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On June 7, the Consumer Financial Protection Bureau (CFPB) released a new study that found that the ways “credit invisible” consumers establish credit history can differ greatly based on their economic background. The CFPB estimated in its May 2015 study "Data Point: Credit Invisibles" that more than 45 million American consumers are credit invisible, meaning they either have a thin credit file that cannot be scored or no credit history at all. The new study reviewed de-identified credit records on more than one million consumers who became credit visible. It found that consumers in lower-income areas are 240 percent more likely to become credit visible due to negative information, such as a debt in collection. The CFPB noted consumers in higher-income areas become credit visible in a more positive way, with 30 percent more likely to become credit visible by using a credit card and 100 percent more likely to become credit visible by being added as a co-borrower or authorized user on someone else’s account. The study also found that the percentage of consumers transitioning to credit visibility due to student loans more than doubled in the last 10 years. CFPB’s research highlights the need for alternative credit data The new study demonstrates the importance of moving forward with inclusion of new sources of high-quality financial data — like on-time payment data from rent, utility and telecommunications providers — into a consumer’s credit file. Experian recently outlined our beliefs on the issue in comments responding to the CFPB’s Request for Information on Alternative Data. As a brand, we have a long history of using alternative credit data to help lenders make better lending decisions. Extensive research has shown that there is an immense opportunity to facilitate greater access to fair and affordable credit for underserved consumers through the inclusion of on-time telecommunications, utility and rental data in credit files. While these consumers may not have a traditional credit history, many make on-time payments for telephone, rent, cable, power or mobile services. However, this data is not typically being used to enhance traditional credit files held by the nationwide consumer reporting agencies, nor is it being used in most third-party or custom credit scoring models. Further, new advances in financial technology and data analytics through account aggregation platforms are also integral to the credit granting process and can be applied in a manner to broaden access to credit. Experian is currently using account aggregation software to obtain consumer financial account information for authentication and income verification to speed credit decisions, but we are looking to expand this technology to increase the collection and utilization of alternative data for improving credit decisions by lenders. Policymakers should act to help credit invisible consumers While Experian continues to work with telecommunications and utility companies to facilitate the furnishing of on-time credit data to the nationwide consumer reporting agencies, regulatory barriers continue to exist that deter utility and telecommunications companies from furnishing on-time payment data to credit bureaus. To help address this issue, Congress is currently considering bipartisan legislation (H.R. 435, The Credit Access and Inclusion Act of 2017) that would amend the FCRA to clarify that utility and telecommunication companies can report positive credit data, such as on-time payments, to the nation' s credit reporting bureaus. The legislation has bipartisan support in Congress and Experian encourages lawmakers to move forward with this important initiative that could benefit tens of millions of American consumers. In addition, Experian believes policymakers should more clearly define the term alternative data. In public policy debates, the term "alternative data" is a broad term, often lumping data sources that can or have been proven to meet regulatory standards for accuracy and fairness required by both the Fair Credit Reporting Act and the Equal Credit Opportunity Act with data sources that cannot or have not been proven to meet these standards. In our comment letter, Experian encourages policymakers to clearly differentiate between different types of alternative data and focus the consumer and commercial credit industry on public policy recommendations that will increase the use of those sources of data that have or can be shown to meet legal and societal standards for accuracy, validity, predictability and fairness. More info on Alternative Credit Data More Info on Alternative Financial Services

The 1990s brought us a wealth of innovative technology, including the Blackberry, Windows 98, and Nintendo. As much as we loved those inventions, we moved on to enjoy better technology when it became available, and now have smartphones, Windows 10 and Xbox. Similarly, technological and modeling advances have been made in the credit scoring arena, with new software that brings significant benefits to lenders who use them. Later this year, FICO will retire its Score V1, making it mandatory for those lenders still using the old software to find another solution. Now is the time for lenders to take a look at their software and myriad reasons to move to a modern credit score solution. Portfolio Growth As many as 70 million Americans either have no credit score or a thin credit file. One-third of Millennials have never bothered to apply for a credit card, and the percentage of Americans under 35 with credit card debt is at its lowest level in more than 25 years, according to the Federal Reserve. A recent study found that Millennials use cash and debit cards much more than older Americans. Over time, Millennials without credit histories could struggle to get credit. Are there other data sets that provide a window into whether a thin file consumer is creditworthy or not? Modern credit scoring models are now being used in the marketplace without negatively impacting credit quality. For example, the VantageScore® credit score allows for the scoring of 30 million to 35 million more people consumers who are typically unscoreable by other traditional generic credit models. The VantageScore® credit score does this by using a broader, deeper set of credit file data and more advanced modeling techniques. This allows the VantageScore® credit score model to more accurately predict unique consumer behaviors—is the consumer paying his utility bill on time?—and better evaluate thin file consumers. Mitigate Risk In today’s ever-changing regulatory landscape, lenders can stay ahead of the curve by relying on innovative credit score models like the VantageScore® credit score. These models incorporate the best of both worlds by leaning on innovative scoring analytics that are more inclusive, while providing marketplace lenders with assurances the decisioning is both statistically sound and compliant with fair lending laws. Newer solutions also offer enhanced documentation to ease the burden associated with model risk management and regulatory compliance responsibilities. Updated scores Consumer credit scores can vary depending on the type of scoring model a lender uses. If it's an old, outdated version, a consumer might be scored lower. If it's a newer, more advanced model, the consumer has a better shot at being scored more fairly. Moving to a more advanced scoring model can help broaden the base of potential borrowers. By sticking to old models—and older scores—a sizable number of consumers are left at a disadvantage in the form of a higher interest rate, lower loan amount or even a declined application. Introducing advanced scoring models can provide a more accurate picture of a consumer. As an example, for many of the newest consumer risk models, like FICO Score 9, a consumer’s unpaid medical collection agency accounts will be assessed differently from unpaid non-medical collection agency accounts. This isn't true for most pre-2012 consumer risk score versions. Each version contains different nuances for increasing your score, and it’s important to understand what they are. Upgrading your credit score to the latest VantageScore® credit score or FICO solution is easier than you think, with a switch to a modern solution taking no longer than eight weeks and your current business processes still in place. Are you ready to reap the rewards of modern credit scoring?

There are about as many definitions for people-based marketing as there are companies using the term. Each company seems to skew the definition to fit their particular service offering. The distinctions are vast, and especially for financial services companies running regulated campaigns, they can be incredibly important. At Experian, we define people-based marketing in its purest form: targeting at the individual level across channels. This is a practice we’re very familiar with in offline marketing, having honed arguably one of the most accurate views of U.S. consumers over the past three decades. And now we’re taking those tried and true principals and applying them to digital channels. It’s not as easy as it sounds. The challenge with people-based marketing  With direct mail, people-based marketing was easy. Jane Doe lives at 123 Main St. If I want to reach her, I can simply send her a direct mail piece at that address. To help, I can utilize any number of services, including the National Change of Address database, to know where to reach her if she ever moves. People-based marketing through digital channels is exponentially more difficult. While direct mail has one signal with which you use to identify a consumer (the address), digital channels offer countless signals. And not all of those signals can be used, either individually or in conjunction with other signals, to reliably tie a consumer to a persistent offline ID. A prime example of this is cookies. The problem with cookies A cookie, in and of itself, isn’t the problem. The problem is the linkage. How was a cookie associated with the person to whom the ad is being served? As marketers, we need to make sure that we are reaching the right people with the right ad … and more importantly not reaching those people who have opted out. This is especially true in the world of regulated data, where you need to know who you are targeting. And cookie-based linkage is controlled by a handful of companies, many of which are walled gardens who don’t share how they link offline people to online cookies and don’t collect this information directly. They rely on other third-party websites to gather PII, and connect it to their cookies. In some cases, the data is very accurate (especially with transaction data). In some cases, it is not (think websites that collect PII when giving surveys, offering coupons, etc.). In short, in order for you to use cookie-based targeting accurately, you need to have insight into the source of the base linkage data that was used to connect the offline consumer record to the online cookie. This same concept applies to all forms of digital linkage that drive people-based marketing. Why does people-based marketing matter in digital credit marketing?  With campaigns that utilize non-regulated data, such as “Invitation to Apply” campaigns that are driven from demographic and psychographic data, the consequences of not reaching the consumer you meant to target are negligible. But with campaigns that utilize regulated data, you must ensure you’re targeting the exact consumer you meant to reach. More importantly, you must make sure you’re not targeting an ad to a consumer who had previously opted out of receiving offers driven with regulated data (prescreen offers, for example). Even if you’ve already delivered a direct mail piece with the same offer, this doesn’t negate your responsibility to reach only approved consumers who have not opted out. --- Bottom line, the world of 1:1 marketing is growing more sophisticated, and that’s a good thing. Marketers just need to understand that while regulated data can be powerful, they must also take great responsibility when handling it. The data exists to deliver firm offers of credit to your very specific target in all-new mediums. People-based marketing has its place, and it can now be done in a compliant, digitally-savvy way – in the financial services space, nonetheless.   Register for our webinar on Credit Marketing Strategies to Drive Today's Digital Consumer.

The final day of Vision 2017 brought a seasoned group of speakers to discuss a wide range of topics. In just a few short hours, attendees dove into a first look at Gen Z and their use of credit, ecommerce fraud, the latest in retail, the state of small business and leadership. Move over Millennials – Gen Z is coming of credit age Experian Analytics leaders Kelley Motley and Natasha Madan gave audience members an exclusive look at how the first wave of Gen Z is handling and managing credit. Granted most of this generation is still under the age of 18, so the analysis focused on those between the ages of 18 to 20. Yes, Millennials are still the dominant generation in the credit world today, standing strong at 61 million individuals. But it’s important to note Gen Z is sized at 86 million, so as they age, they’ll be the largest generation yet. A few stats to note about those Gen Z individuals managing credit today: Their average debt is $12,679, compared to younger Millennials (21 to 27) who have $65,473 in debt and older Millennials (28 to 34) who sport $121,460. Given their young age, most of Gen Z is considered thin-file (less than 5 tradelines) Average Gen Z income is $33,000, and average debt-to-income is low at 5.7%. New bankcard balances are averaging around $1,574. As they age, acquire mortgages and vehicles, their debt and tradelines will grow. In the meantime, the speakers provided audience members a few tips. Message with authenticity. Think long-term with this group. Maintain their technological expectations. Build trust and provide financial education. State of business credit and more on the economy Moody’s Cris deRitis reiterated the U.S. economy is looking good. He quoted unemployment at 4.5%, stating “full employment is here.” Since the recession, he said we’ve added 15 million jobs, noting we lost 8 million during the recession. The great news is that the U.S. continues to add about 200,000 jobs a month, and that job growth is broad-based. Small business loans are up 10% year-to-date vs. last year. While there has been a tremendous amount of buzz around small business, he adds that most job creation has come from mid0size business (50 to 499 employees). The case for layered fraud systems Experian speaker John Sarreal shared a case study that revealed by layering on fraud products and orchestrating collaboration, a business can go from a string 75% fraud detection rate to almost 90%. Additionally, he commented that Experian is working to leverage dark web data to mine for breached identity data. More connections for financial services companies to make with mobile and social Facebook speaker Olivia Basu reinforced the need for all companies to be thinking about mobile. “Mobile is not about to happen,” she said. “Mobile is now. Mobile is everything. You look at the first half of 2017 and we’re seeing 40% of all purchases are happening on mobile devices.” Her challenge to financial services companies is to make marketing personal again, and of course leverage the right channels. Experian Sr. Director of Credit Marketing Scott Gordon commented on Experian’s ability to reach consumers accurately – whether that be through direct or digital delivery channels. A great deal of focus has been around person-based marketing vs. leveraging the cookie. -- The Vision conference was capped off with a keynote speech from legendary quarterback and Super Bowl MVP Tom Brady. He chatted about the details of this past season, and specifically the comeback Super Bowl win in February 2017. He additionally talked about leadership and what that means to creating a winning team and organization. -- Multiple keynote speeches, 65 breakout sessions, and hours of networking designed to help all attendees ready themselves for growing profits and customers, step up to digital, regulatory and fraud challenges, and capture the latest data insights. Learn more about Experian’s annual Vision conference.  

Risk analysts are insatiable consumers of big data who require better intelligence to develop market insights, evaluate risk and confirm business strategies. While every credit decision, risk assessment model or marketing forecast improves when it is based on better, faster and more current data, leveraging large data sets can be challenging and unproductive. That’s why Experian added a new functionality to its Analytical Sandbox, giving clients the flexibility they need to analyze big data efficiently. Experian’s Analytical Sandbox now utilizes H2O –an open source machine learning and deep learning platform that can model and predict with high accuracy billions of rows of high-dimensional data from multiple sources in various formats. Through machine learning and advanced predictive modeling, the platform enables Experian to better provide on-demand data insights that empowers analysts with high-quality intelligence to inform regional trends, provide consumer transactional insight or expose marketing opportunities. As a hosted service, Sandbox is offered as a plug-and-play, meaning no internal development is required. Clients can instantly access the data through a secure Web interface on their desktop, giving users access to powerful artificial and business intelligence tools from their own familiar applications. No special training is required. “AI monetizes data,” said SriSatish Ambati, CEO of H2O.ai. “Our partnership with Experian democratizes and delivers AI to the wider community of financial and risk analysts. Experian's analytics sandbox can now model and predict with high accuracy billions of rows of high-dimensional data in mere seconds.” Through H2O and the Experian Sandbox, machine learning and predictive analytics are giving risk managers from financial institutions of all sizes the ability to incorporate machine learning models into their own big data processing systems.

In just a few short hours, Vision attendees immersed themselves into the depths of the economy, risk models, specialty finance data, credit invisibles, student loan data, online marketplace lending and more. The morning kicked off with one of the most respected and trusted macroeconomists in the U.S., Diane Swonk. With a rap sheet filled with advising central banks and multinational companies, Swonk treated a packed house to a look back on what has transpired in the U.S. economy since the Great Recession, as well as launching into current state and speculating on the months ahead. She described the past decade not as “lost, but rather lagging.” She went onto to say this past year was transitional, and while markets slowed slightly during the months leading up the U.S. presidential election, good things are happening: We’ve finally broken out of the 2% wage rut Recruiting on college campuses has picked up The labor force is growing Debt-to-income levels have returned to where they were prerecession and Investment is coming back. “I believe we’ll see growth over 2% this year,” said Swonk. Still, change is underway. She commented on how the way U.S. consumer spending is changing, and of course we’re seeing a restructuring in the retail space. While JC Penney announces store closings, you simultaneously see Amazon moving from “click to brick,” dabbling in the opening of some actual storefronts. Globally, she said the economy is the strongest it has been in eight years. She closed by noting there is a great deal of political change and unrest in the world today, but says, “Never underestimate our abilities when we tap our human capital.” -- More than 100 attendees filled a room to hear about the current trends and the future of online lending with featured guests from Oliver Wyman, Marlette Funding and Lending USA. While speakers commented on the “hiccup” in the space last year with some layoffs and mergers, volume has continued to double every year for the past several years with roughly $40 billion in cumulative originations today. Panelists discussed the use of alternative data to decision, channel bias, the importance of partnerships and how the market will see fewer and fewer players offering just one product specialty. “It is expensive to acquire customers, so you don’t just want to have one product to sell, but rather a range,” said Sharat Shankar of Lending USA. -- The numbers in the student lending universe are astounding. In a session focused on the U.S. student loan market, new Experian data reveals there is $1.49 billion in total student loan outstandings. In fact, total outstandings have grown 21% over the past four years, while the number of trades have only grown 4%. Costs are skyrocketing. The average balance per trade has grown 17% over the past four years. “We don’t ration education in this country,” said Joe DePaulo of College Ave. Student Loans. “We give everyone access to liquidity when it comes to federal student loans – and it’s not like that in other countries.” While DePaulo notes the access is great, offering many students the opportunity to obtain higher education, he says the problem is with disclosures. Guardians are often the individuals filling out the FAFSA, but the students inherit the loans. Students, he says, rarely understand how much their monthly payment will ultimately be after graduation. For every $10,000 in student loans, he says that will generally equate to a $100 monthly payment. -- Tomorrow, Vision attendees will be treated to more breakout sessions and a concluding keynote with legendary quarterback Tom Brady.

So many insights and learnings to report after the first full day of 2017 Vision sessions. From the musings shared by tech engineer and pioneer Steve Wozniak, to a panel of technology thought leaders, to countless breakout sessions on a wide array of business topics … here’s a look at our top 10 from the day. A mortgage process for the digital age. At last. In his opening remarks, Experian President of Credit Services Alex Lintner asked the audience to imagine a world when applying for a mortgage simply required a few clicks or swipes. Instead of being sent home to collect a hundred pieces of paper to verify employment, income and assets, a consumer could click on a link and provide a few credentials to verify everything digitally. Finally, lenders can make this a reality, and soon it will be the only way consumers expect to go through the mortgage process. The global and U.S. economies are stable. In fact, they are strong. As Experian Vice President of Analytics Michele Raneri notes, “the fundamentals and technicals look really solid across the countries.” While many were worried a year ago that Brexit would turn the economy upside down, it appears everything is good. Consumer confidence is high. The Dow Jones Index is high. The U.S. unemployment rate is at 4.7%. Home prices are up year-over-year. While there has been a great deal of change in the world – politically and beyond – the economy is holding strong. The rise of the micropreneur. This term is not officially in the dictionary … but it will be. What is it? A micropreneur is a business with 0 to 4 employees bringing in no more than $200k in annual revenue. But the real story is that numbers show microbusiness are improving on many fronts when it comes to contribution to the economy and overall performance compared to other small businesses. Keep an eye on these budding business people. Fraud is running fierce. Synthetic identity losses are estimated in the hundreds of millions annually, with 50% year-over year growth. Criminals are now trying to use credit cleaners to get tradelines removed from used Synthetic IDs. Oh, and it is essential for businesses to ready themselves for “Dark Web” threats. Experts advise to harden your defenses (and play offense) to keep pace with the criminal underground. As soon as you think you’ve protected everything, the criminals will find a gap. The cloud is cool and so are APIs. A panel of thought leaders took to the main stage to discuss the latest trends in tech. Experian Global CIO Barry Libenson said, “The cloud has changed the way we deliver services to our customers and clients, making it seamless and elastic.” Combine that with API, and the goal is to ultimately make all Experian data available to its customers. Experian President of Decision Analytics Steve Platt added, “We are enabling you to tap into what you need, when you need it.” No need to “rip and replace” all your tech. Expect more regulation – and less. A panel of regulatory experts addressed the fast-changing regulatory environment. With the new Trump administration settling in, and calls for change to Dodd-Frank and the Consumer Financial Protection Bureau (CFPB), it’s too soon to tell what will unfold in 2017. CFPB Director Richard Cordray may be making a run for governor of Ohio, so he could be transitioning out sooner than the scheduled close of his July 2018 term. The auto market continues to cruise. Experian’s auto expert, Malinda Zabritski, revealed the latest and greatest stats pertaining to the auto market. A few numbers to blow your mind … U.S. passenger cars and light trucks surpassed 17 million units for the second consecutive year Most new vehicle buyers in the U.S. are 45 years of age or older Crossover and sport utility vehicles remain popular, accounting for 40% of the market in 2016 – this is also driving up finance payments since these vehicles are more expensive. There are signs the auto market is beginning to soften, but interest rates are still low, and leasing is hot. Defining alternative data. As more in the industry discuss the need for alternative data to decision, it often gets labeled as something radical. But in reality, alternative data should be simple. Experian Sr. Director of Government Affairs Liz Oesterle defined it as “getting more financial data in the system that is predicted, validated and can be disputed.” #DeathtoPasswords – could it be a reality? It’s no secret we live in a digital world where we are increasingly relying on apps and websites to manage our lives, but let’s throw out some numbers to quantify the shift. In 2013, the average U.S. consumer had 26 online accounts. By 2015, that number increased to 118 online accounts. By 2020, the average person will have 207 online accounts. When you think about this number, and the passwords associated with these accounts, it is clear a change needs to be made to managing our lives online. Experian Vice President David Britton addressed his session, introducing the concept of creating an “ultimate consumer identity profile,” where multi-source data will be brought together to identify someone. It’s coming, and all of us managing dozens of passwords can’t wait. “The Woz.” I guess you needed to be there, but let’s just say he was honest, opinionated and notes that while he loves tech, he loves it even more when it enables us to live in the “human world.” Too much wonderful content to share, but more to come tomorrow …

In a May 4 speech before the ACA International Conference in Washington, FCC Commissioner Michael O’Rielly criticized the FCC’s past decisions on Telephone Consumer Protection Act (TCPA) and outlined his vision on the direction that the new Commission should head to provide more certainty to businesses. Commissioner O’Rielly noted that prior decisions by the FCC and courts have “expanded the boundaries of TCPA far beyond what I believe Congress intended.” He said that the new leadership at the Commission and a new Bureau head overseeing TCPA, provides the FCC with the opportunity to “undo the misguided and harmful TCPA decisions of the past that exposed legitimate companies to massive legal liability without actually protecting consumers.” O’Rielly laid out three principles that he thought would help to frame discussions and guide the development of replacement rules. First, he said that legitimate businesses need to be able to contact consumers to communicate information that they want, need or expect to receive. This includes relief for informational calls, as well as valid telemarketing calls or texts. Second, Commissioner O’Rielly said that FCC should change the definition of an autodialer so that valid callers can operate in an efficient manner. He went on to say that if FCC develops new rules to clarify revocation of consent, it should do so in a clear and convenient way for consumers, but also does not upend standard best practices of legitimate companies. Third, O’Rielly said that the FCC should focus on actual harms and bad actors, not legitimate companies. While Commissioner O’Rielly’ s comments signal his approach to TCPA reform, it is important to note that FCC action on the issue us unlikely to happen overnight. A rule must be considered by the Commission, which will have to allow for public notice and comment. Experian will continue to monitor regulatory and legislative developments on TCPA.

As we enter May, a month dedicated to recognizing our U.S. Armed Forces, it’s only fitting to think about how we are honoring this special group of people. Yes, there will likely be car deals, coupons, and even a few beautiful ceremonies, but as both lawmakers and leaders have recognized, these individuals and their families deserve protections every day. Especially in the financial services universe. There should be no exorbitant fees. No excessively high interest rates. And when they are called to active-duty, they should have avenues to ease their financial commitments and/or exit out of lease agreements. Thankfully, the Servicemembers Civil Relief Act (SCRA) and a strengthened Military Lending Act (MLA) were introduced to help. In fact, we are in year one of the enhanced MLA Final Rule in which compliance was mandated by Oct. 3, 2016. The extended MLA protections include a 36% Military Annual Percentage Rate (MAPR) cap to a wider range of credit products, including payday loans, vehicle title loans, refund application loans, deposit advance loans, installment loans and unsecured open-end lines of credit. The cap additionally applies to fees tacked on for credit-related ancillary products including finance charges and certain application and participation fees. The amended rule covers credit offered or extended to active-duty service members and their dependents, if the credit is subject to a finance charge or is payable by written agreement in more than four installments. And finally, one of the most important additions is that creditors must verify active-duty and dependents at origination. Right now, this can be accomplished by either working with a bureau, like Experian, or by vetting lists directly with the Department of Defense’s (DOD) own database. To continue to help with client need, the bureaus are working with the DOD and financial institutions to ensure alignment in delivery of military member and dependent data for a consistent, immediate and accurate MLA verification process. While much has been introduced over the past year to strengthen protections, there is still more to come. The compliance date for credit cards is Oct. 3, 2017. To date, the MLA status of millions upon millions of consumer credit applications have been verified, ensuring our military members and their dependents receive the financial protections they are entitled to under law. There are roughly 3.4 million military members and dependents in the MLA database, and this is an audience who sacrifices a great deal for our country. Thankfully, protections are finally being enforced to ensure they are taken care of too.

Sometimes life throws you a curve ball. The unexpected medical bill. The catastrophic car repair. The busted home appliance. It happens, and the killer is that consumers don’t always have the savings or resources to cover an additional cost. They must make a choice. Which bills do they pay? Which bills go to the pile? Suddenly, a consumer’s steady payment behavior changes, and in some cases they lose control of their ability to fulfill their obligations altogether. These shifts in payment patterns aren’t always reflected in consumer credit scores. At a single point in time, consumers may look identical. However, when analyzing their past payment behaviors, differences emerge. With these insights, lenders can now determine the appropriate risk or marketing decisions. In the example below, we see that based on the trade-level data, Consumer A and Consumer B have the same credit score and balance. But once we see their payment pattern within their trended data, we can clearly see Consumer A is paying well over the minimum payments due and has a demonstrated ability to pay. A closer look at Consumer B, on the other hand, reveals that the payment amount as compared to the minimum payment amount is decreasing over time. In fact, over the last three months only the minimum payment has been made. So while Consumer B may be well within the portfolio risk tolerance, they are trending down. This could indicate payment stress. With this knowledge,  the lender could decide to hold off on offering Consumer B any new products until an improvement is seen in their payment pattern. Alternatively, Consumer A may be ripe for a new product offering. In another example, three consumers may appear identical when looking at their credit score and average monthly balance. But when you look at the trend of their historical bankcard balances as compared to their payments, you start to see very different behaviors. Consumer A is carrying their balances and only making the minimum payments. Consumer B is a hybrid of revolving and transacting, and Consumer C is paying off their balances each month. When we look at the total annual payments and their average percent of balance paid, we can see the biggest differences emerge. Having this deeper level of insight can assist lenders with determining which consumer is the best prospect for particular offerings. Consumer A would likely be most interested in a low- interest rate card, whereas Consumer C may be more interested in a rewards card. The combination of the credit score and trended data provides significant insight into predicting consumer credit behavior, ultimately leading to more profitable lending decisions across the customer lifecycle: Response – match the right offer with the right prospect to maximize response rates and improve campaign performance Risk – understand direction and velocity of payment performance to adequately manage risk exposure Retention – anticipate consumer preferences to build long-term loyalty All financial institutions can benefit from the value of trended data, whether you are a financial institution with significant analytical capabilities looking to develop custom models from the trended data or looking for proven pre-built solutions for immediate implementation.

It should come as no surprise that reaching consumers on past-due accounts by traditional dialing methods is increasingly ineffective.  The new alternative, of course, is to leverage digital channels to reach and collect on debts. The Past: Dialing for dollars. Let’s take a walk down memory lane, shall we? The collection approach used for many years was to initially send the consumer a collection letter recapping the obligation and requesting payment, usually when an account was 30 days late. If the consumer failed to respond, a series of dialing attempts were then made, trying to reach the consumer and resolve the debt. Unfortunately, this approach has become less effective through the years due to several reasons: The use of traditional landlines continues to drop as consumers shift to cell and Voice Over Internet Protocol (VOIP) services. The cost of reaching consumers by cell is more costly since predictive dialers can’t be used without prior consent, and the obtaining and maintaining consent presents its own set of tricky challenges. Consumers simply aren’t answering their phones. If they think a bill collector is calling, they don’t pick up. It’s that simple. In fact, here is a breakdown by age group that Gallup published in 2015, highlighting the weakness of traditional phone-dialing. The Present:  Hello payment portal. With the ability to get the consumer on the phone to negotiate a payment on the wane, the logical next step is to go digital and use the Internet or text messaging to reach the consumer. With 71 percent of consumers now using smartphones and virtually everyone having an Internet connection, this can be a cost-effective approach. Some companies have already implemented an electronic payment portal whereby a consumer can make a payment using his or her PC or smartphone.  Usually this is prompted by a collection letter, or if permitted by consumer consent, a text message to their smartphone. The Future: Virtual negotiation. But what if the consumer wants to negotiate different terms or payment plans? What if they want to try and settle for less than the full amount?  In the past – and for most companies operating today – this translates into a series of emails or letters being exchanged, or the consumer must actually speak to a debt collector on the phone. And let’s be honest, the consumer generally does not want to speak to a collector on the phone. Fortunately, there is a new technology involving a virtual negotiator approach coming into the market now.  It works like this: The credit grantor or agency contacts the consumer by letter, email, or text reminding them of their debt and offering them a link to visit a website to negotiate their debt without a human being involved. The consumer logs onto the site, negotiates with the site and hopefully comes to terms with what is an acceptable payment plan and amount. In advance, the site would have been fed the terms by which the virtual negotiator would have been allowed to use. Finally, the consumer provides his payment information, receives back a recap of what he has agreed to and the process is complete. This is the future of collections, especially when you consider the younger generations rarely wanting to talk on the phone. They want to handle the majority of their matters digitally, on their own terms and at their own preferred times. The collections process can obviously be uncomfortable, but the thought is the virtual negotiator approach will make it less burdensome and more consumer-friendly. Learn more about virtual negotiation.

Investors and financial institutions continue to invest in fintech to help meet the dynamic expectations of consumers who want fast, easy and hassle-free access to new financial products and services. Just last week, in his annual letter to shareholders, JP Morgan Chase CEO Jamie Dimon noted that the bank has invested approximately $600 million “on emerging fintech solutions – which include building and improving digital and mobile services and partnering with fintech companies.” Meanwhile, policymakers in Washington continue to grapple with how to spur responsible innovation and how fintech fits into the existing regulatory paradigm. The Office of the Comptroller of the Currency (OCC) continues to move forward with the development of a special purpose national charter for fintech lenders.  On March 15, the OCC issued a draft supplement to its existing Licensing Manual that describes how the agency “will apply the licensing standards and requirements in its existing regulations and policies to fintech companies applying for a special purpose national bank charter.” The draft manual, which is open for a 30-day public comment period ending April 14, 2017, would prohibit fintech lenders from offering products “with predatory features” or entities that inappropriately mingle banking and commerce. The agency also defended its legal authority to make the move without a new law from Congress or any formal rulemaking process, saying it’s doing nothing more than expanding a longstanding practice. At the same time, a group of House Republicans, led by House Financial Services Committee Chairman Jeb Hensarling (R-Tex.), has asked Comptroller of the Currency Thomas Curry to slow down plans to grant special charters to fintech firms. In the letter, the lawmakers state that OCC should provide “full and fair opportunity” for public comment on standards for granting fintech charters and allow President Trump’s pick for the next comptroller to weigh in. The lawmakers go on to say that if OCC “proceeds in haste” to create new limited-purpose charter for fintech, Congress will examine the agency’s actions and “if appropriate, overturn them.” The issue will likely continue to bubble under the surface as Congress and the Trump Administration tackle larger issues such as tax reform, infrastructure spending and possibly wider financial services reform. However, the fintech charter is a legacy item for Comptroller Curry and he is likely to seek to move this to closure given that his term expires at the end of April (although he would remain in place until President Trump nominates and confirms his replacement).

The U.S. Senate declared April to be Financial Literacy Month back in 2004. Fast forward 13 years and one has to question if we’ve moved the needle on educating Americans about personal finance and money management. There is still no national standard or common curriculum to teach our kids the basics in schools, and only five states require high school students to take one semester of personal finance in order to graduate. I read an interesting stat years back that high school seniors spend more time shopping for their prom attire than they do researching financial education options for college. No wonder there is sticker shock post-graduation when those first student loan bills coming. The lack of investment shows. In a 2016 Mintel study, very few consumers gave themselves high grades for their knowledge of personal finance, and the situation was worse among women, with twice as many assigning themselves a “C” as an “A.” Having worked in the financial services industry for more than a decade, I can say with certainty I’m a bit of a personal finance geek. Learning about the latest products and economic shifts has been rolled into my job, and I’ve sadly seen the consequences of what happens to consumers when they make poor financial decisions. Slumping credit scores. Delinquent payments. Repossessed vehicles. Hard times. The good news? There are plenty of resources to help Americans learn. The challenge? Finding the right ways to capture mind share via the right mediums at the right time. There is obviously a benefit to the consumer to be more financially literate, but financial institutions benefit as well when consumers are money smart. Individuals who understand financial products and how they can use them to achieve their goals are more likely to purchase those products throughout their financial lives. So how can financial institutions help close the financial literacy gap? Make online education and resources readily available. Research shows more consumers would like to get information about finance through the use of online resources rather than seminars. This preference is likely due to the fact that online resources can be accessed on one’s own schedule and gives the user more control over the topics s/he wants to explore. Provide parents resources to launch smart money talks with their kids. Study after study reveals parents are one of the most powerful teachers in their kids’ lives – and this includes providing an education and modeling strong money management skills. Consider adding online education for kids – or partnering with a provider who has already built a money app for youngsters. Additionally, educate parents about when it might be time to help a child establish their first savings account. Advise them on ways to finance college. Talk about co-signing on vehicles. Explain the power of saving. Train up your next wave of customers and they will likely remain loyal to you. Offer one-on-one credit education sessions. A high-touch solution is sometimes the perfect opportunity to grow a customer in the right financial direction. Perhaps a low credit score prevents an individual from securing an ideal interest rate for an auto or home loan. Each person’s financial situation is different, and a one-on-one session with a trained agent can help them understand what is specifically contributing to their low score. With a few insights, a customer can determine if they need to pay down some debt, address a few late payments, or reduce their number of credit lines. Knowledge is power, and consumers will appreciate this service and personable touch. --- Lenders have a vested interest to close the financial literacy gap, and while they can’t solve for everything, they can certainly make a difference with some basic steps and investments. If nothing else, April seems like a perfect time to evaluate what you’re doing and what resolutions you can make for the year ahead. Just as every saved penny counts, so does every effort to educate Americans on manning their money more effectively.

Experian recently acquired a minority stake in Finicity, a leading financial data aggregator enabling innovation in the FinTech industry through its modern RESTful API and Finicity Aggregation Platform. Steve Smith—chairman, CEO and co-founder of Finicity—has a passion and experience in developing innovative and disruptive technology, products and services that leads to efficiency for markets and, ultimately, improvements for consumers. Here he shares his thoughts about disruptive technology in the lending space and its benefits to lenders and consumers. Q: Finicity has said its objective is to take a loan application approval from weeks to minutes using its technology. That sounds pretty great, but how is that possible? How does this play out behind the scenes? A: Well, we’re living in a world where we, as consumers, expect very user-friendly experiences and we expect things to happen at digital speeds. The loan process is no exception. To deliver the experience consumers are expecting requires us to leverage the technology trends of digitization, mobility and big data. Finicity plays a foundational role by leveraging thousands of digital connections across financial institutions to aggregate consumer-permissioned account data. Once we have this data, we’re able to deliver real-time insights into an individual's financial health. This financial health assessment includes income and assets, two critical components to the loan approval process. All that’s required is the borrower to permission use of the data. Once that’s done, we’re able to gather all appropriate data across multiple accounts, rapidly analyze it and send a verification report to the lender. No papers. No multiple requests. No questions on the validity of the data. All done in minutes, not weeks. Q: This is very disruptive technology. What are the benefits for lenders? Consumers? A: Well, as we discussed, one of the major benefits is the speed to a loan. Furthermore, this reduces cost for the lender by maximizing loan officer’s time, while also freeing up loan capital as they can move through loans more quickly with a higher quality assessment. Another benefit for lenders is reduced fraud. Our information on income and assets is coming from real-time bank validated information. This eliminates the possibility of altered data. For consumers, it’s a dramatically simplified process. No need to chase down multiple documents. There are virtually no second requests for information, which we often see in the process. And they’re always in control of their information. All in all, it’s a dramatically better experience for both the lender and the borrower. Q: What sets this solution apart from others in the market? A: A few things set Finicity apart in delivering the quality of insights required. First, we are an industry leader in the number of financial institutions we connect with, ensuring broader access for more customers. Second, 95 percent of our integrations provide access to formatted data, something that’s critical to credit decisioning solutions. In these cases, we’re not screen scraping. This enhances our ability to collect bank validated transactions; we provide the financial institution transaction ID. This provides assurance of data quality. Finally, is our ability to categorize and analyze the transactions. This allows us to identify income streams and assets. Through this process, we’re also able to flag unusual transactions, like large deposits, that may skew actual assets. Q: The future of financial technology is still evolving. What lies ahead? A: We’re very excited about the future of financial technology and the impact that aggregation will have. Whether it’s financial management, digital payments or credit decisioning, real-time data will improve the experiences and the outcomes. As we’re talking about lending, this is one of the spaces that could see significant disruption. Our ability to generate a richer view of an individual’s or organization’s financial health will more accurately determine their ability to repay a loan. This will be a great benefit for those that have thin file or no credit history. We see a world where suitability for a loan will be driven by their actual financial life independent of their use of credit. One of the largest markets in the US is millennials. However, for consumers under 30, two-thirds have subprime or non-prime credit scores and one-third of millennials don't have any credit history. This is just one group underserved because legacy models don’t leverage the full extent of data available. Q: Is there anything else you can tell us about Finicity and its role changing customer experiences across financial service? A: For us, it all comes down to one thing: enabling individuals and organizations to have the information and insights they need to make smarter financial decisions. The data is there. We’re helping to unlock the potential of that data by working with innovative partners like Experian. To learn more about Experian and Finicity's account aggregation solutions, visit www.experian.com/finicity

Knowing a consumer’s credit information at a single point in time only tells part of the story. I often hear one of our Experian leaders share the example of two horses, running neck-in-neck, at the races. Who will win? Well, if you had multiple insights into those two horses – and could see the race in segments – you might notice one horse losing steam, and the other making great strides. In the world of credit consumers, the same metaphor can ring true. You might have two consumers with identical credit scores, but Consumer A has been making minimum payments for months and showing some payment stress, while Consumer B has been aggressively making larger pay-offs. Trended data adds that color to the story, and suddenly there is more intel on who to market to for future offers. To understand the whole story, lenders need the ability to assess a consumer’s credit behavior over time. Understanding how a consumer uses credit or pays back debt over time can help lenders: Offer the right products & terms to increase response rates Determine up sell and cross sell opportunities Prevent attrition Identify profitable customers Avoid consumers with payment stress Limit loss exposure The challenge with trended data, however, is finding a way to sort through the payment patterns in the midst of huge datasets. At the singular level, one consumer might have 10 trades. Trended data in turn reveals five historical payment fields and then you multiple all of this by 24 months and you suddenly have 1,200 data points. But let’s be real … a lender is not going to look at just one consumer as they consider their marketing or retention campaigns. They may look at 100,000 consumers. And on that scale you are now looking at sorting through 120M data points. So while a lender may think they need trended data – and there is definitely value in accessing it – they likely also need a solution to help them wade through it all, assessing and decisioning on those 120M data points. Tapping into something like Credit3D, which bundles in propensity scores, profitability models and trended attributes, is the solution that truly unveils the value of trended data insights. By layering in these solutions, lenders can clearly answer questions like: Who is likely to respond to an offer? How does a consumer use credit? How can I identify revolvers, transactors and consolidators? Is there a better way to understand risk or to conduct swap set analysis? How can I acquire profitable consumers? How do I increase wallet share and usage? Trended data sounds like a “no-brainer” and it definitely has the ability to shed light on that consumer credit horse race. Lenders, however, also need to have the appropriate analytics and systems to assess on the huge volume of data points. Need more information on Trended Data and Credit 3D? Contact Us