Data & Analytics

Recently, I had the privilege to serve on a panel during a joint workshop held by the Consumer Financial Protection Agency (CFPB) and the Federal Trade Commission (FTC) to examine the accuracy of credit reports and how to best serve consumers.  During the workshop and in following written comments, I shared Experian’s commitment to advance accuracy in consumer credit information and our perspective on how the current regulatory environment supports our efforts to achieve continual improvements. At the workshop, we heard concerns about how inaccuracies in credit reports can impact consumers and businesses in terms of denial of credit or higher-priced credit.  For Experian, these are real concerns.  Our role as a credit reporting agency is to help facilitate fair and affordable credit to consumers and small businesses, and that’s why data accuracy is mission-critical and central to our corporate values. Since the workshop was held in Washington, DC, it’s no surprise that many stakeholders turned to the topic of reforming the existing regulatory system.  Some stakeholders focused on making systemic changes in law and regulation, such as by setting very strict matching standards when credit bureaus receive and issue credit reports.  But experience shows us that the current legal and regulatory standards are, indeed, appropriate and we don’t need a sledgehammer to hit a nail.  Such actions would have unintended negative consequences and are unnecessary when all stakeholders share the goal of ensuring access to credit. In fact, the central theme I reinforced at the workshop was that the CFPB’s existing supervisory and examination authority, combined with market demand, industry investment and consumer expectations are the most effective ways to continually improve accuracy of credit reports. Let me explain how my over 30 years of experience with Experian leads me to this conclusion.  Consumer reporting agencies, like Experian, are regulated by the Federal Fair Credit Reporting Act (FCRA). The FCRA requires that consumer reporting agencies “follow reasonable procedures to assure maximum possible accuracy” when assembling credit reports. Notably, this standard does not set an accuracy rate but appropriately recognizes the complexity brought about by a system with thousands of stakeholders (lenders, users of credit reports, and credit reporting companies reporting billions of pieces of information on hundreds of millions of consumers). It’s been more than eight years since we last saw comprehensive studies to determine the accuracy of credit reports. The two most cited are reports from the Policy and Economic Research Council (“PERC”) and FTC. One of the key findings in both studies was the percentage of consumers that were impacted by material errors in their credit report. In other words, errors that resulted in credit score changes that impacted the interest rate a consumer would pay on a loan.  Both studies found that a small percentage of credit reports, 0.5% in the PERC Study and 2.2% in the FTC report, had material errors. While the percentages do represent many consumers (a minimum of 2.5 million to 4.4 million consumers) they also highlight the important need for continuous improvement so that material and consequential errors are the focus of innovation in data integrity.  We don’t need to throw the baby out with the bathwater, we need to hone in on targeted and discrete changes.  That’s my job at Experian, and I’m passionate about it. In addition to the “maximum possible accuracy” standard, market incentives provide another powerful mechanism to ensure improved data accuracy. Users of credit reports – ranging from banks to employers to government agencies – rely on accurate data to make critical decisions every day about loans, employment access, government benefits, and other important matters. Lenders need accurate data to perform sound risk assessments and provide terms tailored to the borrower’s appropriate risk level.  As a result, credit reporting agencies compete to have the most reliable and accurate data.  The same is true of lenders reporting data on their customers, as they have incentives to maintain good consumer relationships. Further, if inaccurate data is reported by a lender or maintained by a credit reporting agency, we all spend more time responding to consumer disputes instead of investing in new products and services to help consumers.  It’s easy to see why inaccurate data just isn’t good for business! Since the FTC and PERC accuracy studies were completed, the regulatory environment for credit reporting has drastically changed. In 2012, the CFPB began to supervise and examine the credit reporting industry. This regulatory authority allows the CFPB to see the entire credit ecosystem that is composed of not only credit bureaus, but also lenders, other users of credit reports, and entities that furnish data to credit bureaus.  CFPB’s comprehensive and continuous examination procedures include directly reviewing the policies, procedures, and practices of major credit reporting agencies. These steps include reviewing how data furnishers are screened, steps taken to minimize the likelihood of incorrect information on a report, measures to prevent duplicative information, and any programs designed to assess the accuracy of consumer information. These actions allow the CFPB to understand the metrics of accuracy and how it improves over time, and to apply the FCRA on a dynamic basis that can meet any challenges unforeseen when the law was originally passed. The CFPB’s supervisory authority thus serves as a powerful tool to holistically address data accuracy. In a 2017 supervisory report, the CFPB stated that “Credit reporting agencies have made significant advances to promote greater accuracy, the oversight of furnishers, and enhancements to the dispute resolution function.” It’s also important that there are ongoing discussions among the credit bureaus about how to move accuracy forward. To that end, joint efforts by the credit reporting agencies pursuant to an agreement with a group of state attorneys general, resulted in a joint working group to look at what can be done collectively to agree on improvements to accuracy. Recent changes include the delayed reporting of medical debt to allow time for insurance to process payments, and the removal of judgment and tax lien information, which did not meet new, elevated standards. The joint working group continues to explore new ways of increasing the accuracy of credit data. A broad, flexible, yet demanding legal structure, combined with strong market incentives and a robust and effective supervisory program, all work together to foster an environment to best serve consumers. As the consumer’s bureau, Experian is committed to playing a leading role in furthering a strong and accurate credit reporting system.

As I sit here on the day of the launch of the most comprehensive small business stimulus program in our nation’s history in response to the COVID-19 pandemic, my mind turns to the small business owners. Starting today, business owners can start applying for loans that are forgivable under the Small Business Administration’s $350 billion Paycheck Protection Program as long as those businesses maintain payroll to most of their staff and use the funds for eligible expenses.   You’ve heard that small businesses are the heartbeat of the U.S. economy, the statistics back that up - small business represents a 47% of all employees and generate 43.5% of the Gross Domestic Product (GDP).   More than their contributions to our economy, small business owners and their employees are the pillars of our communities, providing products, services, entertainment, and more. After the last few weeks, I think we can all appreciate the role small business plays in each of our lives.     We, at Experian, take our purpose very seriously - creating a better tomorrow by creating opportunities for businesses to succeed.   One thing we can count on in America is that small business owners rise to a challenge, it’s in the foundation of this great nation. Small business owners have the passion, fortitude, and downright grit to take them through the most challenging times – this time will be no exception.   But I also know that now and then a little help is needed, and right now we need to help small business owners who are dealing with the immediate implications of the COVID-19 pandemic. Beginning today, an unprecedented level of government support will be made available through the Small Business Administration and other government bodies.   At Experian, we applaud the signing of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) as it’s a great step toward economic recovery. The CARES Act provides grants and loans to small businesses with an unprecedented loan forgiveness program.   We also feel an obligation to do our part to ensure that small businesses, who are dealing with the immediate implications of this economic crisis, have additional resources at their disposal to make informed decisions at this critical time. That’s why I’m proud to share that we have made available to every small business in the United States free access to their Experian Business Credit report until May 1st. Small business owners can get their reports at www.freecompanycredit.com.   We also feel a deep obligation to our clients, the lenders, trade creditors, utilities, insurance underwriters, and more as they strive to support small businesses during this time. To further help small businesses gain access to capital they need, Experian also launched its free COVID-19 U.S. Business Risk Index to assist lenders and government organizations in understanding how to make lending options available to the business segments that need it the most. This new risk index can help business risk professionals better understand the impact that the pandemic may have on commercial operations based on several key factors. We also hope that our data and advanced analytics enable our clients to offer fair and responsible lending to small businesses that need it most during this time.   I’ll close by urging the small business community to please take advantage of accessing your free Experian business credit report while continuing to show the grit and innovative spirit that has helped make America the most robust economy in the world. I’ll leave you with one of my favorite quotes, from Arianna Huffington, “Fearlessness is not the absence of fear. It’s the mastery of fear. It’s about getting up one more time than we fall down.”   Sincerely,  Hiq Lee 

To quote The Rime of the Ancient Mariner, ‘water, water everywhere, / nor any drop to drink.’ I think the same can be true of data. While organizations have more data than ever before, very few are able to capitalize on this resource and actually leverage it for insight. There is no question on the value of data. It is viewed as a key competitive advantage, and in some instances, a strategic financial asset. However, translating data into meaningful insight is a completely different task to storing and managing it from a regulatory perspective. We see many companies investing in all sorts of data initiatives, like analytics, machine learning automation, data governance, customer insight, etc. Yet, most companies still report they are not sufficiently data driven. Each year we conduct a global study of data usage and data management practices. This year, we surveyed over 1,000 practitioners on how they want to leverage data. The research dug into some of the obstacles they face and why so few are able to leverage data for insight. We found three key areas emerge. First, there is a large degree of distrust in information. The average professional looking at data does not understand how that data got there, when it is useful, and what state it is in. While data can lead to increased agility and better decision making, a significant level of distrust often causes leaders to fall back on making decisions by gut instinct rather than by informed data insight. In fact, we have consistently seen over the past several years that people believe almost a third of their data is inaccurate. Second, we are seeing a rising level of data debt. Data debt is a lot like technical debt. You have a set of data assets that aren’t necessarily fit for purpose or have a high degree of inaccuracy. Unless you take the time to fix that information and govern it properly, you are always going to have a suboptimal data operation. In turn, poor quality means many companies are not fully seeing the ROI or expected benefit from some of the investments they are making. Finally, there is a data skills shortage. This doesn’t just mean data professionals, like data analysts, chief data officers (CDOs), and data scientists. There is also a general lack of understanding around data within the broader business. We see a growing number of companies talking about enabling wider usage of data across the business and wanting to do more with data insight, but very few people across organizations are truly data literate. Our survey results indicated a tide changing where now most companies report that data literacy needs to be a core competency of employees over the next five years. To generate the level of insight needed to fully leverage data as a valuable asset, organizations have to start to tackle issues around inaccuracy, trust, and certainly data skills. Without fixing these components, organizations will continue to be surrounded by all of this useful data that doesn’t actually provide them with what they need. To learn more about these challenges and our new study, please download the report at https://www.edq.com/resources/data-management-whitepapers/2020-Global-data-management-research/.

In today's fast-paced markets, businesses of all sizes strive for an edge over competition, especially when it comes to wining over consumers' hearts and minds. Many find that competitive advantage in the way they apply artificial intelligence to improve their customer decision-making for high business performance. Data strategies for high-performance decisioning In today's fast-paced markets, businesses of all sizes strive for an edge over competition, especially when it comes to wining over consumers' hearts and minds. Many find that competitive advantage in the way they apply artificial intelligence to improve their customer decision-making for high business performance.In fact, recent research we commissioned from Forrester Consulting shows that this. The ability to make meaningful decisions that match your customer's context at a given point in time requires a solid understanding of their needs and goals. Having access to relevant data is essential to consistently deliver experiences that matter. Timing and availability of data is equally important to improving your customer-level decision-making; to make those sought-after better, contextual decisions, you need to have the pertinent data available at the right place and time to meet that given consumer's moment of need. For example, in an operational environment, this may translate into accessing the right type, amount and quality of data in real time, so you are able to respond how and when your customer expects. The role of responsible usage of data in building, fuelling, and maintaining your AI-driven business The energy needs of athletes exceed those of the average person. Similarly, in the AI world, data (nutrient) needs for high-performance require consistent markers over a long period of time. Data scientists looking after credit and fraud risk would use the same variables or 'nutrients' that have been traditionally used for conventional scorecard developments to fuel machine learning methods to build predictive models. These are 'proteins' such as application data, any behavioural data your business has on existing customers, credit bureau data, segmentation data, available public information or transaction data. Some trended economic data can be used as input for developing credit risk methods and governance to fit leading financial reporting standards and frameworks (think of IFRS 9 or Basel, for example). Similarly, to assess affordability, you will need to feed your algorithms with disposable income over your customers' lifetime plus data about how they use it. Financial data about customers' savings, and investments allows for more accurate risk management while property related info derived from rental data is useful for extending personalised credit offers. Meanwhile, more and more businesses are using speech and text data obtained through voice recognition to improve the collection process. In fact, recent research we commissioned from Forrester Consulting shows that this 'race for the customer' comes down to who knows them best. The ability to make meaningful decisions that match your customer's context at a given point in time requires a solid understanding of their needs and goals. Having access to relevant data is essential to consistently deliver experiences that matter. Timing and availability of data is equally important to improving your customer-level decision-making; to make those sought-after better, contextual decisions, you need to have the pertinent data available at the right place and time to meet that given consumer's moment of need. For example, in an operational environment, this may translate into accessing the right type, amount and quality of data in real time, so you are able to respond how and when your customer expects. The role of responsible usage of data in building, fuelling, and maintaining your AI-driven business The energy needs of athletes exceed those of the average person. Similarly, in the AI world, data (nutrient) needs for high-performance require consistent markers over a long period of time. Data scientists looking after credit and fraud risk would use the same variables or 'nutrients' that have been traditionally used for conventional scorecard developments to fuel machine learning methods to build predictive models. These are 'proteins' such as application data, any behavioural data your business has on existing customers, credit bureau data, segmentation data, available public information or transaction data. Some trended economic data can be used as input for developing credit risk methods and governance to fit leading financial reporting standards and frameworks (think of IFRS 9 or Basel, for example). Similarly, to assess affordability, you will need to feed your algorithms with disposable income over your customers' lifetime plus data about how they use it. Financial data about customers' savings, and investments allows for more accurate risk management while property related info derived from rental data is useful for extending personalised credit offers. Meanwhile, more and more businesses are using speech and text data obtained through voice recognition to improve the collection process.    

To stay ahead of the competition and on the path of sustained growth, you need clear line of sight to both risks and opportunities through the customer lifecycle. Gaining better insights on customers is critical to achieving that, so you can make all the right decisions, big and small, about your customers and business clients. Based on the conversations we have with our clients, we have noticed that most executives are paying a lot of attention to measuring customer experience and reducing friction across digital touch-points through the lifecycle. For customer acquisition, for example, businesses like yours look at time spent on each micro-step (e.g. data field), dropout rates at each of those steps, and do A/B testing at a very granular level. The idea is to understand all points of friction including points of confusion, frustration, etc., so you can learn from those and improve the experience. But this is not an easy task. The various challenges involved are making sense of the vast quantities of data and the immaturity of that data as well as the construct of that data. Given the fast pace at which data analytics change and evolve, our recommendation is that you invest in tools that are data and/or analytics agnostic. Thinking ahead: leveraging data analytics and cloud-based decisioning platforms to design the right customer treatment There is a largely untapped opportunity to leverage data, analytics, optimisation and decision management solutions - such as cloud-based decisioning platforms - to design the right customer treatment and identify the next best action for that customer. Selecting the appropriate timing, medium, and channel for those actions lead to greater consistency and contribute to having more relevant communications with your customers. The more relevant you are, the more precise you are with the offers and the treatments leading to improved response rates, greater connectivity and interaction with the customer. This results in memorable experiences that enhance loyalty and drive profitability.

I recently had the opportunity to discuss the current state of #data collection, analytics, and AI in an interview with @CIODive. As technology advances, businesses can collect and analyse more data than ever before. However, most of that information ends up languishing, seldom being used or even catalogued. Recent research suggests that partly, this happens because businesses are unaware of what data they store or don't know how to get actionable insights out of it. This lack of visibility into data stores affects organisations' readiness to apply artificial intelligence (AI) and machine learning (ML): advanced analytics require data to be properly managed and organised. At Experian, we believe in taking an outcome-focused approach to analytics and AI as we look at activating the power of our data AI outcomes. We work backwards, from high-impact client and consumer outcomes, and bringing to bear the analytics, AI and data to achieve them. This way, we can assess more accurately what effort across data collection and analytics is required to achieve an outcome. Executed effectively this can avoid an enormous amount of investment in people, time, data. If you're interested in this topic, I'd recommend you to read the article in full: http://bit.ly/AImlShri_CIODive

Retailers are already starting to display their Christmas decorations in stores and it’s only early November. Some might think they are putting the cart ahead of the horse, but as I see this happening, I’m reminded of the quote by the New York Yankee’s Yogi Berra who famously said, “It gets late early out there.” It may never be too early to get ready for the next big thing, especially when what’s coming might set the course for years to come. As 2019 comes to an end and we prepare for the excitement and challenges of a new decade, the same can be true for all of us working in the lending and credit space, especially when it comes to how we will approach the use of alternative data in the next decade. Over the last year, alternative data has been a hot topic of discussion. In fact if you typed “alternative data and credit” into a Google search today you would get more than 200 million results. That’s a lot of conversations, but while nearly everyone seems to be talking about alternative data, we may not have a clear view of how alternative data will be used in the credit economy. How we approach the use of alternative data in the coming decade is going to be one of the most important decisions the lending industry makes. Inaction is not an option, and the time for testing new approaches is starting to run out – like Yogi said, it’s getting late early. And here’s why: millennials. We already know that millennials tend to make up a significant percentage of consumers with so-called “thin-file” credit reports. They “grew up” during the Great Recession and that has had a profound impact on their financial behavior. Unlike their parents, they tend to have only one or two credit cards, they keep a majority of their savings in cash and, in general, they distrust financial institutions. However, they currently account for more than 21 percent of discretionary spend in the U.S. economy, and that percentage is going to expand exponentially in the coming decade. The recession fundamentally changed how lending happens, resulting in more regulation and a snowball effect of other economic challenges. As a result, millennials must work harder to catch up financially and are putting off major life milestones that past generations have historically done earlier in life, such as home ownership. They more often choose to rent and, while they pay their bills, rent and other factors such as utility and phone bill payments are traditionally not calculated in credit scores, ultimately leaving this generation thin-filed or worse, credit invisible. This is not a sustainable scenario as we enter the next decade. One of the biggest market dynamics we can expect to see over the next decade is consumer control. Consumers, especially millennials, want to be in the driver’s seat of their “credit journey” and play an active role in improving their financial situations. We are seeing a greater openness to providing data, which in turn enables lenders to make more informed decisions. This change is disrupting the status quo and bringing new, innovative solutions to the table. At Experian we have been testing how advanced analytics and machine learning can help accelerate the use of alternative data in credit and lending decisions. And we continue to work to make the process of analyzing this data as simple as possible, making it available to all lenders in all verticals. To help credit invisible and thin-file consumers gain access to fair and affordable credit, we’ve also recently announced Experian Lift, a new suite of credit score products that combines exclusive traditional credit, alternative credit and trended data assets to create a more holistic picture of consumer creditworthiness that will be available to lenders in early 2020. This new Experian credit score may improve access to credit for more than 40 million credit invisibles. There are more than 100 million consumers who are restricted by the traditional scoring methods used today. Experian Lift is another step in our commitment to helping improve financial health of consumers everywhere and empowers lenders to identify consumers who may otherwise be excluded from the traditional credit ecosystem. This isn’t just a trend in the United States. Brazil is using positive data to help drive financial inclusion, as are other around the world. Like I said, it’s getting late early. Things are moving fast. Already we are seeing technology companies playing a bigger role in the push for alternative data – often powered by fintech startups. At the same time there also has been a strong uptick in tech companies entering the banking space. Have you signed up for your Apple credit card yet? It will take all of 15 seconds to apply, and that’s expected to continue over the next decade. All of this is changing how the lending and credit industry must approach decision making, while also creating real-time frictionless experiences that empower the consumer. We saw this with the launch of Experian Boost earlier this year. The results speak for themselves: hundreds of thousands of previously thin-filed consumers have seen their credit scores instantly increase. We have also empowered millions of consumers to get more control of their credit by using Experian Boost to contribute new, positive phone, cable and utility payment histories. Through Experian Boost, we’re empowering consumers to play an active role in building their credit histories. And, with Experian Lift, we’re empowering lenders to identify consumers who may otherwise be excluded from the traditional credit ecosystem. That’s game changing. Disruptions like Experian Boost and newly announced Experian Lift are going to define the coming decade in credit and lending. Our industry needs to be ready because while it may seem early, it’s actually getting late.

As a member of the Forbes Technology Council, I get to publish articles on some of the latest technology trends and best practices. A recent piece, entitled “Are we comfortable with machines having the final say?”, deals with the sensitive issue of decisions being made by complex algorithms and how it impacts all areas of our lives. The article takes a closer look at high-impact decisions, such as loan determinations and health diagnosis, where the lack of understanding how algorithms may be used is becoming of increasing concern. In this context, it raises the importance of Explainable AI (XAI). This is a concept where technology and science are being used to explain how an algorithm or machine reaches a decision and tries to do this in a way that is transparent to users. However, this approach is still being tested and is only used in certain limited circumstances. As humans, we are taught to explain our decisions but we all know how difficult it is - and science has repeatedly shown how easily biased we are. XAI still has some way to go, but we can inspect, test and pick machines apart in a way we can never do with the human mind. So perhaps one day we will find a way to truly explain a machine’s decision. Whether that would make us comfortable with the machines having the final say, is still to be seen. Check out the full article here.

We are delighted to announce our investment in bonify, a German fintech start-up dedicated to giving consumers better insights into their creditworthiness. bonify gives its 500,000 customers easy access to their creditworthiness and financial data, offering them a number of financial management tools to help analyse and optimise their financial situation. At Experian, we believe very deeply in the power of data to help improve people’s lives. That’s why we’re so excited by bonify’s continued goal to improve its users’ financial lives, and the steps it is taking to help people in Germany understand and benefit from their financial information. We are delighted to join a number of investors in supporting the growth of this innovative start-up. Charles Butterworth, Managing Director Experian UK, Ireland and EMEA​, said: "We are excited by the way bonify is helping people in Germany understand, engage with and improve their credit scores. We look forward to supporting the team as an investor and partner in their future growth.“ Founder and CEO of bonify, Dr. Gamal Moukabary​, said: “Experian's  investment shows that we are on the right track. It rewards our achievements and  our unique value proposition. Experian is an ideal investor and partner for us to  support the next growth phase. Our goal is to expand our operations into other  European countries.” Manuel Silva Martínez, Partner and Head of Investments, Santander  InnoVentures​, added: “We are delighted to welcome Experian  Ventures to bonify. Experian will add tremendous value and technical expertise to  bonify’s product roadmap. We are thrilled to support bonify as we accelerate growth and help more and more people across Germany and Europe with taking control of  their finances in a sound and responsible way.