utilize alternative data sources that are third party validated, like rent and utility payment histories, while continuing to rely on tools that can prevent against fraud schemes. It will be interesting to see what new credit and non credit data will be utilized as a common practice in the future as lenders continue their efforts to find more useful data to power their credit and marketing decisions.

According to Experian’s latest State of the Automotive Finance Market report, a record 84.5% of consumers who acquired a new vehicle in Q2 2013 used either a loan or a lease to fund the purchase - up from 82.5% in Q2 2012. Leases accounted for an all-time high of 27.6% of new vehicles financed during the second quarter, up from 24.4% in Q2 2012.

By: Joel Pruis As we go through the economic seasons, we need to remember to reassess our strategy.  While we use data as the way to accurately assess the environment and determine the best course of action for your future strategy, the one thing that is for certain is that the current environment will definitely change.  Aspects that we did not anticipate will develop, trends may start to slow or change direction. Moneyball continues to be a movie that gives us some great examples.  We see that Billy Beane and Peter Brand were constantly looking at their position and making adjustments to the team’s roster.  Even before they made any significant adjustments, Beane and Brand found themselves justifying their strategy to the owner (even though the primary issue was with the head coach not playing the roster that maximized the team’s probability of winning).  The first aspect that worked against the strategy was the head coach and while we could go down a tangent about cultural battles within an organization, let's focus on how Beane adjusted.  Beane simply traded the players the head coach preferred to play forcing the use of players preferred by Beane and Brand. Later we see Beane and Brand making final adjustments to the roster by negotiating trades resulting in the Oakland A’s landing Ricardo Rincon.  The change in the league that allowed such a trade was that Rincon’s team was not doing well and the timing allowed the A’s to execute the trade.   Beane adjusted with the changes in the league.  One thing to note, is that he changed the roster while the team was doing well.  They were winning but Beane made adjustments to continue maximizing the team’s potential.  Too often we adjust when things are going poorly and do not adjust when we seem to be hitting our targets. Overall, we need to continually assess what has changed in our environment and determine what new challenges or new opportunities these changes present.  I encourage you to regularly assess what is happening in your local economy.  High-level national trends are constantly on the front page of the news but we need to drill down to see what is happening in a specific market area being served.  As Billy Beane did with the Oakland A’s throughout the season, I challenge you to assess your current strategies and execution against what is happening in your market territory.   Related posts: How Financial Institutions can assess the overall conditions for generating the net yield on the assets How to create decision strategies for small business lending Upcoming Webinar: Learn about the current state of small business, the economy and how it applies to you

After reaching post-recession lows in June, the July S&P/Experian Consumer Credit Default Indices showed that default rates increased slightly in several categories. While the national composite,* first mortgage and auto loan default rates all increased, the bankcard default rate continued to decline and hit a new low of 3.22%.

If you're looking to implement and deploy a knowledge-based authentication (KBA) solution in your application process for your online and mobile customer acquisition channels - then, I have good news for you! Here’s some of the upside you’ll see right away: Revenues (remember, the primary activities of your business?) will accelerate up Your B2C acceptance or approval rates will go up thru automation Manual review of customer applications will go down and that translates to a reduction in your business operation costs Products will be sold and shipped faster if you’re in the retail business, so you can recognize the  sales revenue or net sales quicker Your customers will appreciate the fact that they can do business in minutes vs. going thru a lengthy application approval process with turnaround times of days to weeks And last but not least, your losses due to fraud will go down To keep you informed about what’s relevant when choosing a KBA vendor, here’s what separates the good KBA providers from the bad: The underlying data used to create questions should be from multiple data sources and should vary in the type of data, for example credit and non-credit Relying on public record data sources is becoming a risky proposition given recent adoption of various social media websites and various public record websites Have technology that will allow you to create a custom KBA setup that is unique to your business and business customers, and the proven support structure to help you grow your business safely Provide consulting (performance monitoring)and analytical support that will keep you ahead of the fraudsters trying to game your online environment by assuring your KBA tool is performing at optimal levels Solutions that can easily interface with multiple systems, and assist from a customer experience perspective. How are your peers in the following 3 industries doing at adopting a KBA strategy to help grow and protect their businesses? E-commerce 21% use KBA today and are satisfied with the results* 13% have KBA on roadmap and the list is growing fast* Healthcare 20% use dynamic KBA* Financial Institutions 30% combination of dynamic & static KBA* 20% dynamic KBA* What are the typical uses of KBA?* Call center Web / mobile verification Enrollment ID verification Provider authentication Eligibility *According to a 2012 report on knowledge-based authentication by Aite Group LLC Knowledge-based authentication, commonly referred to as KBA, is a method of authentication which seeks to prove the identity of someone accessing a service, such as a website. As the name suggests, KBA requires the knowledge of personal information of the individual to grant access to the protected material. There are two types of KBA: "static KBA", which is based on a pre-agreed set of "shared secrets"; and "dynamic KBA", which is based on questions generated from a wider base of personal information.  

Small-business credit conditions strengthened in Q2 2013, lifting the Experian/Moody's Analytics Small Business Credit Index 2.8 points to 111.7 - the highest level since it began tracking. Consumer spending growth was modest, but steady and consumer confidence is at multiyear highs. This is a reassuring signal that consumer spending is unlikely to backtrack in the near future. Furthermore, credit quality improved for every business size, with the total share of delinquent dollars 2.4 percentage points lower than a year ago and at the lowest point on record.

According to a recent survey by freecreditscore.com™, women find financial responsibility more attractive in assessing a romantic partner (96 percent) than physical attractiveness (87 percent) or career ambition (87 percent). Men slightly favor good looks over financial responsibility (92 percent versus 91 percent); however, 20 percent of men surveyed would not marry someone with a poor credit score.

Isis has had a slew of announcements – about an impending national rollout and further assertion by both Amex and Chase of their intent to continue their partnership. Surprisingly (or not) Capital One has stayed mum about its plans, and neither has Barclays or Discover shown any interest. And much ink has been spilled at how resolute (and isolationist) Isis has been – including here on this blog. So does the launch reflect a maturity in the JV to tackle a national rollout, or is it being forced to show its hands? Wait..I have more questions... What about the missing partner? I have no reason to believe that CapitalOne will continue its relationship with Isis – as I doubt they learnt anything new from the Isis pilot – apart from the excruciatingly difficult orchestration required to balance multiple TSMs, Carriers, Handsets and the Secure Element. Further, there are no new FI launch partners – no BofA, no WellsFargo, no Citi – who each are capable of paying the upfront cost to be on Isis. But, even to those who can afford it – the requisite capital and operating expenditures stemming from a national rollout, should give pause when compared against the lift Isis can provide to incremental revenue via Isis wallet consumers. This is the biggest qualm for Issuers today – that Isis has all the capability to drive distribution and do secure provisioning – but none of the capacity to drive incremental card revenue. And Isis opting to profit from simply delivering merchant offers based on store proximity, with no visibility in to past payment behavior and no transactional marketing capabilities – is hardly different or better than what FourSquare already does for Amex, for example. So why bother? *Updated* There is also a total misalignment of objectives between Isis and its Issuing partners around customer acquisition. Isis charges for provisioning credentials to the wallet regardless of how many transactions that may follow. So Isis has an incentive to push its wallet to everyone with a phone even if that person never completes a contactless transaction. Where as its Issuers have an incentive to get most bang for the buck by targeting the folks most likely to use a smartphone to pay after activation. See a problem? *End Update* How much more runway does Isis have? This is the question that has been around most. How much more capital is Isis’s parents willing to plow in to the JV before they come calling? The rumored quarter a billion pot holds enough to power a national rollout, but is it enough to sustain that momentum post-launch? If those $100 Amazon Gift cards they were handing out in Austin/SLC to boost consumer adoption (a final push just prior to reporting overall usage numbers) were any indication, Isis needs to invest in a smarter go-to-market strategy. It wouldn’t be surprising if Isis had to go back to its parents for mo’ money so that it can continue to run – while standing absolutely still. Who has a recognizable brand – Isis or Amex/Chase? Isis once boasted about buying a billion impressions in their pilot markets across various marketing channels. I shudder to see the ROI on that ad spend – especially when all the Ads in the world could not help if a customer still had to get a new phone, or get a new SIM by visiting the carrier store – to do what a plastic card can do effortlessly. It’s FI partners (Chase, Amex and CapitalOne) have so far kept any Isis branding outside of their ads, and I doubt if that would change. After all, why would Amex and Chase who collectively spent about $4.2B in advertising last year care about giving Isis any visibility, when a Chase or an Amex customer still has to fire up an Isis app to use a Chase or an Amex card? Why would Amex and Chase dilute its brand by including Isis messaging – when they themselves are pitted against each other inside the wallet? For some inexplicable reason – Isis made a conscious decision to become a consumer brand instead of a white label identity, provisioning and payment platform. (And for all of the faults attributable to Google – they are a consumer brand and yet – look at all the trouble it had to make its payments efforts scale.) I believe that until Isis displays a willingness to let its Issuing partners play front and center, any support they in turn provide to Isis is bound to be non-committal. Have you counted the Point-of-Sale registers? MCX proved to be the sand in mobile payments gears since the announcement. It has had “quite the intended” effect of killing any kind of forward movement on in-store payment initiatives that required a conventional point-of-sale upgrade. Contactless upgrades at point-of-sale which have long been tied to the EMV roadmap has had a series of setbacks, not the least of which is the continuing ambiguity around Issuer readiness, merchant apathy, and roadblocks such as the recent ruling. More so, the ruling injected more ambiguity in to how proximity payments would function, which payment apps must be supported for the same debit or credit transaction etc. With retailers, Isis brings nothing new that others are unable to claim, and infact it brings even less – as there is no new context outside of store-customer-proximity that it can bring to deliver discounts and coupons to customer prospects. And it’s cringeworthy when someone claims to “help” retailers in driving incremental traffic to stores, simply because they are able to pair context and proximity among other factors. These claims are hugely suspect due to how limited their “contexts” are – and no one can blend intent, past behavior, location and other factors better than Google – and even they churned out an inferior product called Google Offers. Transactional data is uniquely valuable – but Banks have been negligent in their role to do anything meaningful. But I digress. Coming full circle: Will we ever see proximity payments realized in a way that does not include the SE? The UICC based Secure Element model has been the favored approach by Carriers, which allows device portability and to exert control on the proximity payments ecosystem. We have seen deviations from the norm – in the form of Bankinter, and the recent RBC/BellID Secure cloud – which reject the notion of an onboard Secure Element, and opts to replace it with credentials on TEE, in memory or on the cloud. There is much interest around this topic, but predicting which way this will turn out is difficult owing to where the power to effect change resides – in the hands of OEMs, Ecosystem owners, Carriers etc. And don’t forget that Networks need to subscribe to this notion of credentials outside of SE, as well. But what about an Isis wallet that decouples itself from NFC/SE? Google has toyed with such an approach, but it clearly has the assets (Gmail, Android et al) to build itself a long runway. What about an Isis that exists outside of NFC/SE? Well – why do you need Isis then? To be fair, such an approach would pale against MCX or Paydiant or a number of other wallets and offer even less reasons for merchants to adopt. Paydiant offers both a better point-of-sale integration and a quicker QR capture – which Isis will struggle to match. It’s abundantly clear – take away the SE – and just as easily, the Carrier value proposition collapses on its own like a pack of cards. That’s one risky bet. What are your thoughts about the future of Isis? I am on Twitter here, if you wish to connect. And you can find me on LinkedIn here.   This is a re-post from Cherian's original blog post "Isis: A JV at odds."

According to the Q2 2013 Experian Automotive State of the Automotive Finance Market report, vehicle repossessions reached their lowest rate in seven years, with only 0.36 percent of all vehicle loans reaching repossession. This change is a drop of 14.8 percent over the previous quarter and a 10.4 percent decrease from the previous low of 0.41 percent in Q2 2006.

By: Reggie Whitley After spending years working in bank fraud, one of the most difficult conversations to have with a consumer is “We can no longer successfully protect your accounts.” Identity theft is shockingly easy to commit.  In most cases consumers are able to recover successfully from compromises thanks to the diligence of their financial institutions, the cooperation of retailers, and credit reporting services that assist in recovery from compromises. Problems arise when you have consumers who become attractive targets for various reasons – these could be relationships to others, high net worth, extensive products, or business ownership.  These targets aren’t ‘one and done’ consumers for an identity criminal.  For these consumers identity thieves will continue accessing their identities for months or even years.  These consumers are often forced to migrate from banks or credit card companies because the identity crimes follow them and they become too expensive to protect.  For these consumers, identity theft is a true nightmare. In the past year, fraud protection strategies and tools have emerged that will begin to reduce the risk of continued compromise these consumers face.  Real time identity alerting tools have emerged to offer consumers a way to receive notification when their identities are being used, not just at a single institution, but across the financial landscape. Consumers now have the ability to receive SMS, Email, or Web notifications whenever their identity has been verified.  If the consumer receives an alert on an banking account they just opened, they simply move on, no action is required.  In the event that the alert is NOT something they generated, the consumer calls in, discusses with a fraud specialist and is connected to the generating bank or retailer to file a fraud report. Obviously, this service benefits any consumer who would like to monitor usage of their identity and detect fraud, but knowing first hand the horror stories extensively compromised consumers get caught in, tools like start to open a level of REAL TIME protection that hasn’t before existed. The benefit is truly across the board.  Banks and retailers begin to realize savings when consumers engage them within minutes of fraud.  This reduces the success of identity thieves, discouraging additional attempts.  Finally, detecting this fraud reduces the extensive efforts needed to help a consumer clear up credit reports and file fraud reports. Perhaps in the near future instead of turning high risk consumers away, we can provide them with the ability to protect themselves and the industry from the nightmare situations that are still too frequent today.

The $478 billion in Q2 2013 mortgage originations is a 10 percent increase over a year ago ($436 billion) but a 7 percent decrease from the previous quarter ($515 billion) — primarily as a result of the slowdown in refinancing activity.

The average bankcard balance per consumer in Q2 2013 was $3,831, a 1.3 percent decline from the previous year. Consumers in the VantageScore® near prime and subprime credit tiers carried the largest average bankcard balances at $5,883 and $5,903 respectively. The super prime tier carried the smallest average balance at $1,881.

The June release of the S&P/Experian Consumer Credit Default Indices showed default rates continued to fall across all categories. The national composite* and the first mortgage default rate both hit new post-recession lows (1.34 percent and 1.23 percent, respectively). The table below summarizes the June 2013 results for the S&P/Experian Consumer Credit Default Indices.

Using data from IntelliViewSM, Credit.com recently compiled a list of states with the highest average bankcard utilization rates. Alaska took first place, with an average utilization ratio of 27.73 percent. This should come as no surprise since Alaska has recently topped lists for highest credit card balances and highest revolving debt.

By: Maria Moynihan Government organizations that handle debt collection have similar business challenges regardless of agency focus and mission. Let’s face it, debtors can be elusive. They are often hard to find and even more difficult to collect from when information and processes are lacking. To accelerate debt recovery, governments must focus on optimization--particularly, streamlining how resources get used in the debt collection process.  While the perception may be that it’s difficult to implement change given limited budgets, staffing constraints or archaic systems, minimal investment in improved data, tools and technology can make a big difference. Governments most often express the below as their top concerns in debt collection: Difficulty in finding debtors to collect on late tax submissions, fines or fees. Prioritizing collection activities--outbound letters, phone calls, and added steps in decisioning. Difficulty in incorporating new tools or technology to reduce backlogs or accelerate current processes. By simply utilizing right party contact data and tools for improved decisioning, agencies can immediately expose areas of greater possible ROI over others. Credit and demographic data elements like address, income models, assets, and past payment behavior can all be brought together to create a holistic view of an individual or business at a point in time or over time. Collections tools for improved monitoring, segmentation and scoring could be incorporated into current systems to improve resource allotment. Staffing can then be better allocated to not only focus on which accounts to pursue by size, but by likelihood to make contact and payment. Find additional best practices to optimize debt recovery in this guide to Maximizing Revenue Potential in the Public Sector. Be sure to check out our other blog posts on debt collection.