Financial Services

It’s the “Battle of the Sexes” credit edition. Who sports higher scores, less debt and more on-time payments? According to Experian’s latest analysis, women take the credit title. Thank you very much. The report analyzed multiple categories including credit scores, average debt, number of open credit cards, utilization ratios, mortgage amounts and mortgage delinquencies of men and women in the United States. Results revealed: Women’s average credit score of 675 compared to men’s score of 670 Women have 3.7 percent less average debt than men Women have 23.5 percent more open credit cards Women and men have the same revolving utilization ratio of 29.9 percent Women’s average mortgage loan amount is 7.9 percent less than men’s Women have a lower incidence of late mortgage payments by 8.1 percent “There were several gaps between men and women in this study, including the five-point credit score lead that the women hold,” said Michele Raneri, Experian’s Vice President of Analytics and New Business Development. “Even with more credit cards, women have fewer overall debts and are managing to pay those debts on time.” The report also takes a look at the vehicle preferences of men and women and how those choices play into their overall credit and financial health. Below are the top-line results: Women were more likely to purchase a more functional, utilitarian vehicle, while men tended to lean toward sports cars and trucks The top three vehicle segments men purchased in 2015 were mid-size pickup trucks, large pickup trucks and standard specialty cars. In fact, they were 1.37 times more likely to purchase a mid-sized pickup truck than the general population The top three vehicle segments for women were small crossover-utility vehicles, mid-size sports-utility vehicles and compact crossover-utility vehicles. Women were 1.40 times more likely to purchase the small crossover-utility vehicle than the general population Experian conducted a similar study, comparing men and women on various credit attributes in 2013. At that time, women also scored higher than men in the credit score category - holding steady with a 675 VantageScore® credit score compared to the men’s 674 VantageScore® credit score, but the gap has widened, with the men’s score further lowering to 670. While men’s scores have dropped since 2013, the overall financial health for both sexes is strong. Most notably, the mortgage 60-plus delinquency rate has dropped significantly. In the 2013 pull, men were tracking at 5.7 percent and women were 5.3 percent. Today, those numbers have dropped to .86 percent for men and .79 percent for women. What a difference a few years has made in regards to the recovering housing market. Time will tell if the country’s state of credit will continue to trend higher, as indicated in the 2015 annual report, or if the buzz of potential recession and an election year will reverse the positive trend. As for now, the women once again claim bragging rights as it pertains to credit. Analysis methodology The analysis is based on a statistically relevant, sampling of depersonalized data of Experian’s consumer credit database from December 2015. Gender information was obtained from Experian Marketing Services.

Proven identity and device authentication to minimize identity tax return fraud Identity fraud places an enormous burden on its victims and presents a challenge to businesses, organizations and government agencies, including the IRS and all state revenue authorities. Tax return fraud occurs when an attacker uses a consumer’s stolen Social Security number and other personal information to file a tax return, often claiming a significant refund. The IRS is challenged by innovative fraudsters continually trying to outsmart its current risk strategies around prevention, detection, recovery and victim assistance. And with the ever-increasing number of identity data compromised and tax return fraud victims, it’s necessary to question whether tax preparation companies are doing all they can to keep personally identifiable information (PII) secure and screen for fraud before forms are submitted. “ID theft isn’t just credit card fraud,” said Rod Griffin, Director of Public Education for Experian. A recent Experian online survey indicated that nearly 76 percent of consumers are familiar with ID theft and tax fraud — up significantly from the past two years. And 28 percent of those surveyed have been a victim or know a victim of tax fraud. To protect all parties’ interests, tax preparation agencies are challenged by today’s savvy fraudsters who have reaped the benefits of recent breaches. In order to protect consumers, organizations need to apply comprehensive, data-driven intelligence to help thwart identity fraud and the use of stolen identity data via fraudulent returns. The key to securing transactions, reducing friction and providing a consistently satisfying customer experience, online and offline, is authenticating consumers in a clear and frictionless environment. As a result, it’s necessary to have reliable customer intelligence based on both high-quality contextual identity and device attributes alongside other authentication performance data. Comprehensive customer intelligence means having a holistic, bound-together view of devices and identities that equips companies and agencies with the tools to balance cost and risk without increasing transactional friction. Businesses and agencies must not rely on a singular point of customer intelligence gathering and decisioning, but must move to more complex device identification and out-of-wallet verification procedures. Effective solutions typically involve a layered approach with several of the following: Identity transaction link analysis and risk attribute derivation Device intelligence and risk assessment Credit and noncredit data and risk attributes Multifactor authentication, using one-time passcodes via SMS messaging Identity risk scores Dynamic knowledge-based authentication questions Traditional PII validation and verification Biometrics and remote document verification Out-of-band alerts, communications and confirmations Contextual account, transaction and channel purview Additionally, government agencies must adhere to recognized standards, such as those prescribed by the National Institute of Standards and Technology to establish compliance. The persistent threat of tax fraud highlights the urgent need for businesses and agencies to continue educating consumers and more importantly, to improve the strategic effectiveness of their current solutions processes. Learn more about Experian Fraud and Identity Solutions, including government-specific treatments, and how the most effective fraud prevention and identity authentication strategy leverages multiple detection capabilities to highlight attackers while enabling a seamless, positive experience for legitimate consumers.

It’s hard to remember a world without online lenders. Today, fintech players continue to pop up, making it easier to cross-shop loans and land instant approvals.  Gone are the days of lengthy applications and waiting to hear if you’ve scored the latest credit line or personal loan. Consumers, especially with top-tier credit, can easily seek lower monthly payments or consolidate another loan with a cash-out option. Whatever the need, there’s a lender ready to serve. Strike that. There’s actually two or three lenders waiting to serve you. In fact, a recent Experian data pull revealed an increasing share of personal loan balances is actually going to lenders outside of the traditional banks and credit union space (they still own the lion’s share of the business). In 2013 (Q4), these more non-traditional lenders had 15.36 percent of personal loan balances. In Q4 of 2015, that number increased to 27.26 percent. The personal loan business today is just over $222.9 billion in outstanding balances. As the competition heats up, lenders will need to diversify, stand out and provide more value to consumers. Those that engage with new, value-added services, and deliver timely, personalized needs-based messages will capture the greatest share of the market. Here is a sampling of ways to draw consumers in and deliver the value they seek in a financial institution: Be Transparent Lending Club, one of the original peer-to-peer lenders and currently the biggest in terms of dollars funded, continues to grow by providing consumers and investors with transparency, good loan terms and speed. Prosper, on the other hand, recently acquired an app that allows their customers to track spending, budget and monitor their credit. They plan to leverage this technology in the near future and offer it to customers and investors for free. Research reveals Millennials especially are looking to tech and free services to manage their personal finances. A recent Experian survey focused on Millennials and credit revealed 48 percent have used free financial services, like Mint, to manage their finances. Additionally, 57 percent use on average three financial apps. Know Your Customers Payoff uses survey data to segment their customers into roughly 10 financial personalities based on how they use and think about their debt. These personality types are used to tailor marketing messages and customer service conversations about how to improve their financial situation. Their site features a quiz, Discover the Secrets of Your Financial Personality, helping consumers and Payoff understand more about trends attached to spending, saving and managing money. Offer Solutions for Debt Consolidation Even after consumers consolidate debt and pay it off successfully, unforeseen expenses, unexpected life events, evolving spending habits and the increasing cost-of-living expenses mean there will always be a market for debt consolidation solutions. Understanding consolidation credit account behavior is mandatory for lenders looking to stand out and stay ahead of the consolidation needs of consumers. Having visibility to consumers’ interest rates, revolving loan balances and the remaining months on existing loans provides unique ways to segment and engage clients with need-based offers. Consumer-tailored messages during the prospecting, acquisition and account management stages of the relationship sets the stage for repeat business. The research is clear. Individuals are willing to switch brands if they feel a different provider will better meet their needs. Lenders – in both the traditional and fintech spaces – should not expect many chances when it comes to getting it right with consumers. Fail to keep them engaged and you’ll fail to keep them. Period.   Learn more about identifying profitable consolidation candidates, check out Experian’s annual Vision Conference in May.

Time to dust off those compliance plans and ensure you are prepared for the new regulations, specifically surrounding the Military Lending Act (MLA). Last July, the Department of Defense (DOD) published a Final Rule to amend its regulation implementing the Military Lending Act, significantly expanding the scope of the existing protections. The new, beefed-up version encompasses new types of creditors and credit products, including credit cards. While the DOD was responsible for implementing the rule, enforcement will be led by the Consumer Financial Protection Bureau (CFPB). The new rule became effective on October 1, 2015, and compliance is required by October 3, 2016. Compliance, however, with the rules for credit cards is delayed until October 3, 2017. While there is no formal guidance yet on what federal regulators will look for in reviewing MLA compliance, there are some insights on the law and what’s coming. Why was MLA enacted? It was created to provide service members and their dependents with specific protections. As initially implemented in 2007, the law: Limited the APR (including fees) for covered products to 36 percent; Required military-specific disclosures, and; Prohibited creditors from requiring a service member to submit to arbitration in the event of a dispute. It initially applied to three narrowly-defined “consumer credit” products: Closed-end payday loans; Closed-end auto title loans; and Closed-end tax refund anticipation loans. What are the latest regulations being applied to the original MLA implemented in 2007? The new rule expands the definition of “consumer credit” covered by the regulation to more closely align with the definition of credit in the Truth in Lending Act and Regulation Z. This means MLA now covers a wide range of credit transactions, but it does not apply to residential mortgages and credit secured by personal property, such as vehicle purchase loans. One of the most significant changes is the addition of fees paid “for a credit-related ancillary product sold in connection with the credit transaction.”  Although the MAPR limit is 36 percent, ancillary product fees can add up and — especially for accounts that carry a low balance — can quickly exceed the MAPR limit. The final rule also includes a “safe harbor” from liability for lenders who verify the MLA status of a consumer. Under the new DOD rule, lenders will have to check each credit applicant to confirm that they are not a service member, spouse, or the dependent of a service member, through a nationwide CRA or the DOD’s own database, known as the DMDC. The rule also permits the consumer report to be obtained from a reseller that obtains such a report from a nationwide consumer reporting agency. MLA status for dependents under the age of 18 must be verified directly with the DMDC. Experian will be permitted to gain access to the DMDC data to provide lenders a seamless transaction. In essence, lenders will be able to pull an Experian profile, and MLA status will be flagged. What is happening between now and October 2016, when lenders must be compliant? Experian, along with the other national credit bureaus, have been meeting with the DOD and the DMDC to discuss providing the three national bureaus access to its MLA database. Key parties, such as the Financial Services Roundtable and the American Bankers Association, are also working to ease implementation of the safe harbor check for banks and lenders. The end goal is to enable lenders the ability to instantly verify whether an applicant is covered by MLA by the Oct. 1, 2016 compliance date. --- If you have inquiries about the new Military Lending Act regulations, feel free to email MLA.Support@experian.com or contact your Experian Account Executive directly. Next Article: A check-in on the latest Military Lending Act news

Every portfolio has a set of delinquent customers who do not make their payments on time. Truth. Every lender wants to collect on those payments. Truth. But will you really ever be able to recover all of those delinquent funds? Sadly, no. Still, financial institutions often treat all delinquent customers equally, working the account the same and assuming eventually they’ll get their funds. The sentiment to recover is good, but a lot of collection resources are wasted on customers who are difficult or impossible to recover. The good news? There is a better way. Predictive analytics can help optimize the allocation of collection resources by identifying the most effective accounts to prioritize to your best collectors, do not contact and proceed to legal actions to significantly increase the recovery of dollars, and at the same time reduce collection costs. I had the opportunity to recently present at the annual Debt Buyer Association’s International Conference and chat with my peers about this very topic. We asked the room, “How many of you are using scoring to determine how to work your collection accounts?” The response was 50/50, revealing many of these well-intentioned collectors are working themselves too hard, and likely not getting the desired returns. Before you dive into your collections work, you need to respond to two questions: Which accounts am I going to work first? How am I going to work those accounts? This is where scoring enters the scene. A scoring model is a statistical algorithm that assigns a numerical expression based on known information to predict an unknown future outcome. You can then use segmentation to group individuals with others that show the same behavior characteristics and rank order groups for collection strategies. In short, you allow the score to dictate the collection efforts and slope your expenses based on the propensity and expected amount of the consumer to pay. This will inform you on: What type, if any, skip trace tactic you should use? If you should purchase additional data? What intensity you should work the account? With scoring, you will see different performances on different debts. If you have 100 accounts you are collecting on, you’ll then want to find the accounts where you will have the greatest likelihood to collect, and collect the most dollars. I like to say, “You can’t get blood from a stone.” Well the same holds true for certain accounts in your collections pile. Try all you like, but you’ll never recoup those dollars, or the dollars you do recoup will be minimal. With a scoring strategy, you can establish your “hit list” and find the most attractive accounts to collect on, and also match your most profitable accounts with your best collectors. My message to anyone managing a collections portfolio can be summed up in three key messages. You need to use scoring in your business to optimize resources and increase profits. The better data that goes into your model will net you better performance results. Get a compliance infrastructure in place so you can ensure you are collecting the right way and stay out of trouble. The beauty of scores is they tell you what to do. It will help you best match resources to the most profitable accounts, and work smarter, not harder. That’s the power of scoring.

Compliance definitions LOA, CIP, FACTA, KYC — These acronyms seem endless, and navigating compliance can be both confusing and a painful drain on resources. How do you know the best approach for your institution? Should you look at regulations for Know Your Customer (KYC) or the Customer Identification Program (CIP)? What about the levels of assurance (LOAs) or the Fair and Accurate Credit Transactions Act (FACTA) Red Flags Rule? Does the USA PATRIOT Act affect your industry? The myriad guidelines, rules and mandates surrounding fraud compliance are changing the way organizations do business. Let’s start with some brief definitions. CIP/KYC The Customer Identification Program requires banks to form a reasonable belief that they know the true identity of each customer. The CIP must include procedures that specify the identifying information that will be obtained from each customer, along with reasonable and practical risk-based procedures for verifying each customer’s identity. The Know Your Customer provision is a financial regulatory rule mandated by the Bank Secrecy Act and the USA PATRIOT Act. These guidelines focus on prevention of money laundering and the use of financial institutions to finance terrorist activities. This process has three stages: the CIP, customer due diligence (CDD) and enhanced due diligence (EDD). The last two stages address customer risk from an anti–money laundering perspective. LOA/FACTA (Red Flags Rule) Levels of assurance regarding identity focus on the extent to which electronic authentication may be used to verify that the individual identified in the input data truly is the same person engaging in the electronic transaction. This can be a daunting task — even the National Institute of Standards and Technology acknowledges that electronic authentication of individual people is a technical challenge when performed remotely over an open network. To choose the level of assurance that works within your company structure, you must determine what is needed to maintain the internal compliance and risk thresholds for each business requirement. LOAs are based on two categories: trustworthiness of the identity-proofing process and trustworthiness of the credential-management function (which includes technology and implementation/management). There are four LOA levels: Minimal Assurance Moderate Assurance Substantial Assurance High Assurance The FACTA Red Flags Rule requires institutions to establish a program that identifies ecommerce “red flags.” This program should consist of a pattern, practice or specific activity that indicates the possible existence of identity theft applicable to account-opening activities, existing account maintenance and new activity on accounts that have been inactive for two years or more. Don’t be discouraged In this world of compliance regulations that read like alphabet soup, we understand the challenges of meeting regulations while providing a frictionless customer experience. When an organization strikes the perfect balance between compliance and customer service, it has a competitive advantage that can lead to additional revenue opportunities (e.g., profitably acquiring new customers, detecting fraud and reducing charge-offs, minimizing operational costs, and improving operational efficiencies). To achieve this, businesses need cost-effective, flexible tools that allow them to meet current and future guidelines, manage risk and ultimately authenticate as many true customers as possible — all while segmenting out only the real fraudsters and noncompliant identities. You can be assured that new regulations will come, existing regulations will be redefined and communications on how to comply will be difficult to interpret. To find out more about compliance, click here.

Over the next several years, the large number of home equity lines of credit (also known as HELOCs) originated during the boom period of 2005 to 2008, will begin approaching their end of draw periods. Upon entering the repayment period, these 10-year interest-only loans will become amortized to cover both principal and interest, resulting in payment shock for many borrowers. HELOCs representing $265 billion will reach their end of draw between 2015 and 2018. Now is the time for lenders to be proactive and manage this risk effectively. Lenders with HELOC portfolios aren’t the only ones affected by HELOC end of draw. Non-HELOC lenders also are at risk when consumers are faced with payment shock. Experian analysis shows that it is an issue of consumer liquidity — consumers who reach HELOC end of draw are more likely to become delinquent not only on their HELOC, but on other types of debt as well. If consumers were 90 days past due on their HELOC at end of draw, there was a 112 percent, 48.5 percent and 24 percent increase in delinquency on their mortgage, auto and bankcard trade, respectively. With advanced data and analytics, lenders can be proactive in managing the risk associated with HELOC end of draw. Whether your customer has a HELOC with you or with another lender or is a new prospect, having the key data elements to obtain a full view of that consumer’s risk is vital in mitigating HELOC end-of-draw risk. Lenders should consider partnering with companies that can help them develop and deploy HELOC risk strategies in the near future. It is essential that lenders proactively plan and are well-positioned to protect their businesses from HELOC end-of-draw risk. Experian HELOC end of draw study

Accuracy matters. It matters in dart throwing, math calculations, and now more than ever, in data reporting. The Consumer Financial Protection Bureau (CFPB) issued a bulletin on Feb. 3 warning banks and credit unions that if they fail to meet accuracy obligations when reporting negative account histories to credit reporting companies, the result could be bureau action. As noted in the Fair Credit Reporting Act (FCRA) section 623, data furnishers have an obligation to ensure the accuracy of the information furnished to a Credit Reporting Agency (CRA). Violation of these rules presents a variety of risks, and the regulatory agencies have enforced harsh consequences. Avoiding penalties is certainly a strong incentive for data furnishers to implement a formal compliance management system and data quality program. But there are additional benefits to ensuring accuracy – most notably keeping customers happy and loyal, and maintaining a reputable brand in the marketplace. Today’s consumers increasingly understand the impact of credit scoring and data reporting, and recognize a poor credit score can impact their lives in major ways. Credit is tied to so many milestone financial moments. Securing mortgage loans, auto loans, obtaining low-interest rate interest credit cards and securing private student loans can all be derailed with an unfavorable and inaccurate credit report. Not to mention credit reports can influence one’s eligibility for rental housing, setting premiums for auto and homeowners insurance in some states, or determining whether to hire an applicant for a job. To properly serve customers who simply expect a fair and accurate representation of their financial history, data furnishers must be able to guarantee the credibility of their reported data. Those organizations that cannot ensure accuracy put their reputation at risk and may lose a customer’s trust and business. “Consumers should not be sidelined out of the basic banking services they need because of the flaws and limitations in a murky system,” Cordray said in the bulletin. “People deserve to have more options for access to lower-risk deposit accounts that can better fit their needs.” The CFPB has handled more than 105,000 credit-reporting complaints in its short history, making credit reporting the third most-complained-about consumer issue. By far the most common types of credit-reporting issues identified by consumers is incorrect information on credit report (77 percent).* Certainly these mistakes are not made intentionally. But speak to a consumer battling an inaccuracy, especially someone in the midst of applying for credit for a specific need, and frustrations can soar quickly. All lenders are advised to maintain a full 360-degree view of data reporting, from raw data submissions to the consumer credit profile. Better data input equals fewer inaccuracies. Additionally, there are comprehensive reporting solutions available to assess the accuracy of consumer credit data. The regulatory environment will without a doubt continue to be a hot topic in the media, fueled by announcements such as these by the CFPB, so lenders should take note and identify processes to ensure complete and utter accuracy. It matters in so many ways, so it’s best to make data reporting a priority now, if it’s not already. Source: CFPB August 2015 Monthly Complaint Report

Understanding the behaviors of best-in-class credit risk managers For financial institutions to achieve superior performance, having the appropriate set of credit risk managers is a prerequisite. The ability to gain insight from data and customer behavior and to use that insight for strategic advantage is a critical ingredient for success. At the same time, the risk-management community is under increasing pressure to understand and explain underlying trends in credit portfolios — and to monitor, interpret and explain these trends with ever-greater accuracy. A common problem financial institutions face when confronting staff resource needs is the difficulty in recruiting and retaining experienced risk-management professionals. The risk-management community is notoriously small, and hiring expertise from within this community is extremely difficult. Skilled risk managers truly are a finite resource, but their skill set is in huge demand. Hiring the right talent is crucial to job satisfaction, leading to higher engagement levels and reduced attrition costs. On top of that, employee engagement is vital to an organization’s success. It drives employee productivity and fosters a culture of innovation, which leads to higher profitability for the entire organization. Building, attracting and retaining risk-management resources requires a commitment to engaging in staff personal development. A great way to support employee engagement is to invest in their personal and professional development, including opportunities for training and team building. If an organization can show that it is committed to developing its people and providing opportunities for career growth, employee engagement levels will rise, with all the benefits this entails. Typically, financial institutions bridge the resource skill gap by either hiring skilled statistical and analytical experts or developing in-house resources. Both of these approaches, however, require significant on-the-job training to teach employees how to link raw statistical techniques and procedures to influencing the profit and loss statement of the business line which they support. The challenge is often broadening the understanding of these skill set “silos” and their contribution to the overall portfolio. By opening that view, the organization generates additional value from these resources as lines of communication are improved and insights and opportunities found within the data are shared more effectively across the organizational team. Experian’s Global Consulting Practice provides a solution to this problem. Our two-day Risk and Portfolio Management Essentials training workshop offers the opportunity to understand the behaviors of best-in-class risk managers. What are the tools and enablers required for the role? How do they prepare for the process of managing credit risk? What areas must risk managers consider managers across the Customer Life Cycle? What differentiates the good from the great? To complement the training modules, Experian® offers an interactive, team-based approach that engages course participants in the build options of a defined portfolio. Participants leverage the best-in-class techniques presented in the sessions in a series of competitive, team-based exercises. This set of cross-organizational exercises drives home the best-in-class techniques and further builds understanding that resonates across the organization long after the course is concluded. For our current offerings, locations and to register click here.  

What is blockchain? Blockchain is beginning to get a lot of attention, so I thought it might be time to figure out what it is and what it means. Basically, a blockchain is a permissionless, distributed database that maintains a growing list of records (transactions) in a linear, chronological (and time-stamped) ledger. At a high level, this is how it works. Each computer connected to the network gets a copy of the entire blockchain and performs the task of validating and relaying transactions for the whole chain. The batches of valid transactions added to the record are called “blocks.” A block is the “current” part of a blockchain that records some or all of the recent transactions and once completed goes into the blockchain as a permanent database. Each time a block gets completed, a new block is created, with every block containing a hash of the previous block. There are countless numbers of blocks in the blockchain. To use a conventional banking analogy, the blocks would be a full history of every banking transaction for every person, and the blockchain would be a complete banking history. The entire blockchain is sent to everyone who has access, and every user validates the information in the block. It’s like if Tom, Bob and Harry were standing on the street corner and saw a cyclist hit by a car. Individually, all three men will be asked if the cyclist was struck by the car, and all three will respond “yes.” The cyclist being hit by the car becomes part of the blockchain, and that fact cannot be altered. Blockchain generally is used in the context of bitcoin, where similar uses of the structure are called altchains. Why should I care or, at the very least, pay attention to this movement? Because the idea of it is inching toward the tipping point of mainstream. I recently read an article that identified some blockchain trends that could shape the industry in coming months. The ones I found most interesting were: Blockchain apps will be released Interest in use cases outside payments will pick up Consortia will prove to be important Venture capital money will flow to blockchain start-ups While it’s true that much of the hype around blockchain is coming from people with a vested interest, it is beginning to generate more generalized market buzz as its proponents emphasize how it can reduce risk, improve efficiency and ultimately provide better customer service. Let’s face it, the ability to maintain secure, fast and accurate calculations could revolutionize the banking and investment industries, as well as ecommerce. In fact, 11 major banks recently completed a private blockchain test, exchanging multiple tokens among offices in North America, Europe and Asia over five days. (You can read The Wall Street Journal article here.) As more transactions and data are stored in blockchain or altchain, greater possibilities open up. It’s these possibilities that have several tech companies, like IBM, as well as financial institutions creating what has become known as an open ledger initiative to use the blockchain model in the development of new technologies that will enable a wider array of services. There is no doubt that the concept is intriguing — so much so that even the SEC has approved a plan to issue stock via blockchain. (You can read the Wired article here.) The potential is enough to make many folks giddy. The idea that risk could become a thing of the past because of the blockchain’s immutable historical record — wow. It’s good to be aware and keep an eye on the open ledger initiative, but let’s not forget history, which has taught us that (in the wise words of Craig Newmark), “Crooks are early adopters.” Since blockchain’s original and primary usage has been with bitcoin, I don’t think it is unfair to say that there will be some perceptions to overcome — like the association of bitcoin to activities on the Dark Web such as money laundering, drug-related transactions and funding illegal activities. Until we start to see the application across mainstream use cases, we won’t know how secure blockchain is or how open business and consumers will be to embracing it. In the meantime, remind me again, how long has it taken to get to a point of practical application and more widespread use of biometrics? To learn more, click here to read the original article.  

Ensure you’re protecting consumer data privacy Data Privacy Day is a good reminder for consumers to take steps to protect their privacy online — and an ideal time for organizations to ensure that they are remaining vigilant in their fight against fraud. According to a new study from Experian Consumer Services, 93 percent of survey respondents feel identity theft is a growing problem, while 91 percent believe that people should be more concerned about the issue. Online activities that generate the most concern include making an online purchase (73 percent), using public Wi-Fi (69 percent) and accessing online accounts (69 percent). Consumers are vigilant while online Most respondents are concerned they will fall victim to identity theft in the future (71 percent), resulting in a generally proactive approach to protecting personal information. In fact, almost 50 percent of respondents say they are taking more precautions compared with last year. Ninety-one percent take steps to secure physical information, such as shredding documents, while also securing digital information (using passwords and antivirus software). Many consumers also make sure to check their credit report (33 percent) and bank account statements (76 percent) at least once per month. There’s still room for consumers to be safer Though many consumers are practicing good security habits, some aren’t: More than 50 percent do not check to see if a Website is secure Fifty percent do not have all their Web-enabled devices password-protected because it is a hassle to enter a password (30 percent) or they do not feel it is necessary (25 percent) Fifty-five percent do not close the Web browser when they are finished using an online account Additionally, 15 percent keep a written record of passwords and PINs in their purse or wallet or on a mobile device or computer Businesses need to be responsible when it comes data privacy  Customer-facing businesses must continue efforts to educate consumers about their role in breach and fraud prevention. They also need to be responsible and apply comprehensive, data-driven intelligence that helps thwart both breaches and the malicious use of breached information and protect all parties’ interests. Nearly 70 percent of those polled in a 2015 Experian–Ponemon Institute study said that the increased visibility and media reporting of breaches, including payment-related incidents, have caused their organizations to step up data security efforts. Experian Fraud & ID is uniquely positioned to provide true customer intelligence by combining identity authentication with device assessment and monitoring from a single integrated provider. This combination provides the only true holistic view of the customer and allows organizations to both know and recognize customers and to provide them with the best possible experience. By associating the identities and the devices used to access services, the true identity can be seen across the customer journey. This unique and integrated view of identity and device delivers proven superior performance in authentication, fraud risk segmentation and decisioning. For more insights into how businesses are responding to breach activities, download our recent white paper, Data confidence realized: Leveraging customer intelligence in the age of mass data compromise. For more findings from the study, view the results here.

Who will take the coveted Super Bowl title in 2016? Now that we’re down to the final two teams, the commentary will heighten. Sportscasters, analysts, former athletes, co-workers ... even your local barista has an opinion. Will it be Peyton Manning's Denver Broncos or the rising Carolina Panthers? Millions will make predictions in the coming weeks, but a little research can go a long way in delivering meaningful insights. How have the teams been trending over the season? Are there injuries? Who is favored and what’s the spread? Which quarterback is leading in pass completions, passing yards, touchdowns, etc.? Who has been on this stage before, ready to embrace the spotlight and epic media frenzy? The world of sports is filled with stats resulting from historical data. And when you think about it, the world of credit could be treated similarly. Over the past several years, there has been much hype about “credit invisibles” and the need to “score more.” A traditional pull will likely leave many “no-file” and “thin-file” consumers out, so it’s in a lender’s best interest to leverage alternative scoring models to uncover more. But it’s also important to remember a score is just a snapshot, a mere moment in time. How did a consumer arrive to that particular score pulled on any given day? Has their score been trending up or down? Has an individual been paying off debt at a rapid pace or slipping further behind?   Two individuals could have the exact same score, but likely arrived to that place differently. The backstory is good to know – in sports and in the world of credit. Trended data can be attached to balances, credit limits, minimum payment due, actual payment and date of payment. By assessing these areas on a consumer file for 24 months, more insights are delivered and lenders can take note of behavior patterns to assist with risk assessment, marketing and share-of-wallet analysis. For example, looking closer at those consumers with five trades or more, Experian trended data reveals: 27% are revolvers, carrying balances each month 27% are transactors, paying off large portions, or all of their balances 9% are rate surfers, who tend to frequently transfer balances to credit cards with 0% or low introductory rates. Now these consumers can be viewed beyond a score. Suddenly, lenders can look within or outside their portfolio to understand how consumers use credit, what to offer them, and assess overall profitability. In short, trended data provides a more detailed view of a borrower’s historical credit performance, and that richness makes for a more informed decision. Without a doubt, there is power in the score – and being able to score more – but when it comes time to place your bets, the trended data matters, adding a whole new dimension to an individual’s credit score. Place your wagers accordingly. As for who will win Super Bowl 2016? I haven’t a clue. I’m more into the commercials. And I hear Coldplay is on for the half-time show. If you’re betting, best of luck, and do your homework.

Attract and retain high-value demand deposit accounts The excitement of the new year has ended, and now the big question remains: What will 2016 hold for our market and the economy? So far, we’ve seen this election year bring a volatile financial market: The Federal Reserve increased short-term interest rates by 25 basis in December, and there is uncertainty if and when future increases will come China’s gross domestic product is forecasted at 6.5 percent, the lowest in a quarter century The Dow Jones industrial average is down 10 percent to start the year, signaling a lot of uncertainty for banks and consumers It’s hard to find answers in a shifting financial landscape with a long list of mixed signals. The average consumer is looking on and wondering if we face another Great Recession or if the current economy is spiking a fever just before it is completely cured. The reality, for those of us in the banking industry, is that the modest economic recovery is likely to continue as part of a new normal pattern. In 2016, banks that remain competitive in a more digital world will be those that have frictionless products and processes to attract and retain high-value, highly sought-after consumer deposits and loans. Banks should expect the competition for deposits to intensify, and they will need to ensure that new deposit customers are on boarded effectively and cross-sold loan products quickly to reduce first-year attrition. Cross-selling at the point of origination for the demand deposit account (DDA) customers is the best way to ensure that new customers keep the institution as their primary bank. Financial institutions can exceed consumer expectations and ensure a competitive business model by leveraging modernized technology capabilities fully in combination with making relevant decisions to deliver consumer-friendly experiences. First-year DDA attrition rates will demonstrate how the consumer’s expectations were met and if the new bank got the account-opening process right or wrong. Experian® suggests three capabilities clients should consider: A deposits technology platform that offers frictionless change to data, origination strategies and instant cross-sell to loan products that yield sticky customers Strategies that comply with current and evolving regulatory demands, such as those being sought by the Consumer Financial Protection Bureau (CFPB) Business planning to identify execution gaps and a road map to ensure that gaps are addressed, confirming continued competitive ability to attract high-value deposit and loan customers DDA-account opening effectiveness can be achieved by using a consumer’s life stage, affordability considerations, unique risk profile and financial needs to on board optimally and grow those high-value consumers effectively and efficiently. Financial institutions that are nimble and fast adopters of these critical capabilities will reduce operating expenses for their organizations, grow sustainable revenue from new prospects and customers, and delight those new customers along the way. This is a win-win for banks and consumers. Join me next week as we discuss best practices across the entire demand deposit account life cycle.

The new year has started, the champagne bottles recycled. Bye-bye holidays, hello tax season. In fact, many individuals who are expecting tax refunds are filing early to capture those refunds as soon as possible. After all, a refund equates to so many possibilities – paying down debt, starting a much-needed home improvement project or perhaps trading up for a new vehicle. So what does that mean for lenders?  As consumers pocket tax refunds, the likelihood of their ability to make payments increases. By the end of February 2014, more than 48 million tax refunds had been issued according to the IRS – an increase of 5.6 percent compared to the same time the previous year. As of Feb. 28, the average refund in 2014 was $3,034, up 3 percent compared to the average refund amount for the same time in 2013. To capitalize on this time period, introducing collection triggers can assist lenders with how to manage and collect within their portfolios. Aggressively paying down a bankcard, doubling down on a mortgage payment or wiping out a HELOC signal to the lender a change in positive behavior, but without a trigger attached, it can be hard to pinpoint which customers are shifting from their status quo payments. Experian actually offers around 100 collection triggers, but lenders do not need all to seek out the predictive insights they require. A “top 20” list has been created, featuring the highest percentages in lift rates, and population hit rates. Experian has done extensive analysis to determine the top-performing collection triggers. Among the top 15 to 20 triggers, the trigger hit rate ranged from 2 to 8 percent on an average client’s total portfolio, taking into consideration liquidation rates, average percent of payment lifts, lift in liquidation rates over the baseline liquidation, percent of overall portfolio that triggered, percent of overall portfolio that triggered only on the top-selected triggers, and percent of volume by trigger on the total customers that had a trigger hit. With that said, it is essential to implement the right strategy that includes a good mixture of the top-performing triggers. The key is diversifying and balancing trigger selection and setting triggers up during opportune times. Tax season is one of those times. Some of the top-ranked triggers include: Closed-Zero Balance Triggers: This is when a consumer’s account is reported as closed after being delinquent for a certain number of days. Specifically, the closed-zero balance trigger after being delinquent for 120 days has the highest percent of payment lift over an average payment that you would receive from a customer (at a 710 percent lift rate). These triggers are good indicators the consumer is showing positive improvement, thus having a higher likelihood for collections. Paid Triggers: This is when a consumer’s account is reported as paid after being delinquent, in collections, etc. Five of the top 20 triggers are paid triggers. These triggers have good coverage and a good balance between high lift rates (100 percent to 500 percent) and percent of the triggered population. These triggers are also good indicators the consumer is showing positive improvement, thus having a higher likelihood for collections. Inquiry Triggers: This is when a consumer is applying for an auto loan, mortgage loan, etc. The lift rates for these triggers are lowest within the Top 20, but on the other hand, these triggers have the highest hit rates (up to a 33 percent hit rate). These triggers are good indicators consumers are seeking to open additional lines of credit. Home Equity Loan Triggers: These triggers indicate the credit available on a consumer’s home equity loan. They are specifically enticing to collectors due to the fact that home equity lines of credit are usually larger than your average credit on your bank card. The larger the line of credit, the more you are able to potentially collect. To learn more about collection triggers, visit https://www.experian.com/consumer-information/debt-collection.html

Looking at true fraud rate I’ve talked with many companies over the years about their fraud problems. Most have a genuine desire to operate under the fraud prevention model and eliminate all possible fraud from their systems. The impact on profit is often the primary motivation for implementing solutions, but in reality most companies employ a fraud management schema, offsetting the cost of fraud with the cost of managing it. There are numerous write-ups and studies on the true cost of fraud. What most people don’t realize is that, for each item lost to fraud, a business operating on 10 percent net profit margins will need to sell 10 times the amount of product in order to recover the expense associated with the loss. These hard costs don’t include the soft dollar costs, such as increased call center expenses to handle customer calls. Recently, some organizations have started to add reputational risk into their cost-of-fraud equation. With the proliferation of social media, a few unhappy customers who have been victims of fraud easily can impact an organization’s reputation. This is an emerging fuzzy cost that eventually can be tied back to lost revenue or a drop in share price. Most companies say with pride that their acceptable fraud rate is zero. But when it comes time to choose a partner in fraud detection, it almost always comes down to return on investment. How much fraud can be stopped — and at what price? More informed organizations take all operational expenses and metrics into consideration, but many look at vendor price as the only cost. It’s at this point that they start to increase their acceptable fraud rate. In other words, if — hypothetically — Vendor A can stop only 80 percent of the fraud compared with Vendor B, but Vendor A costs less than 80 percent of what Vendor B costs, they’ll choose Vendor A. All of a sudden, their acceptable fraud rate is no longer zero. This method of decision making is like saying we’ll turn off the security cameras for 20 percent of the day because we can save money on electricity. On the surface, I understand. You have to be accountable to the shareholders. You have to spend and invest responsibly. Everyone is under pressure to perform financially. How many executives, however, take the time to see where those lost dollars end up? If they knew where the money went, would they change their view? We must be vigilant and keep our acceptable fraud rate at zero.