All posts by Gary Stockton

Last year the three primary credit bureaus; Experian, Equifax, and TransUnion announced and implemented enhanced standards for the collection and timely updating of public record data reported on consumer credit reports. This was done in accordance with the National Consumer Assistance Plan requirements. Part of this work involved the partial removal of tax lien data from our consumer credit reporting database. With the complete removal of remaining tax lien data scheduled for April 16th, some of our clients have asked how these changes might impact commercial credit reports. In this business Q&A I ask Brodie Oldham for some clarification. What is NCAP and how did it impact Experian's core credit data? Brodie Oldham: Gary the NCAP is the National Consumer Assistance Plan and it was put in place by the three U.S. credit reporting agencies Experian, Equifax and TransUnion in response to the U.S. attorney general's request for clarity and transparency in consumer credit data. The data that was the main focus was data that did not meet completeness or freshness requirements of data furnishers to the credit reporting agencies. The data that had the most impact from the study was public record data; judgments and liens for consumers that weren't updated or didn't have all of the personal identifying data necessary to meet the guidelines. This data is planned to be removed in April of 2018. Was there impact to Experian's commercial credit data? Brodie Oldham: No Gary not an impact to our commercial credit data collected at Experian. We continue to collect that public record information for use in evaluating small businesses through our commercial credit scores. The impact with the public record information is really when we're evaluating a business owner guarantor using the consumer credit information where public record data has been removed. What was the impact to commercial blended scores? Brodie Oldham: The impact is when we're evaluating small business owners or guarantors using their consumer credit information. When we look at segments where commercial-only data is used there is no impact there because we're not changing the way that we collect public record information on the commercial side of our business?With the blended scores you would expect that if we remove some of the consumer derogatory information in public records that the score would go up. And we saw a mean lift to about .03 percent, so very small. In the performance of the blended generic credit scores in their evaluation and capture of those delinquent accounts. We saw a very insignificant lift, so the scores are very stable and working well even with the change that we're having with public records. Additional Resources: Whitepaper - NCAP Impact on BIS Scores (June-2017) National Consumer Assistance Plan Is Extended as Experian, Equifax and TransUnion Settle with State Attorneys General  

Pew Research Center has stated that the Millennials are projected to be the largest generation by 2050. So with this in mind Experian examined the business credit trends of Millennial business owners to see how their behaviors might impact small business. The results of that research has been published in a new whitepaper titled "Millennial-owned small business — a fast growing segment." Andrea Schmalzer is the analyst who worked on the study and we asked her a few questions about the research in our latest Business Q&A.   Gary Stockton: Can you tell us a little about the data set you analyzed for your study? Andrea Schmalzer: In this study what we did was we looked at small businesses during the year 2012 2015 and 2017. We then segmented the data by generation for millennials. We looked at anybody born between 1981 and the year 2000. Andrea Schmalzer: There are various ranges for defining millennials. However this is definitely within the standard range of the definition. Gary Stockton: In terms of small business. How large is the millennial segment today? Andrea Schmalzer: So the millennial segment is actually still a smaller segment of the business community at about 7 percent. But they are growing quite rapidly. Since 2012 they've grown about 92 percent in small businesses. Whereas if you look at the baby boomers they've only grown by 11 percent. So there's definitely substantial growth happening within the millennial-owned business area. Gary Stockton: What are the industries that millennials are most concentrated in? Andrea Schmalzer: So the millennials are concentrated in basically the same industries as all other generations.We do see about 44 percent of all small businesses owned by millennials in the services industries. So that can be anything from a nail salon to a medical doctor. We then have about 18 percent in retail trade. So that's any goods that you're going to be buying for personal use, and then about 12 percent are focused in on construction industries. Gary Stockton: Do millennials represent an opportunity for lenders? and if so, how? Andrea Schmalzer: Absolutely. What we're seeing is a really strong decreasing trend in delinquency rate for millennials? So back in 2012 we were seeing about 18 percent delinquency rates. Currently in 2017, what we're seeing is about 9 percent which is totally in line with all other generations? We're also noticing their business credit scores improving year over year. As well as their longevity. So by year 5 their business survival rate is stronger than any other generation. At this point it looks like the millennials are starting to figure out the way that businesses work, and how to use credit wisely. So there's definitely room for lenders to appeal to this segment. Download Report  

No business wants to be hacked or suffer a breach. Alarming headlines seemingly every week remind businesses of the impact – damaged reputation, data loss, revenue loss and even going out of business. Because of the realities of a breach, many businesses are now protecting themselves by purchasing cyber insurance to cover losses associated with a cyber incident, such as breach, attack, virus or cyber security issue. According to the PwC report Insurance 2020 & beyond, annual gross written cyber security premiums are set to increase from around $2.5 billion in 2015 to $7.5 billion by 2020. While cyber insurance has been offered for years, demand continues to increase due to the publicity from breaches as well as the potential losses. If a criminal locks a software system so a business cannot access their data, then the business is unable to function. This means the business must close and lose revenue until the software is back up and running. Cyber insurance protects the company from all associated costs from the incident, including data loss and revenue. Apple and Cisco business customers can now get cybersecurity insurance at a discount through policies the tech companies negotiated with an insurance carrier. In addition to consumer-facing businesses, many manufacturing companies are now purchasing cybersecurity insurance. According to a New York Times article, manufacturers are increasingly vulnerable because factories are now run on computers and digital systems, meaning a breach can halt production. This opens many opportunities for insurance companies to offer cyber insurance coverage to companies ranging from small businesses to large enterprises. However, the profitability of offering cyber insurance depends on an insurer's ability to accurately underwrite policies. While this is true for all types of insurance policies, correctly underwriting cyber insurance is especially challenging because risk factors are complex, and not a lot of data currently exists. Without access to the right information, insurance companies cannot correctly underwrite cybersecurity policies. When underwriting cybersecurity policies, insurers should consider the following: Cyber health of the network and computers – Companies can take steps make it harder for hackers to attack their network. For example, companies with open ports are more vulnerable because hackers can more easily access the data stored on the cloud. Companies that actively monitor and protect ports that are open for a specific reason can mitigate some risk, determining the security of a network is complex and only one aspect of the total security of a company. Employee behavior – It’s been widely reported that human error, such as poor password hygiene and clicking on unsafe links, cause many security vulnerabilities. However, some employees cause the breaches by stealing data from companies and selling it on the dark web, which is the area of the Internet known for criminal activity. The dark web has chat rooms and drop zones that are not accessible by a regular browser. Criminals buy and sell all types of information – healthcare records, social security numbers, driver’s license, travel loyalty cards – that can often be used to commit other crimes, such as corporate breaches and identity theft. Evaluating Risk of Employee Behavior While most insurance companies evaluate an insured company's network vulnerability, determining employee behavior as it relates to risk is much more challenging and beyond the capability of most insurers. To accurately understand behavior risk, insurers must consider the following: Has an employee’s data recently been breached? Because many people practice poor password hygiene by using the same passwords for multiple accounts, this increases the odds a criminal can use the same passwords to access the company’s data. What is the employee’s current financial situation? What is their FICO score? Do they pay their bills on-time? Are they in debt? While not everyone in debt will commit criminal activity, being in a poor financial situation increases the risk that a person may perform criminal activity for money. Is the employee active on the dark web? Companies that employ people who are actively engaged in criminal activity are going to have a much higher risk of cyber security issues. Employees whose personal information is available for sale on the dark web also increase a company’s security risk. Without this level of detail, insurance companies are making underwriting decisions without evaluating all the possible risk exposures. To properly underwrite cyber insurance, it is essential to have access to employee behavior data. Otherwise, insurers issuing cyber insurance policies without evaluating these factors are taking an unnecessary risk themselves. Check out our related article titled Accurately Underwrite Cybersecurity Insurance – Better Assess Employee Risk for more insights on how Experian helps commercial insurers more accurately underwrite cyber risk. Contact us if you are interested in offering cyber insurance through your insurance company and have questions about how Experian can help you. Download our whitepaper Take the first step to identify a company’s cyber exposure by assessing the risk posed by employees. Download the Experian whitepaper to gain insight on how to improve your underwriting process for cyber risk. Download Whitepaper Watch our webinar Sixty percent of small businesses will go out of business within six months of a cyber attack. According to IBM’s 2021 Data Breach report, the average business loss suffered from a data breach is $4.24 million, that’s an increase of 10% from 2020. In this 15-minute Sip and Solve session, the team from Experian unpacks the challenge of accurately scoring the risk of small businesses using a new dimension for insurers. Watch Recording

The lease for the $50,000 office equipment seemed like any other order at first glance. The customer passed the credit check without issues. But when the multinational corporation was unable to collect payment, it dug deeper and realized that the ship-to address was a residence. With more research, the business discovered that its “customer” had used stolen identity information to pass the credit check. Because the company did not use systems to check for fraudulent ship-to addresses, the fraudulent order was unnoticed and the company fell victim to ship-to fraud. Although only a handful of the company’s customer accounts were fraudulent, the company lost a significant amount of money last year because each account included large six-figure deals. What is ship-to fraud? In a ship-to fraud scheme, a criminal poses as a customer and presents a verifiable billing record, address and credit history. Companies often deem these criminals as credit worthy because their records are up to date and they have a good credit history. Often, the first few orders placed are for smaller items and the bills are paid on time, which increases the criminal’s credit limit. The criminal then places a significantly larger item and never pays the bill. Because the shipping address is a location unrelated to the actual business, the criminal can easily pick up the order and sell the goods. While ship-to fraud happens with consumer goods, the impact is typically more significant in the B2B world because the cost of the goods is higher. Also, most consumer goods are paid for before the items ship. However, B2B companies often extend lines of credit to customers or bill at set intervals, which means products are often shipped before payment. Keys to reducing risk Here are five ways you can help prevent B2B ship-to fraud at your company: Review your business application process. Most companies ask for headquarter information when determining the creditworthiness of a new business customer. However, many companies have products shipped to locations other than the headquarters. During the application process, capture all operating locations on the application. This makes it easier to determine which shipments are going to legitimate addresses and those that may be potentially fraudulent. Compare ship-to addresses with all operating location addresses. If a product is being sent to a location that was not listed on the business application as an operating address, there is a risk the purchase is fraudulent. The risk is even higher if there is large physical distance between the ship-to address and the customer’s operating and billing locations. Determine if the ship-to address is a freight forwarder or consolidator. If the ship-to address includes a container number, it is possible that the purchase is fraudulent. Criminals often use freight forwarders and consolidators to receive fraudulent purchases because it creates more anonymity for the fraudster. Check to see if the ship-to address is a P.O. box. Because most businesses don’t use a P.O box for product orders, a P.O. box used as a ship-to address should be a red flag for potential fraud. P.O. boxes are another way criminals anonymously receive purchases. Look up the address on Google. Put the address into Google and see if the business placing the order shows up in the search results. If not, look for these red flags: - A residence – Consider if a home-based business is likely to order the product. - A forwarding or consolidating business – Some of these types of businesses do not use container numbers in the address, which means physical verification is your best protection. - Property for sale – While shipments to properties on the market can be legitimate, this raises concerns because criminals often use vacant buildings as ship-to addresses. View the location on Google Maps. By viewing the photos online, you can get further verification that the address is an actual business. You can often get a feel for the area and see if there are a lot of vacant buildings or other red flags. Be sure to check the data on the photo to see if it was taken relatively recently. Empower employees to escalate potential fraud. Your employees are your first line of defense against ship-to fraud. They are the ones processing the orders, printing the shipping labels and packing the boxes. Train your employees on potential red flags and have a process to handle concerns. Encourage employees to pick up the phone and speak with customers to clarify any concerns about the address. If they aren’t convinced it’s a legitimate order, have a process for the employee to stop the shipment and escalate the issue up the chain of command. Many legitimate businesses and shipments may have a single red flag for ship-to fraud. However, when an order has multiple red flags, you should be especially cautious and delay the shipment until the shipment is proven legitimate. Because manually confirming all ship-to addresses can be time consuming, many businesses are now using automated solutions to flag suspicious orders. Your B2B company can save money and time by using a system to help eliminate ship-to fraud. By waiting to develop a process to prevent this type of fraud, your company risks becoming the next cautionary tale.  

Gary Stockton: Experian has just released the Q4 2017 Main Street Report. We partner with Moody's Analytics on this report each quarter, and Derrek Grunfelder-McCrank is the economist who works on the report. We asked him a few questions about the trends that we're seeing in this quarter's data. Gary Stockton:  The latest Main Street Report states that small business credit conditions remain positive. Is there a primary factor that's driving this stability? Derrek G. McCrank: Yeah there certainly is Gary. The primary factor that's driving stability in small business credit is the broader U.S. economy. Right now we have the labor market that's tight. This is resulting in wage increases for consumers as a result. Consumer spending has been reliable. Inflation is starting to pick up in a slow steady manner. On top of it all at the end of last year we just got tax reform. Right now the outlook for small business credit is positive. And that doesn't look set to change anytime soon. Gary Stockton:  and are you seeing greater numbers of small businesses investing in that business by borrowing for equipment purchases? Derrek G. McCrank:  Well Gary while we can't say for certain. The data seems to suggest that this isn't happening to the extent it could just yet. One of the questions in the NFIB's monthly survey is about whether firms are planning capital expenditures in the next three to six months. Since the end of the last recession. We've seen the positive response rate to this question steadily increasing. However it still sits below its long term average. Couple this with tax reform coming so late at the end of last year, and a decent number of firms are likely to have waited until the new year when they could invest in their business with a little more certainty. Gary Stockton: Well historically small businesses been keeping bankruptcy in check, but this quarter we saw it up slightly. Is this a major concern? Derrek G. McCrank: This isn't a cause for concern yet. Though it is something to monitor going forward. In the first quarter of 2017 the small business bankruptcy rate bottomed out, it hi its floor. As the year progressed, the bankruptcy rate moved off of that floor and that appears to be all that happened. In fact I'm hopeful that this might indicate a return to a more dynamic environment for small businesses which I look forward to discussing in a little more detail and our upcoming webinar. But for now, given the state of the economy, I'm optimistic for the state of small business credit. Gary Stockton: On the flip side, the Northeast saw a steep decline in business bankruptcies in Q4. Can you share some insight on what might be driving that? Derrek G. McCrank: Sure, so in the fourth quarter. the Northeast saw declines in its severely delinquent or 90 days past due rate coupled with a slight uptick in its business bankruptcy rate. What happened with business bankruptcies mirrored the trend nationally, so it shouldn't be a cause for concern this year, the declines in the severely delinquent rate were driven by two primary factors - geography and industry, from a geographic point of view, Connecticut, New Hampshire and Maine were the driving forces behind the reductions in severe delinquency, and from an industrial point of view financial services, public administration and the manufacturing industries are credited with declines in severe delinquency. Download the latest report  

So you’ve created the perfect campaign with great creatives and an unbeatable offer. You deploy the campaign and sit on the edge of your seat waiting for all the leads to flood in. After a couple of days, you notice a couple of responses but nowhere near the volume of what you were hoping for, and you’re stuck asking yourself “why?” Here are a couple of hypotheses: 1.) the people you reached out to aren’t the right audience so they don’t care about your offer, or 2.) your target audience didn’t see your efforts because you used the wrong channel. The process of finding new business customers can be expensive and sometimes unpredictable, but it doesn’t have to be. Here are 3 tips to help improve your prospecting efforts: Tip #1: Define your ideal customer One of the most fundamental ways you can help grow your current customer base is to have a clear understanding of what they actually look like (or defining what they should look like). What’s their job title? What are their biggest business challenges? Are they web savvy? How do they prefer to get industry news? Addressing discovery questions like these allows you to better understand who you’re talking to and how to talk to them. Additionally, you’ll be able to use this profile to help you mimic your best customers and target look-a-likes.   Tip #2: Target new businesses Get your products/services in front of new businesses before your competitors. Not surprisingly, many marketers overlook targeting new businesses because of the lack of data -- how do you know a new company is in business? How do you know if they’re the right business for you to even target? Fortunately, there are many services in today's market that can help fill in the gaps. Using something like Experian’s US Business Database, which is a database of more than 16 million active U.S. companies, can help you discover new businesses sooner and beat out your competitors to reach them first.  Tip #3: Find the decision-makers Identifying the right businesses to target is important, but ensuring that your offer gets in front of the right person – the decision maker – is even better. By finding the decision maker and directing your marketing efforts towards them, you can rest assure that your message lands in the hands of the person that matters most. Want to take it one step further? Once you know who you’re talking to, you can tailor the message and offer to be more relevant for that specific audience, which ultimately helps increase your chances of getting a response.      Finding and reaching new business customers can be a daunting and expensive tasks, especially if you don’t target your prospecting efforts. Be sure to keep these tips in mind when approaching your marketing strategy and don’t let today’s data challenges hold you back. Learn more about Experian's US Business Database or our other marketing capabilities.

According to the Kauffman Foundation business starts in the United States have been on a steady decline for the past four decades, while the cost of education has risen. In fact, as of 2017, outstanding college debt stood at 1.4 trillion dollars. So how does student debt impact business owners who started a business after college? In our latest Business Q&A I ask Andrea Schmalzer about her recent study of business owner student debt. Gary: Andrea why did you to decide to study student debt for small business owners? Andrea: Hi Gary we decided to take a look at student loan debt in regard to small businesses due to the fact that student loan debt has now increased to over one point four trillion dollars. In addition to that, small business creation has been on a downward trend basically since the 1990's. So we decided to take a look and see if student loan debt was impacting new business creation and longevity. Gary: And are there any industries where student debt has seen a significant increase? Andrea: Yes. In the public administration segment, which includes prisons, research laboratories, realtors, state run businesses, we saw an increase of student debt of about 89 percent between the years 2012 and 2017. So right now small business owners are opening their businesses with close to 60 thousand dollars in debt, when back in 2012 it was just over 30 thousand. Gary: And were there any other interesting insights that you saw in the data? Andrea: Actually yes. The biggest finding that we had was that having student loan debt didn't impact business survival. We have in our sample almost 79 percent of small businesses with student loan debt lasting five or more years. And that's compared to about 60 percent survival rate of five or more years for small businesses as a whole. So we're seeing a definite positive trend with small business owners acquiring student debt. To learn more about these insights, download the whitepaper. Download Whitepaper   Help us spread the word! Click To Tweet!  

Experian and Moody’s Analytics just released the latest Experian/Moody’s Analytics Main Street Report for Q4 2017. The report brings deep insight into the overall financial well-being of the small-business landscape, as well as providing commentary around what certain trends mean for credit grantors and the small-business community. The overall outlook for small-business credit is positive. Outstanding balances rose in the fourth quarter, as did the average balance outstanding per business. Delinquency and default rates rose slightly, suggesting that credit conditions have loosened. Continuing strength in the macroeconomy will keep small businesses moving in the near term, along with higher profits from the recently passed tax legislation. Small-business credit will be less certain in the medium to long term as rising wages and tax code changes take a toll. Northeast sees the steepest decline in delinquency The Northeast saw the steepest decline in severe delinquencies in the fourth quarter, and construction was one of the industries responsible for that trend. Many small construction firms have a focus on residential projects, making consumer credit growth an ideal metric to use as a basis for understanding what’s happening and what will happen in the industry. We have published the entire contents of the report in an interactive page, complete with charts and graphs. Download Main Street Report

I had the pleasure of speaking with Kelly DeBoer recently. She is a Product Manager at Experian working in Business Information Services. Kelly leads product strategy for our business marketing products. In this Business Q&A we talk about B2B marketing trends and how Experian is helping business clients get the most out of their marketing initiatives. Gary: B2B marketing has changed significantly in the last five years. What are some of the important trends that you're seeing? Kelly: What we're seeing in the B2B space is really what we've seen in the B2C space for years, and that is, our clients are really trying to gain as much insight into their not only existing clients but potential clients as well? So you know additional firmographic information, credit information, anything that gives them a fuller picture of their clients, and then not only how to retain their existing clients and cross-sell, but also in terms of prospecting, how to best reach these targets once we've identified them what's the best channels to reach those prospects to get the best response. Gary: Kelly, most of our clients think of Experian Business Information Services as firstly business data and credit risk management. So how are we helping clients with their marketing initiatives? Kelly: With regard to B2B marketing, Experian has a tremendous amount of marketing assets including not only our U.S. Business Database which has over 16 million businesses. We also overlay that with our credit information, so clients can come and tap into this this huge resource to help them with their targeting in terms of selecting by firmographics, employee size, sales volume, as well as credit attributes, UCC filings, bankruptcies, information that can be translated to marketing campaigns. It can be utilized for direct marketing, for telemarketing, for digital applications - social media, email campaigns, analytical solutions, modeling. So it's a vast amount of resources that we can tap into to help with marketing campaigns. Gary: Can you share about some B2B marketing solutions we can look forward to from Experian? Kelly: Experian has a lot on the horizon with regard to B2B marketing. But one thing I'm particularly excited about is our new B2C linkage business to consumer linkage. Ultimately our clients have been coming to us saying you know, we're looking for a way to link our consumer records to any businesses that they may be associated with. So we create a customized linkage system that allows us to take in those consumer records, match them to our commercial repositories, and then provide back information that allows our clients to then not only target that consumer at their residential address but also their business address. So it gives them a chance to cross-sell and up-sell commercial offers as well as their consumer offers. Experian Business Marketing Solutions