Develop strategies to mitigate credit risk with Experian
Increase your sales and generate revenue while managing credit risk
In today’s market, your customers, whether businesses or consumers, may not
be able to pay full price for a product or service immediately. However, they may
be able to do so in smaller installments over time if you provide them interest-free
credit for a limited period. The important thing is that, given this option of credit,
they can afford to commit to a purchase today.
In some cases, you may be able to generate revenue from interest if your customer
cannot pay you back in the allotted time or if you are a business that loans money
on the basis of interest repayments, such as a credit-card provider or bank. Offering
credit to your customers can provide you greater income over time, but how do you
guarantee that they can and will repay you in full? The risk is higher for organizations
that bill their customers once their services have been used. This is the case for
most insurance, healthcare, utility and telecommunications companies.
Manage your risk when offering credit
The most important thing to determine when offering credit is the balance between
your risk and your reward. The more credit you give, the more you have to gain in
sales, revenue and, ultimately, profit. However, your risk of loss, reduced profit
and even bankruptcy (particularly for smaller businesses) also grows. How do you mitigate
this risk and tip the balance in your favor?
Credit policies can provide guidelines for your business around when to accept
credit applications, any extra steps required for loans over a certain amount, e.g.,
specialist underwriting, or what your organizations’ approach should be to a
first missed payment. Understanding the total value of the opportunity presented by
a customer also can mitigate risk, particularly if you can assess their likelihood
to respond to a credit offer, their ability to afford and repay credit, their loyalty
to your brand, or any changes in their circumstance that could affect their behavior.
Regardless of how your customer applies for credit, creating a positive experience
for them is important to stay competitive. People expect instant decisions, so you
need to be able to establish their risk versus reward quickly and effectively. Throughout
this process, you also will need to meet industry best practice and country regulations
to ensure that you are operating in the safest way for your business and your customer.
Experian® can help you:
Understand the aggregate risk of the markets you are in –
this allows you to plan better for a market and adjust your risk policies accordingly.
Create the appropriate credit risk policies, products and contracts –
we advise on a best-practice approach that complies with regulation and can help design
decisioning frameworks that meet with your organization’s appetite for risk.
Identify and retain profitable customers – we can help you
identify profitable customers in your portfolio and opportunities for wallet share
Automate credit granting decisions – we provide data, analytics,
software platforms and consultancy to support automated decisions throughout the credit lifecycle. Automated
decisions can provide consistency and a good customer experience.
Grant credit manually – we provide application processing
platforms that are programmed to route certain credit applications to a support team,
such as an underwriting team. In this instance, we provide relevant data and information
at the right time, which facilitates manual intervention.
Make payments easier for your customer – we can help you
predict your customer’s likelihood to pay by automated electronic
payment, allowing you to focus your marketing efforts. We also can support automated
payments in some regions, check invoice addresses or deliver email invoices.
Take effective collections action for missed payments –
we support a range of collections activities, from sending cobranded reminder letters
in some regions that can highlight the potential impact of delayed payment on a credit
score, to helping you prioritize your resources for chasing payment.