Tag: alternative credit data

Alternative credit data and trended data each have advantages to lenders and financial institutions. Is there such a thing as the MVD (Most Valuable Data)? Get Started Today When it comes to the big game, we can all agree the score is the last thing standing; however, how the two teams arrived at that score is arguably the more important part of the story. The same goes for consumers’ credit scores. The teams’ past records and highlight reels give insight into their actual past performance, while game day factors beyond the stat sheets – think weather, injury rehab and personal lives – also play a part. Similarly, consumers’ credit scores according to the traditional credit file may be the dependable source for determining credit worthiness. But, while the traditional credit file is extensive, there is a playbook of other, additional information you can arm yourself with for easier, faster and better lending decisions. We’ve outlined what you need to create a win-win data strategy: Alternative credit data and trended data each have unique advantages over traditional credit data for both lenders and consumers alike. How do you formulate a winning strategy? By making sure you have both powerhouses on your roster. The results? Better than that game-winning touchdown and hoisting the trophy above your head – universe expansion and the ability to lend deeper. Get Started Today

Are You #TeamTrended or #TeamAlternative? There’s no such thing as too much data, but when put head to head, differences between the data sets are apparent. Which team are you on? Here’s what we know: With the entry and incorporation of alternative credit data into the data arena, traditional credit data is no longer the sole determinant for credit worthiness, granting more people credit access. Built for the factors influencing financial health today, alternative credit data essentially fills the gaps of the traditional credit file, including alternative financial services data, rental payments, asset ownership, utility payments, full file public records, and consumer-permissioned data – all FCRA-regulated data. Watch this video to see more:    Trended data, on the other hand shows actual, historical credit data. It provides key balance and payment data for the previous 24 months to allow lenders to leverage behavior trends to determine how individuals are utilizing their credit. Different splices of that information reveal particular behavior patterns, empowering lenders to then act on that behavior. Insights include a consumer’s spend on all general purpose credit and charge cards and predictive metrics that identify consumers who will be in the market for a specific type of credit product. In the head-to-head between alternative credit data and trended data, both have clear advantages. You need both on your roster to supplement traditional credit data and elevate your game to the next level when it comes to your data universe. Compared to the traditional credit file, alternative credit data can reveal information differentiating two consumers. In the examples below, both consumers have moderate limits and have making timely credit card payments according to their traditional credit reports. However, alternative data gives insight into their alternative financial services information. In Example 1, Robert Smith is currently past due on his personal loan, whereas Michelle Lee in Example 2 is current on her personal loan, indicating she may be the consumer with stronger creditworthiness.   Similarly, trended data reveals that all credit scores are not created equal. Here is an example of how trended data can differentiate two consumers with the same score. Different historical trends can show completely different trajectories between seemingly similar consumers.   While the traditional credit score is a reliable indication of a consumer’s creditworthiness, it does not offer the full picture. What insights are you missing out on? Go to Infographic Get Started Today

From the time we wake up to the minute our head hits the pillow, we make about 35,000 conscious and unconscious decisions a day. That’s a lot of processing in a 24-hour period. As part of that process, some decisions are intuitive: we’ve been in a situation before and know what to expect. Our minds make shortcuts to save time for the tasks that take a lot more brainpower. As for new decisions, it might take some time to adjust, weigh all the information and decide on a course of action. But after the new situation presents itself over and over again, it becomes easier and easier to process. Similarly, using traditional data is intuitive. Lenders have been using the same types of data in consumer credit worthiness decisions for decades. Throwing in a new data asset might take some getting used to. For those who are wondering whether to use alternative credit data, specifically alternative financial services (AFS) data, here are some facts to make that decision easier. In a recent webinar, Experian’s Vice President of Analytics, Michele Raneri, and Data Scientist, Clara Gharibian, shed some light on AFS data from the leading source in this data asset, Clarity Services. Here are some insights and takeaways from that event. What is Alternative Financial Services? A financial service provided outside of traditional banking institutions which include online and storefront, short-term unsecured, short-term installment, marketplace, car title and rent-to-own. As part of the digital age, many non-traditional loans are also moving online where consumers can access credit with a few clicks on a website or in an app. AFS data provides insight into each segment of thick to thin-file credit history of consumers. This data set, which holds information on more than 62 million consumers nationwide, is also meaningful and predictive, which is a direct answer to lenders who are looking for more information on the consumer. In fact, in a recent State of Alternative Credit Data whitepaper, Experian found that 60 percent of lenders report that they decline more than 5 percent of applications because they have insufficient information to make a loan decision. The implications of having more information on that 5 percent would make a measurable impact to the lender and consumer. AFS data is also meaningful and predictive. For example, inquiry data is useful in that it provides insight into the alternative financial services industry. There are also more stability indicators in this data such as number of employers, unique home phone, and zip codes. These interaction points indicate the stability or volatility of a consumer which may be helpful in decision making during the underwriting stage. AFS consumers tend to be younger and less likely to be married compared to the U.S. average and traditional credit data on File OneSM . These consumers also tend to have lower VantageScore® credit scores, lower debt, higher bad rates and much lower spend. These statistics lend themselves to seeing the emerging consumer; millennials, immigrants with little to no credit history and also those who may have been subprime or near prime consumers who are demonstrating better credit management. There also may be older consumers who may have not engaged in traditional credit history in a while or those who have hit a major life circumstance who had nowhere else to turn. Still others who have turned to nontraditional lending may have preferred the experience of online lending and did not realize that many of these trades do not impact their traditional credit file. Regardless of their individual circumstances, consumers who leverage alternative financial services have historically had one thing in common: their performance in these products did nothing to further their access to traditional, and often lower cost, sources of credit. Through Experian’s acquisition and integration of Clarity Services, the nation’s largest alternative finance credit bureau, lenders can gain access to powerful and predictive supplemental credit data that better detect risk while benefiting consumers with a more complete credit history. Alternative finance data can be used across the lending cycle from prospecting to decisioning and account review to collections. Alternative data gives lenders an expanded view of consumer behavior which enables more complete and confident lending decisions. Find out more about Experian’s alternative credit data: www.experian.com/alternativedata.

2019 is here — with new technology, new regulations and new opportunities on the docket. What does that mean for the financial services space? Here are the five trends you should keep your eye on and how these affect your credit universe.   1. Credit access is at an all-time high With 121 million Americans categorized as credit-challenged (subprime scores and a thin or nonexistent credit file) and 45 million considered credit-invisible (no credit history), the credit access many consumers take for granted has appeared elusive to others. Until now. The recent launch of Experian BoostTM empowers consumers to improve their credit instantly using payment history from their utility and phone bills, giving them more control over their credit scores and making them more visible to lenders and financial institutions. This means more opportunities for more people. Coupled with alternative credit data, which includes alternative financial services data, rental payments, and full-file public records, lenders and financial institutions can see a whole new universe. In 2019, inclusion is key when it comes to universe expansion goals. Both alternative credit and consumer-permissioned data will continue to be an important part of the conversation.   2. Machine learning for the masses The financial services industry has long been notorious for being founded on arguably antiquated systems and steeped in compliance and regulations. But the industry’s recent speed of disruption, including drastic changes fueled by technology and innovation, may suggest a changing of the guard. Digital transformation is an industry hot topic, but defining what that is — and navigating legacy systems — can be challenging. Successfully integrating innovation is the convergence at the center of the Venn diagram of strategy, technology and operations. The key, according to Deloitte, is getting “a better handle on data to extract the greatest value from technology investments.” How do you get the most value? Risk managers need big data, machine learning and artificial intelligence strategies to deliver market insights and risk evaluation. Between the difficulty of leveraging data sets and significant investment in time and money, it’s impossible for many to justify. To combat this challenge, the availability and access to an analytical sandbox (which contains depersonalized consumer data and comparative industry intel) is crucial to better serve clients and act on opportunities in lenders’ credit universe and beyond. “Making information analysis easily accessible also creates distinct competitive advantages,” said Vijay Mehta, Chief Innovation Officer for Experian’s Consumer Information Services, in a recent article for BAI Banking Strategies. “Identifying shifts in markets, changes in regulations or unexpected demand allows for quick course corrections. Tightening the analytic life cycle permits organizations to reach new markets and quickly respond to competitor moves.” This year is about meaningful metrics for action, not just data visualization.   3. How to fit into the digital-first ecosystem With so many things available on demand, the need for instant gratification continues to skyrocket. It’s no secret that the financial services industry needs to compete for attention across consumers’ multiple screens and hours of screen time. What’s in the queue for 2019? Personalization, digitalization and monetization. Consumers’ top banking priorities include customized solutions, omnichannel experience improvement and enhancing the mobile channel (as in, can we “Amazonize” everything?). Financial services leaders’ priorities include some of the same things, such as enhancing the mobile channel and delivering options to customize consumer solutions (BAI Banking Strategies). From geolocation targeting to microinteractions in the user experience journey to leveraging new strategies and consumer data to send personalized credit offers, there’s no shortage of need for consumer hyper-relevance. 33 percent of consumers who abandon business relationships do so because personalization is lacking, according to Accenture data for The Financial Brand. This expectation spans all channels, emphasizing the need for a seamless experience across all devices.   4. Keeping fraudsters out Many IT professionals regard biometric authentication as the most secure authentication method currently available. We see this technology on our personal devices, and many companies have implemented it as well. Biometric hacking is among the predicted threats for 2019, according to Experian’s Data Breach Industry Forecast, released last month. “Sensors can be manipulated and spoofed or deteriorate with too much use. ... Expect hackers to take advantage of not only the flaws found in biometric authentication hardware and devices, but also the collection and storage of data,” according to the report.   5. Regulatory changes and continued trends  Under the Trump Administration, the regulatory front has been relatively quiet. But according to the Wall Street Journal, as Democrats gain control of the House of Representatives, lawmakers may be setting their sights on the financial services industry — specifically on legislation in response to the credit data breach in 2017. The Democratic Party leadership has indicated that the House Financial Services Committee will be focused on protecting consumers and investors, preserving sector stability, and encouraging responsible innovation in financial technology, according to Deloitte. In other news, the focus on improving accuracy in data reporting, transparency for consumers in credit scoring and other automated decisions can be expected to continue. Consumer compliance, and specifically the fair and responsible treatment of consumers, will remain a top priority.   For all your needs in 2019 and beyond, Experian has you covered. Learn more

What if you had an opportunity to boost your credit score with a snap of your fingers? With the announcement of Experian BoostTM, this will soon be the new reality. As part of an increasingly customizable and instant consumer reality in the marketplace, Experian is innovating in the space of credit to allow consumers to contribute information to their credit profiles via access to their online bank accounts. For decades, Experian has been a leader in educating consumers on credit: what goes into a credit score, how to raise it and how to maintain it. Now, as part of our mission to be the consumer’s bureau, Experian is ushering in a new age of consumer empowerment with Boost. Through an already established and full-fledged suite of consumer products, Experian Boost is the next generation offering a free online platform that places the control in the consumers’ hands to influence their credit scores. The platform will feature a sign-in verification, during which consumers grant read-only permission for Experian Boost to connect to their online bank accounts to identify utility and telecommunications payments. After they verify their data and confirm that they want the account information added to their credit file, consumers will receive an instant updated FICO® Score. The history behind credit information spans several centuries from a group of London tailors swapping information on customers to keeping credit files on index cards being read out to subscribers over the telephone. Even with the evolution of the credit industry being very much in the digital age today, Experian Boost is a significant step forward for a credit bureau. This new capability educates the consumer on what types of payment behavior impacts their credit score while also empowering them to add information to change it. This is a big win-win for consumers and lenders alike. As Experian is taking the next big step as a traditional credit bureau, adding these data sources is a new and innovative way to help consumers gain access to the quality credit they deserve as well as promoting fair and responsible lending to the industry. Early analysis of Experian’s Boost impact on the U.S. consumer credit scores showed promising results. Here’s a snapshot of some of those findings: These statistics provide an encouraging vision into the future for all consumers, especially for those who have a limited credit history. The benefit to lenders in adding these new data points will be a more complete view on the consumer to make more informed lending decisions. Only positive payment histories will be collected through the platform and consumers can elect to remove the new data at any time. Experian Boost will be available to all credit active adults in early 2019, but consumers can visit www.experian.com/boost now to register for early access. By signing up for a free Experian membership, consumers will receive a free credit report immediately, and will be one of the first to experience the new platform. Experian Boost will apply to most leading consumer credit scores used by lenders. To learn more about the platform visit www.experian.com/boost.

As our society becomes ever more dependent on everything mobile, criminals are continually searching for and exploiting weaknesses in the digital ecosystem, causing significant harm to consumers, businesses and the economy.  In fact, according to our 2018 Global Fraud & Identity Report, 72 percent of business executives are more concerned than ever about the impact of fraud. Yet, despite the awareness and concern, 54 percent of businesses are only “somewhat confident” in their ability to detect fraud. That needs to change, and it needs to change right away.  Our industry has thrived by providing products and services that root out bad transactions and detect fraud with minimal consumer friction. We continue to innovate new ways to authenticate consumers, apply new cloud technologies, machine learning, self-service portals and biometrics. Yet, the fraud issue still exists. It hasn’t gone away. How do we provide effective means to prevent fraud without inconveniencing everyone in the process? That’s the conundrum. Unfortunately, a silver bullet doesn’t exist. As much as we would like to build a system that can detect all fraud, eliminate all consumer friction, we can’t. We’re not there yet. As long as money has changed hands, as long as there are opportunities to steal, criminals will find the weak points – the soft spots.  That said, we are making significant progress. Advances in technology and innovation help us bring new solutions to market more quickly, with more predictive power than ever, and the ability to help clients to turn  these services on in days and weeks. So, what is Experian doing? We’ve been in the business of fraud detection and identity verification for more than 30 years. We’ve seen fraud patterns evolve over time, and our product portfolio evolves in lock-step to counter the newest fraud vectors. Synthetic identity fraud, loan stacking, counterfeit, identity theft; the specific fraud attacks may change but our solution stack counters each of those threats. We are on a continuous innovation path, and we need to be. Our consumer and small business databases are unmatched in the industry for quality and coverage, and that is an invaluable asset in the fight against fraud. It used to be that knowing something about a person was the same as authenticating that same person. That’s just not the case today. But, just because I may not be the only person who knows where I live, doesn’t mean that identity information is obsolete. It is incredibly valuable, just in different ways today. And that’s where our scientists come into their own, providing complex predictive solutions that utilize a plethora of data and insight to create the ultimate in predictive performance. We go beyond traditional fraud detection methods, such as knowledge-based authentication, to offer a custom mix of passive and active authentication solutions that improve security and the customer experience. You want the latest deep learning techniques? We have them. You want custom models scored in milliseconds alongside your existing data requests. We can do that. You want a mix of cloud deployment, dedicated hosted services and on-premise? We can do that too. We have more than 20 partners across the globe, creating the most comprehensive identity management network anywhere. We also have teams of experts across the world with the know how to combine Experian and partner expertise to craft a bespoke solution that is unrivaled in detection performance. The results speak for themselves: Experian analyzes more than a billion credit applications per year for fraud and identity, and we’ve helped our clients save more than $2 billion in annual fraud losses globally. CrossCore™, our fraud prevention and identity management platform, leverages the full breadth of Experian data as well as the data assets of our partners. We execute machine learning models on every decision to help improve the accuracy and speed with which decisions are made. We’ve seen CrossCore machine learning result in a more than 40 percent improvement in fraud detection compared to rules-based systems. Our certified partner community for CrossCore includes only the most reputable leaders in the fraud industry. We also understand the need to expand our data to cover those who may not be credit active. We have the largest and most unique sets of alternative credit data among the credit bureaus, that includes our Clarity Services and RentBureau divisions. This rich data helps our clients verify an individual’s identity, even if they have a thin credit file. The data also helps us determine a credit applicant’s ability to pay, so that consumers are empowered to pursue the opportunities that are right for them. And in the background, our models are constantly checking for signs of fraud, so that consumers and clients feel protected. Fraud prevention and identity management are built upon a foundation of trust, innovation and keeping the consumer at the heart of every decision. This is where I’m proud to say that Experian stands apart. We realize that criminals will continue to look for new ways to commit fraud, and we are continually striving to stay one step ahead of them. Through our unparalleled scale of data, partnerships and commitment to innovation, we will help businesses become more confident in their ability to recognize good people and transactions, provide great experiences, and protect against fraud.

Every morning, I wake up and walk bleary eyed to the bathroom, pop in my contacts and start my usual routine. Did I always have contacts? No. But putting on my contacts and seeing clearly has become part of my routine. After getting used to contacts, wearing glasses pales in comparison. This is how I view alternative credit data in lending. Are you having qualms about using this new data set? I get it, it’s like sticking a contact into your eye for the first time: painful and frustrating because you’re not sure what to do. To relieve you of the guesswork, we’ve compiled the top four myths related to this new data set to provide an in-depth view as to why this data is an essential supplement to your traditional credit file. Myth 1: Alternative credit data is not relevant. As consumers are shifting to new ways of gaining credit, it’s important for the industry to keep up. These data types are being captured by specialty credit bureaus. Gone are the days when alternative financing only included the payday store on the street corner. Alternative financing now expands to loans such as online installment, rent-to-own, point-of-sale financing, and auto-title loans. Consumers automatically default to the financing source familiar to them – which doesn’t necessarily mean traditional financial institutions. For example, some consumers may not walk into a bank branch anymore to get a loan, instead they may search online for the best rates, find a completely digital experience and get approved without ever leaving their couches. Alternative credit data gives you a lens into this activity. Myth 2: Borrowers with little to no traditional credit history are high risk. A common misconception of a thin-file borrower is that they may be high risk. According to the CFPB, roughly 45 million Americans have little to no credit history and this group may contain minority consumers or those from low income neighborhoods. However, they also may contain recent immigrants or young consumers who haven’t had exposure to traditional credit products. According to recent findings, one in five U.S. consumers has an alternative financial services data hit– some of these are even in the exceptional or very good credit segments. Myth 3: Alternative credit data is inaccurate and has poor data quality. On the contrary, this data set is collected, aggregated and verified in the same way as traditional credit data. Some sources of data, such as rental payments, are monthly and create a consistent look at a consumer’s financial behaviors. Experian’s Clarity Services, the leading source of alternative finance data, reports their consumer information, which includes application information and bank account data, as 99.9% accurate. Myth 4: Using alternative credit data might be harmful to the consumer. This data enables a more complete view of a consumer’s credit behavior for lenders, and provides consumers the opportunity to establish and maintain a credit profile. As with all information, consumers will be assessed appropriately based on what the data shows about their credit worthiness. Alternative credit data provides a better risk lens to the lender and consumers may get more access and approval for products that they want and deserve. In fact, a recent Experian survey found 71% of lenders believe alternative credit data will help consumers who would have previously been declined. Like putting in a new pair of contact lenses the first time, it may be uncomfortable to figure out the best use for alternative credit data in your daily rhythm. But once it’s added, it’s undeniable the difference it makes in your day-to-day decisions and suddenly you wonder how you’ve survived without it so long. See your consumers clearly today with alternative credit data. Learn More About Alternative Credit Data

Picking up where we left off, online fintech lenders face the same challenges as other financial institutions; however, they continue to push the speed of evolution and are early adopters across the board. Here’s a continuation of my conversation with Gavin Harding, Senior Business Consultant at Experian. (Be sure to read part 1.) Part two of a two-part series: As with many new innovations, fintechs are early adopters of alternative data. How are these firms using alt data and what are the results that are being achieved? In a competitive market, alternative data can be the key to helping fintechs lend deeper and better reach underserved consumers. By augmenting traditional credit data, a lender has access to greater insights on how a thin-file consumer will perform over time, and can then make a credit decision based on the identified risk. This is an important point. While alternative data often helps lenders expand their universe, it can also provide quantitative risk measures that traditional data doesn’t necessarily provide. For example, alternative data can recognize that a consumer who changes residences more than once every two years presents a higher credit risk. Another way fintechs are using alternative data is to screen for fraud. Fraudsters are digitally savvy and are using technology to initiate fraud attacks on a broader array of lenders, in bigger volumes than ever before. If I am a consumer who wants to get a loan through an online fintech lender, the first thing the lender wants to know is that I am who I say I am. The lender will ask me a series of questions and use traditional data to validate. Alternative data takes authentication a step further and allows lenders to not only identify what device I am using to complete the application, but whether the device is connected to my personal account records – giving them greater confidence in validating my identity. A second example of using alternative data to screen for fraud has to do with the way an application is actually completed. Most individuals who complete an online application will do so in a logical, sequential order. Fraudsters fall outside of these norms – and identifying these patterns can help lenders increase fraud detection. Lastly, alternative data can help fintech lenders with servicing and collections by way of utilizing behavioral analytics. If a consumer has a history of making payments on time, a lender may be apt to approve more credit, at better terms. As the consumer begins to pay back the credit advance, the lender can see the internal re-payment history and recommend incremental line increases. From your perspective, what is the future of data and what should fintechs consider as they evolve their products? The most sophisticated, most successful “think tanks” have two things that are evolving rapidly together: Data: Fintechs want all possible data, from a quality source, as close to real-time as possible. The industry has moved from “data sets” to “data lakes” to “data oceans,” and now to “data universes.” Analytics: Fintechs are creating ever-more sophisticated analytics and are incorporating machine learning and artificial intelligence into their strategies. Fintechs will continue to look for data assets that will help them reach the consumer. And to the degree that there is a return on the data investment, they will continue to capitalize on innovative solutions – such as alternative data.   In the competitive financial marketplace, insight is everything. Aite Group recently conducted a new report about alternative data that dives into new qualitative research collected by the firm. Join us to hear Aite Group’s findings about fintechs, banks, and credit unions at their webinar on December 4. Register today! Register for the Webinar Click here for more information about Experian’s Alternative Data solutions. Don’t forget to check out part one of this series here.   About Gavin Harding With more than 20 years in banking and finance Gavin leverages his expertise to develop sophisticated data and analytical solutions to problem solve and define strategies across the customer lifecycle for banking and fintech clients. For more than half of his career Gavin held senior leadership positions with a large regional bank, gaining experience in commercial and small business strategy, SBA lending, credit and risk management and sales. Gavin has guided organizations through strategic change initiatives and regulatory and supervisory oversight issues. Previously Gavin worked in the business leasing, agricultural and construction equipment sectors in sales and credit management roles.

Shawn Hanson, CEO of Marine Credit Union in Wisconsin, knows a thing or two about growth.  Over the past 18 years as CEO, Shawn and his team have the grown the credit union significantly, both organically and through acquisitions. In addition, he has developed a clear vision to reach the underserved. I spoke with Shawn to get his perspective and insights about growth, risk and the underserved. Here’s what he had to say: Marine Credit Union has grown from $120M to $789M over the past 18 years under your leadership.  What have been the top 2-3 actions you’ve taken to fuel this growth? The past two decades of growth have included a lot of successes, but also some key failures. Failures that taught us some hard lessons in who we are – and who we are not. If I can point to one action that has had the most impact on our growth, it is the refinement of our focus. We clarified our mission, vision and strategy and aligned our business decisions accordingly. Over the past 18 years as CEO, what has been your proudest moment? (Or proudest moments?) I reach out to employees on a regular basis and ask them to share with me a story of how they impacted a member’s life. I hear stories of people who never thought they would dig themselves out of a financial hole, and people we are helping to save thousands of dollars each month in bill payments. I feel so fortunate that I get to hear these stories every day. So, to answer your question, my proudest moment will happen today when I hear that next story. Then again tomorrow. And again, the next day. What drove Marine’s decision to focus on serving the underserved? I started my career in the consumer finance industry, so it is where my roots lie. Over time, we have come to discover that serving the underserved is not only a good business to be in, it is a business that is good. A business that is doing well while doing good – performing financially while giving back to its communities – is a business that people want to be around. How does your credit union define underserved?  What services does your staff offer members that are unique? We define the underserved as people who cannot typically get help down the block. While this most often means individuals, who are credit-challenged, it is more than that. Our underserved can be an overleveraged borrower who needs some help simplifying their life and streamlining bill payments. We have a debt consolidation product that’s a perfect fit for that situation. Our underserved can be a self-employed borrower whose income statements don’t fit inside a neat box, a homebuyer with an unconventional property. or an immigrant with alternative documentation. Our in-house underwriting and decentralized decision-making structure give us more flexibility to serve our underserved. Given your credit union’s history of growth through acquisitions, how have you preserved the culture of reaching the underserved? We are experienced, but we are not perfect. When it comes to the integration of employees, we learn through each acquisition. Our strategy is very different from other financial institutions, and we know this creates a learning curve for merging employees. Cultural integration is incredibly important to us. We have taken this too slow, too fast and everywhere in between. What we know for certain is that one size does not fit all. Whatever approach we decide on for a cultural integration, we do it with intention and two key principles in mind: do what’s best for the employees and the members. Why do you think credit unions are uniquely positioned to reach & serve the underserved? Talk about roots; this is where we were born. Serving the underserved is in our credit union DNA. Beyond our history, it is what we are known for: people helping people. Credit unions have built a legacy of trust with the communities we serve. Trust has become a coveted commodity. What is the biggest misperception among credit unions regarding the topic of serving the underserved? It’s too risky. One of the underpinnings of the credit union movement is providing a path to affordable credit.  What should risk-adverse credit unions think about when evaluating their mission? Think about the role you play in your community; how would the world be poorer, but for your presence? If you can answer with clarity, you're serving a need. Everybody seems to be chasing the most qualified borrowers today. We're focused on being there for the rest. Marine’s mission is to “create a better future for themselves and their families”.  What has been the biggest surprise for you serving the underserved? We call it “the snowball effect.” Repeatedly, we have seen one small “yes” turn into a remarkably different life for a member we have helped. A car loan led to transportation to work, which led to a steady job, which led to a promotion, which led to buying a home. I never underestimate the power of a chance. How has your board helped to accelerate the mission to reach the underserved?  What advice do you have for boards who are concerned of taking on more perceived risk? I feel very fortunate to work with a Board of Directors who has accelerated our mission in many ways, but most importantly, by having an open mind and allowing themselves to think differently. Our Board is always learning and always pushing me, one another and the credit union to be better. Strategic planning season is upon us.  What advice do you have for credit unions looking to lend deeper? Hone your focus. Know who you are and who you are not. Know who you serve and who you do not. Get aligned on where you want to be 5, 10 and 20 years from now, and work backward. What do you need to be focusing on in 2019 to achieve your long-term goals, and what do you need to stop wasting energy on? Ensure your people, products and processes are aligned and scaled to support a diversification or transition. This can take years to build or evolve. Walk, don’t run.   About Shawn Hanson Shawn Hanson is the CEO of Marine Credit Union. He has been with the credit union since April 2000 when the credit union had two offices and $37 million in assets. Hanson’s vision for the future is a differentiated financial institution that provides services to a broad geographic base with the best service. Hanson has also held positions at Citizens Community Federal Credit Union and AVCO Financial Services. Learn more about the array of alternative credit data sources available to financial institutions to reach your underserved populations.  

Traditional credit data has long been the end-all-be-all ruling the financial services space. Like the staple black suit or that little black dress in your closet, it’s been the quintessential go-to for decades. Sure, the financial industry has some seasonality, but traditional credit data has reigned supreme as the reliable pillar. It’s dependable. And for a long time, it’s all there was to the equation. But as with finance, fashion and all things – evolution has occurred. Specifically, how consumers are managing their money has evolved, which calls for deeper insights that are still defensible and disputable. Alternative credit data is the new black. It's increasingly integrated in credit talks for lenders across the country. Much like that LBD, it's become a lending staple – that closet (or portfolio) must-have – to leverage for better decisioning when determining creditworthiness. What is alternative data? In our data-driven industry, “alternative” data as a whole may best be summed up as FCRA-compliant credit data that isn't typically included in traditional credit reports. For traditional data, think loan and inquiry data on bankcards, auto, mortgage and personal loans; typically trades with a term of 12 months or greater. Some examples of alternative credit data include alternative financial services data, rental data, full-file public records and account aggregation. These insights can ultimately improve credit access and decisioning for millions of consumers who may otherwise be overlooked. Alternative or not, every bit of information counts FCRA-compliant, user permissioned data allows lenders to easily verify assets and income electronically, thereby giving lenders more confidence in their decision and allowing consumers to gain access to lower-cost financing. From a risk management perspective, alternative credit data can also help identify riskier consumers by identifying information like the number of payday loans acquired within a year or number of first-payment defaults. Alternative credit data can give supplemental insight into a consumer’s stability, ability and willingness to repay that is not available on a traditional credit report that can help lenders avoid risk or price accordingly. From closet finds that refresh your look to that LBD, alternative credit data gives lenders more transparency into their consumers, and gives consumers seeking credit a greater foundation to help their case for creditworthiness. It really is this season’s – and every season’s – must-have. Learn more

As more financial institutions express interest and leverage alternative credit data sources to decision and assess consumers, lenders want to be assured of how they can best utilize this data source and maintain compliance. Experian recently interviewed Philip Bohi, Vice President for Compliance Education for the American Financial Services Association (AFSA), to learn more about his perspective on this topic, as well as to gain insights on what lenders should consider as they dive into the world of alternative credit data. Alternative data continues to be a hot topic in the financial services space. How have you seen it evolve over the past few years? It’s hard to pinpoint where it began, but it has been interesting to observe how technology firms and people have changed our perceptions of the value and use of data in recent years. Earlier, a company’s data was just the information needed to conduct business. It seems like people are waking up to the realization that their business data can be useful internally, as well as to others.  And we have come to understand how previously disregarded data can be profoundly valuable. These insights provide a lot of new opportunities, but also new questions.  I would also say that the scope of alternative credit data use has changed.  A few years ago, alternative credit data was a tool to largely address the thin- and no-file consumer. More recently, we’ve seen it can provide a lift across the credit spectrum. We recently conducted a survey with lenders and 23% of respondents cited “complying with laws and regulations” as the top barrier to utilizing alternative data. Why do you think this is the case? What are the top concerns you hear from lenders as it relates to compliance on this topic? The consumer finance industry is very focused on compliance, because failure to maintain compliance can kill a business, either directly through fines and expenses, or through reputation damage. Concerns about alternative data come from a lack of familiarity. There is uncertainty about acquiring the data, using the data, safeguarding the data, selling the data, etc. Companies want to feel confident that they know where the limits are in creating, acquiring, using, storing and selling data. Alternative data is a broad term. When it comes to utilizing it for making a credit decision, what types of alternative data can actually be used?  Currently the scope is somewhat limited. I would describe the alternative data elements as being analogous to traditional credit data. Alternative data includes rent payments, utility payments, cell phone payments, bank deposits, and similar records. These provide important insights into whether a given consumer is keeping up with financial obligations. And most importantly, we are seeing that the particular types of obligations reflected in alternative data reflect the spending habits of people whose traditional credit files are thin or non-existent.  This is a good thing, as alternative data captures consumers who are paying their bills consistently earlier than traditional data does. Serving those customers is a great opportunity. If a lender wants to begin utilizing alternative credit data, what must they know from a compliance standpoint? I would begin with considering what the lender’s goal is and letting that guide how it will explore using alternative data. For some companies, accessing credit scores that include some degree of alternative data along with traditional data elements is enough. Just doing that provides a good business benefit without introducing a lot of additional risk as compared to using traditional credit score information. If the company wants to start leveraging its own customer data for its own purposes, or making it available to third parties, that becomes complex very quickly.  A company can find itself subject to all the regulatory burdens of a credit-reporting agency very quickly. In any case, the entire lifecycle of the data has to be considered, along with how the data will be protected when the data is “at rest,” “in use,” or “in transit.” Alternative data used for credit assessment should additionally be FCRA-compliant. How do you see alternative credit data evolving in the future? I cannot predict where it will go, but the unfettered potential is dizzying. Think about how DNA-based genealogy has taken off, telling folks they have family members they did not know and providing information to solve old crimes. I think we need to carefully balance personal privacy and prudent uses of customer data. There is also another issue with wide-ranging uses of new data. I contend it takes time to discern whether an element of data is accurately predictive.  Consider for a moment a person’s utility bills. If electricity usage in a household goes down when the bills in the neighborhood are going up, what does that tell us? Does it mean the family is under some financial strain and using the air conditioning less? Or does it tell us they had solar panels installed? Or they’ve been on vacation?  Figuring out what a particular piece of data means about someone’s circumstances can be difficult. About Philip Bohi Philip joined  AFSA in 2017 as Vice President, Compliance Education. He is responsible for providing strategic direction and leadership for the Association’s compliance activities, including AFSA University, and is the staff liaison to the Operations and Regulatory Compliance Committee and Technology Task Forces. He brings significant consumer finance legal and compliance experience to AFSA, having served as in-house counsel at Toyota Motor Credit Corporation and Fannie Mae. At those companies, Philip worked closely with compliance staff supporting technology projects, legislative tracking, and vendor management. His private practice included work on manufactured housing, residential mortgage compliance, and consumer finance matters at McGlinchey Stafford, PLLC and Lotstein Buckman, LLP. He is a member of the Virginia State Bar and the District of Columbia Bar. Learn more about the array of alternative credit data sources available to financial institutions.

According to our recent research for the State of Alternative Credit Data, more lenders are using alternative credit data to determine if a consumer is a good or bad credit risk. In fact, when it comes to making decisions: More than 50% of lenders verify income, employment and assets as well as check public records before making a credit decision. 78% of lenders believe factoring in alternative data allows them to extend credit to consumers who otherwise would be declined. 70% of consumers are willing to provide additional financial information to a lender if it increases their chance for approval or improves their interest rate. The alternative financial services space continues to grow with products like payday loans, rent-to-own products, short-term loans and more. By including alternative financial data, all types of lenders can explore both universe expansion and risk mitigation. State of Alternative Credit Data

The second full day of Experian Vision 2018 kicked off with an inspirational message from keynote speakers Capt. Mark Kelly and Former Congresswomen Gabby Giffords, rolled into a series of diverse breakout sessions, and concluded with Super Bowl-winning quarterback Aaron Rodgers sharing tales of sports, leadership and winning. Need a recap of some of the headlines from the day? Here you go ... Retail Apocalypse? Not so fast alarmists. Yes, there are media headlines around mergers, closings and consumers adopting new ways to shop, but let me give you three reasons as to why the retail sky is not falling. There were more store openings last year than closings, and that trend is expected to continue this year with an estimated 5,500 openings by December. There continues to be a positive sales trajectory. E-commerce sales are increasing. Big department stores have seen pains, but if brands are focused on connection, relevance and convenience, there is hope. Consumers continue to spend. Subprime auto bubble? Nope. Malinda Zabritski, Sr. Director of Experian Automotive Sales, says the media likes to fixate on the subprime, but subprime financing has been on the decline, reaching record lows. Deep subprime is at .65%. Additionally, delinquency rates have also tapered. The real message? Consumers are relying on auto lenders for financing, largely due to consumer preferences to lease. The market is healthy, and while it has slowed slightly, the market is still at 7% year-over-year growth. Consumer-permissioned data is not just a value-add for thin-file consumers. Take for instance the inclusion of demand deposit accounts (DDAs). David Shellenberger, Sr. Director of Scoring and Predictive Analytics for FICO, says people who have had long relationships with their checking accounts tend to be more stable and generally sport higher credit scores. Consumers with thick, mature files can also benefit with DDA data. Consumer-permissioned data is not just about turning a “no” to a “yes.” It can also take a consumer from near-prime to prime, or from prime to super-prime. Would you want to make a credit decision with less information or more? This was the question Paul DeSaulniers, Experian Sr. Director of Product, posed to the audience as he kicked off the session on alternative data. With an estimated 100 million U.S. consumers falling below “thick-file” credit status, there is a definite need to learn more about these individuals. By leveraging alternative credit data – like short-term lending product use, rental data, public records and consumer-permissioned data – a more holistic view of these consumers is available. A few more facts: While alternative finance users tend to be more subprime, 20% are prime or better. A recent data pull revealed 20% of approved credit card users also had alternative finance data on them as well. About 2/3 of households headed by young adults are rentals. Imagine a world where the mortgage journey takes only seven to 10 days. With data and technology, we are closer than you think. Future products are underway that could master the underwriting phase in just one day, leaving the remaining days dedicated for signing disclosures, documents and wiring funds. Processes need to be firmed up, but a vision has been set. The average 30- to 45-day mortgage journey could soon be a distant memory. 97% of online banking applications that are started are abandoned. Why? Filling out lengthy forms, especially on a mobile device, is not fun. New technology, such as Experian’s Instant Form Fill, is allowing consumers to provide a name, zip and last four numbers of their social security number for an instant form fill of the rest of the application. Additionally, voice assistants are expected to increasingly facilitate research on purchases big and small. A recent study revealed nearly half of consumers perceive voice assistants to be useful. Businesses have more fraud losses than ever before. Not surprising. What is scary? An estimated 54% of businesses said they are not confident in their ability to detect fraud. Another session reported that approximately 20% of credit charge-offs are synthetic IDs, a growing pain point for all businesses. Consumers, on the other hand, say they “want visible signs of security” and “no friction.” Tough to balance, but those are today’s expectations. More Vision 2018 insights can be accessed on #ExperianVision twitter feed. Vision 2019 will be in San Antonio, Texas next May 5-8.

The traditional credit score has ruled the financial services space for decades, but it‘s clear the way in which consumers are managing their money and credit has evolved. Today’s consumers are utilizing different types of credit via various channels. Think fintech. Think short-term loans. Think cash-checking services and payday. So, how do lenders gain more visibility to a consumer’s credit worthiness in 2018? Alternative credit data has surfaced to provide a more holistic view of all consumers – those on the traditional file and those who are credit invisibles and emerging. In an all-new report, Experian dives into “The State of Alternative Credit Data,” providing in-depth coverage on how alternative credit data is defined, regulatory implications, consumer personas attached to the alternative financial services industry, and how this data complements traditional credit data files. “Alternative credit data can take the shape of alternative finance data, rental, utility and telecom payments, and various other data sources,” said Paul DeSaulniers, Experian’s senior director of Risk Scoring and Trended/Alternative Data and attributes. “What we’ve seen is that when this data becomes visible to a lender, suddenly a much more comprehensive consumer profile is formed. In some instances, this helps them offer consumers new credit opportunities, and in other cases it might illuminate risk.” In a national Experian survey, 53% of consumers said they believe some of these alternative sources like utility bill payment history, savings and checking account transactions, and mobile phone payments would have a positive effect on their credit score. Of the lenders surveyed, 80% said they rely on a credit report, plus additional information when making a lending decision. They cited assessing a consumer’s ability to pay, underwriting insights and being able to expand their lending universe as the top three benefits to using alternative credit data. The paper goes on to show how layering in alternative finance data could allow lenders to identify the consumers they would like to target, as well as suppress those that are higher risk. “Additional data fields prove to deliver a more complete view of today’s credit consumer,” said DeSaulniers. “For the credit invisible, the data can show lenders should take a chance on them. They may suddenly see a steady payment behavior that indicates they are worthy of expanded credit opportunities.” An “unscoreable” individual is not necessarily a high credit risk — rather they are an unknown credit risk. Many of these individuals pay rent on time and in full each month and could be great candidates for traditional credit. They just don’t have a credit history yet. The in-depth report also explores the future of alternative credit data. With more than 90 percent of the data in the world having been generated in just the past five years, there is no doubt more data sources will emerge in the coming years. Not all will make sense in assessing credit decisions, but there will definitely be new ways to capture consumer-permissioned data to benefit both consumer and lender. Read Full Report