Fintech

The ability to verify customer identities is essential for financial institutions for numerous reasons: regulatory requirements, for the protection of their consumers and their business, mitigating risk and more. Being able to detect high-risk customers and large transactions is a critical component of Know Your Customer (KYC) strategies. In addition to being good business practices, this type of risk mitigation is also outlined in industry regulations. In an increasingly complex regulatory environment, companies may be faced with meeting multiple KYC and Anti-Money Laundering (AML) requirements. Actions taken to validate customers such as enhanced due diligence in KYC compliance have impacts spanning far beyond just regulatory compliance. As with any business, bottom line and budget are primary drivers for many financial institutions. Enhanced due diligence (EDD) can positively impact a business's bottom line by contributing to the reduction of fraud rates. And with increased security to discover potential fraudsters, organizations can protect both customers and reputational value. Enhanced due diligence explained: Why KYC, CIP and AML are critical in financial services EDD takes Customer Due Diligence (CDD) to the next level. Financial institutions conduct CDD to protect their organizations from financial crime. CDD is also a critical component of KYC steps to comply with AML laws. AML legislation requires financial institutions to validate their customers to ensure they aren’t part of explicitly illegal financial activity or funding terrorism. EDD is, as it sounds, a more involved form of due diligence, which encompasses additional procedures. EDD involves determining a customer’s risk, often requiring additional information and evidence to determine their viability. While CDD is performed on all customers, EDD is reserved for high-risk potential customers. Because EDD is often more costly and involved in terms of time and resources, a risk-based approach is recommended to flag only the instances when this additional level of validity is required. KYC references the mandatory process of identifying and verifying a client’s identity at account opening and over the course of their relationship with a company to ensure they are the person they say they are. KYC consists of three parts: Customer identification program (CIP), CDD and EDD. CIP requires, at minimum, that financial institutions provide four pieces of identifying information including name, date of birth, address and identification number. CDD consists of classifying the identifying information that was collected. After identifying who the client is (via CIP), CDD assesses the information to determine risk. Enhanced due diligence in KYC In order to establish a competent EDD program, you must improve your CIP and KYC programs. Objective, automated and efficient identity verification capabilities help you acquire profitable, legitimate customers and monitor them effectively over time to meet regulatory compliance expectations. How can EDD benefit your business? Failing to comply with EDD regulations can result in countless risks for financial institutions like fines and reputational losses. While many customers pose little to no risk, high-risk individuals must be flagged quickly and efficiently. The primary benefit of EDD is to protect both financial institutions and their customers from financial crimes such as money laundering and terrorist financing, but there are other risks as well. By mitigating potential risks associated with higher-risk customers, EDD can prevent financial institutions from incurring regulatory fines, legal action, and damage to their reputation. In turn, this ensures that customers have more trust in their financial service providers. Financial institutions can then gain a competitive advantage by offering more secure financial products and services that investors, businesses and customer demand. Access EDD from Experian Experian leverages our advanced analytics, reliable data sources, and team of experts to conduct objective, full and comprehensive due diligence with confidence and certainty. Our solutions, including flexible monitoring and segmentation tools, allow you to resolve discrepancies and fraud risk in a single step, all while keeping pace with emerging fraud threats with effective customer identification software. Improving your Customer Identification Program (CIP) and KYC programs In conclusion, Enhanced Due Diligence in KYC, CIP, and AML are critical components of the financial services regulatory compliance framework. EDD goes beyond the standard KYC, CIP, and AML checks to mitigate risks associated with higher-risk customers. Implementing EDD can help financial institutions comply with regulatory requirements, protect against potential risks, and prevent financial crimes. Ultimately, this benefits not only the institutions but also their customers and the broader economy. It’s vital that financial institutions understand and appreciate the importance of EDD and take appropriate measures to implement it effectively. Experian offers objective, automated and efficient identity verification solutions to help you acquire profitable, legitimate customers and monitor them over time to meet regulatory compliance expectations. Discover the power of CIP and KYC solutions. Learn more

Experian’s eighth annual identity and fraud report found that consumers continue to express concerns with online security, and while businesses are concerned with fraud, only half fully understand its impact – a problem we previously explored in last year’s global fraud report. In our latest report, we explore today’s evolving fraud landscape and influence on identity, the consumer experience, and business strategies. We surveyed more than 2,000 U.S. consumers and 200 U.S. businesses about their concerns, priorities, and investments for our 2023 Identity and Fraud Report. This year’s report dives into: Consumer concerns around identity theft, credit card fraud, online privacy, and scams such as phishing.Business allocation to fraud management solutions across industries.Consumer expectations for both security and their experience.The benefits of a layered solution that leverages identity resolution, identity management, multifactor authentication solutions, and more. To identify and treat each fraud type appropriately, you need a layered approach that keeps up with ever-changing fraud and applies the right friction at the right time using identity verification solutions, real-time fraud risk alerts, and enterprise orchestration. This method can reduce fraud risks and help provide a more streamlined, unified experience for your consumers. To learn more about our findings and how to implement an effective solution, download Experian’s 2023 Identity and Fraud Report. Download the report

The unsecured personal loan, one of the most popular products in the financial space, has seen ebbs and flows over the last several years due to many factors, including economic volatility, the global pandemic, changing consumer behaviors and expectations, and more. Experian data scientists and analysts took a deep dive into data between 2018 and 2022 to uncover and analyze trends in this important industry segment. Additionally, they recommend fintech lending solutions to help fintechs stay ahead of ever-changing market conditions and discover new opportunities. This analysis shows that digital loans accounted for 45 percent of the market in 2022. While this is down from 52% in 2021, digital loan market share continues to grow. The analysis also provides a detailed look into who the digital borrower is and how they compare to traditional borrowers. As we look to the rest of 2023 and beyond, fintechs must be armed with the best digital lending technology, tools, and data to fuel profitable growth while mitigating as much risk as possible. Download our fintech trends report for a full analysis on origination volume trends, delinquency trends, and consumer behavior insights. Download now

The fraud problem is ever-present, with 94% of businesses reporting it as a top priority, and fraudsters constantly finding new targets for theft. Preventing fraud requires a carefully orchestrated strategy that can recognize and treat a variety of types — without adding so much friction that it drives customers away. Experian’s fraud prevention and detection platform, CrossCore®, was recently named an Overall Leader, Product Leader in Fraud Reduction Intelligence Platforms, Innovation Leader and Market Leader in Fraud Reduction by KuppingerCole. CrossCore is an integrated digital identity and fraud risk platform that enables organizations to connect, access, and orchestrate decisions that leverage multiple data sources and services. CrossCore combines risk-based authentication, identity proofing, and fraud detection into a single, state-of-the-art cloud platform. It engages flexible decisioning workflows and advanced analytics to make real-time risk decisions throughout the customer lifecycle. This recognition highlights Experian’s comprehensive approach to combating fraud and validates that CrossCore offers best-in-class capabilities by augmenting Experian’s industry-leading identity and fraud offerings with a highly curated ecosystem of partners which enables further optionality for organizations based on their specific needs. To learn more about how CrossCore can benefit your organization, read the report or visit us. Learn more

On average, the typical global consumer owns three or more connected devices.1 80% of consumers bounce between devices, while 31% who turned to digital channels for their last purchase used multiple devices along the way.2 Considering these trends, many lenders are leveraging multiple channels in addition to direct mail, including email and mobile applications, to maximize their credit marketing efforts. The challenge, however, is effectively engaging consumers without becoming overbearing or inconsistent. In this article, we explore what identity resolution for credit marketing is and how the right identity tools can enable financial institutions to create more cohesive and personalized customer interactions. What is identity resolution? Identity resolution connects unique identifiers across touchpoints to build a unified identity for an individual, household, or business. This requires an identity graph, a proprietary database that collects, stitches, and stores identifiers from digital and offline sources. As a result, organizations can create a persistent, high-definition customer view, allowing for more consistent and meaningful brand experiences. What are the types of identity resolution? There are two common approaches to identity resolution: probabilistic ID matching and deterministic ID matching. Probabilistic ID matching uses multiple algorithms and data sets to match identity profiles that are most likely the same customer. Data points used in probabilistic models include IP addresses and device types. Deterministic ID matching uses first-party data that customers have produced, enabling you to merge new data with customer records and identify matches among existing identifiers. Examples of this type of data include phone numbers and email addresses. What role does identity resolution play in credit marketing? Maintaining a comprehensive customer view is crucial to credit marketing — the insights gained allow lenders to determine who they should engage and the type of offer or messaging that would resonate most. But there are many factors that can prevent financial institutions from doing this effectively: poor data quality, consumers bouncing between multiple devices, and so on. Seven out of 10 consumers find it important that companies they interact with online identify them across visits. Identity resolution for credit marketing solves these issues by matching and linking customer data from disparate sources back to a single profile. This enables lenders to: Create highly targeted campaigns. If your data is incomplete or inaccurate, you may waste your marketing spend by engaging the wrong audience or sending out irrelevant credit offers. An identity resolution solution that leverages expansive, regularly updated data gives you access to high-definition views of individuals, resulting in more personalization and greater campaign engagement. Deliver seamless, omnichannel experiences. To further improve your credit marketing efforts, you’ll need to keep up with consumers not only as their needs or preferences change, but also as they move across channels and devices. Instead of creating multiple identity profiles for the same person, identity resolution can recognize an individual across touchpoints, allowing you to create consistent offers and cohesive experiences. Picking the right marketing identity resolution solution While the type of identity resolution for marketing solution can vary depending on your business’s goals and challenges, Experian can help you get started. To learn more, visit us today. 1 Global number of devices and connections per capita 2018-2023, Statista. 2 Cross Device Marketing - Statistics and Trends, Go-Globe.

To reach customers in our modern, diverse communications landscape, it's not enough to send out one-size-fits-all marketing messages. Today's consumers value and continue to do business with organizations that put them first. For financial institutions, this means providing personalized experiences that enable your customers to feel seen and your marketing dollars to go further. How can you achieve this? The answer is simple: a customer-driven credit marketing strategy. What is customer-driven marketing? Customer-driven marketing is a strategy that focuses on putting consumers first, rather than products. It means thinking about the needs, wants and motivations of the prospects you're trying to reach and centering your marketing campaigns and messages around that audience. When done well, this comprehensive approach extends beyond the marketing team to all members of a company. The benefits of customer-driven credit marketing One benefit of this type of personalized credit marketing is that you can target customers with a potentially higher lifetime value. By focusing your marketing efforts on the right prospects, you'll ensure that budgets are being spent wisely and that you're not wasting valuable marketing dollars communicating with consumers who either won't respond or aren't a fit for your business. Customer-driven marketing enables you to identify and reach the most profitable, highly responsive prospects in the most efficient way, while also engaging with current customers to optimize retention rates. When you create marketing programs that are customer-driven, you're not just selling; you're building relationships. Rather than being simply a service provider, you become a trusted financial partner and advisor. This kind of data-driven customer experience can help you onboard more customers and retain them for longer, translating to better results when it comes to your bottom line. Customer-driven marketing: How to get started Customer-driven marketing is less funnel, more spiral. You research, test, refine and repeat, all while taking into account customer feedback and campaign results. It starts with defining your target audience and creating customer personas. As you do this, think about all the factors that are involved in your target customers’ path to purchase, from general awareness and growing need to the final motivation that pushes them to commit. You'll also want to consider what their pain points may be and the barriers that may prevent them from buying. Next, develop a marketing strategy that aligns with your target customers' needs and outlines how and where you'll reach them. It may also be helpful to gather and respond to customer feedback to ensure the value propositions in your campaigns are aligned with customer expectations. These insights can help you refine your messaging, resulting in increased response and retention rates. Use the right data to extend relevant credit offers When you send credit offers, you want to ensure they're reaching the right prospects at the right time. You also want to make sure these credit offers are relevant to the consumers that receive them. That's where quality data comes in. By optimizing your data-driven customer segmentation, you can develop timely and personalized credit offers to boost response rates. For example, you might have a target audience of consumers who are both creditworthy and looking for a new vehicle. Segmenting this audience into smaller groups by demographic, life stage, financial and other factors helps you create credit marketing campaigns that speak to each type of customer as an individual, not just a number. Meet consumers on their preferred channels Nowadays, consumer behavior is more fragmented than ever. This is relevant not just from a demographic point of view, but from the perspective of purchasing behavior. Customer-driven marketing helps you interact with prospects as individuals so that the value propositions they encounter are a true fit for their life situation. For instance, different age groups tend to spend time on different platforms. But why they're on those channels at any particular time matters too. Messaging aimed at prospects in their leisure time should be different from messaging they'll encounter when actively researching potential purchases. Keep up with your customers This is one answer to the question of how to improve customer retention as well. Research demonstrates that it's more cost-effective to keep a customer than to acquire a new one. When you tailor retention efforts with a well-thought-out customer-driven marketing strategy, you're likely to boost retention rates, which in many cases lead to better profits over time. Importance of a customer-driven marketing strategy Putting consumers at the center of credit marketing strategies — and at the center of your business as a whole — is the foundation for personalized experiences that can ultimately increase response rates and customer satisfaction. For more on how your organization can develop an effective customer-driven marketing strategy, learn about our credit marketing solutions.

The rise of the digital channel lead to a rise in new types of fraud – like cryptocurrency and buy now, pay later scams.  While the scams themselves are new, they’re based on tried-and-true schemes like account takeover and synthetic identity fraud that organizations have been working to thwart for years, once again driving home the need for a robust fraud solution.   While the digital channel is extremely attractive to many consumers due to convenience, it represents a balancing act for organizations – especially those with outdated fraud programs who are at increased risk for fraud. As organizations look for ways to keep themselves and the consumers they serve safe, many turn to fraud risk mitigation. What are fraud risk management strategies? Fraud risk management is the process of identifying, understanding, and responding to fraud risks. Proper fraud risk management strategies involve creating a program that detects and prevents fraudulent activity and reduces the risks associated with fraud. Many fraud risk management strategies are built on five principles: Fraud Risk AssessmentFraud Risk GovernanceFraud PreventionFraud DetectionMonitoring and Reporting By understanding these principles, you can build an effective strategy that meets consumer expectations and protects your business. Fraud risk assessment Fraud protection begins with an understanding of your organization’s vulnerabilities. Review your top risk areas and consider the potential losses you could face. Then look at what controls you currently have in place and how you can dial those up or down to impact both risk and customer experience. Fraud risk governance Fraud risk governance generally takes the form of a program encompassing the structure of rules, practices, and processes that surround fraud risk management. This program should include the fraud risk assessment, the roles and responsibilities of various departments, procedures for fraud events, and the plan for on-going monitoring. Fraud prevention “An ounce of prevention is worth a pound of cure.” This adage certainly rings true when it comes to fraud risk management. Having the right controls and procedures in place can help organizations stop a multitude of fraud types before they even get a foot in the door. Account takeover fraud prevention is an ideal example of how organizations can keep themselves and consumers safe. Fraud detection The only way to stop 100% of fraud is to stop 100% of interactions. Since that’s not a sustainable way to run a business, it’s important to have tools in place to detect fraud that’s already entered your ecosystem so you can stop it before damage occurs. These tools should monitor your systems to look for anomalies and risky behaviors and have a way to flag and report suspicious activity. Monitoring and reporting Once your fraud detection system is in place, you need active monitoring and reporting set up. Some fraud detection tools may include automatic next steps for suspicious activity such as step-up authentication or another risk mitigation technique. In other cases, you’ll need to get a person involved. In these cases it’s critical to have documented procedure and routing in place to ensure that potential fraud is assessed and addressed in a timely fashion. How to implement fraud risk management By adhering to the principles above, you can gain a holistic view of your current risk level, determine where you want your risk level to be, and what changes you’ll need to make to get there. While you might already have some of the necessary tools in place, the right next step is usually finding a trusted partner who can help you review your current state and help you use the right fraud prevention services that fit your risk tolerance and customer experience goals. To learn more about how Experian can help you leverage fraud prevention solutions, visit us or request a call. Learn more

 With nearly seven billion credit card and personal loan acquisition mailers sent out last year, consumers are persistently targeted with pre-approved offers, making it critical for credit unions to deliver the right offer to the right person, at the right time. How WSECU is enhancing the lending experience As the second-largest credit union in the state of Washington, Washington State Employees Credit Union (WSECU) wanted to digitalize their credit decisioning and prequalification process through their new online banking platform, while also providing members with their individual, real-time credit score. WSECU implemented an instant credit decisioning solution delivered via Experian’s Decisioning as a ServiceSM environment, an integrated decisioning system that provides clients with access to data, attributes, scores and analytics to improve decisioning across the customer life cycle. Streamlined processes lead to upsurge in revenue growth   Within three months of leveraging Experian’s solution, WSECU saw more members beginning their lending journey through a digital channel than ever before, leading to a 25% increase in loan and credit applications. Additionally, member satisfaction increased with 90% of members finding the simplified process to be more efficient and requiring “low effort.” Read our case study for more insight on using our digital credit solutions to: Prequalify members in real-time at point of contact Match members to the right loan products Increase qualification, approval and take rates Lower operational and manual review costs Read case study

BNPL is a misunderstood form of credit. In fact, many consumers are unaware that it is credit at all and view it simply as a mode of payment. This guide debunks common BNPL myths to explain what BNPL data will mean for lenders and consumers. In the past year, Experian collected more than 130 million buy now, pay later (BNPL) records from four major BNPL fintech lenders and conducted the most comprehensive analysis of BNPL data available today. The results provided valuable insights on: Who are the consumers using BNPL loans? What is the nature of their current mainstream credit relationships? What do their current BNPL behaviors look like? BNPL myth-busting: Who’s using it, how much are they spending and how risky are BNPL loans? Since BNPL launched in the United States in the 2010s, BNPL has exploded into the consciousness of online shoppers, especially during the COVID-19 pandemic.  According to Forrester, Millennials are the biggest adopters of BNPL at 18%, followed by their younger counterparts in Gen Z at 11%.1 But looking at statistics like these without additional analysis could be problematic.  The dramatic growth of leading BNPL fintechs such as Klarna, Affirm and Afterpay has demonstrated how strongly these services resonate with consumers and retailers. The growth of BNPL has attracted the attention of established lenders interested in capitalizing on the popularity of these services (while also looking to minimize its impact on their existing services, such as credit cards or personal loans). Meanwhile, the Consumer Financial Protection Bureau (CFPB) has urged caution about potential risks, calling for more consistent consumer protections market-wide and transparency into consumer debt accumulation and overextension across lenders. The underlying assumptions debated are that BNPL is used: Predominantly by young people with limited incomes and credit history To pay for frequent, low-value purchases using a cheap and readily available source of credit As a result, it is often seen as a riskier form of lending. But are these assumptions correct? Using data from more than 130 million BNPL transactions from four leading BNPL fintech lenders, we’ve obtained a more detailed and comprehensive understanding of BNPL users and their defining features. Our findings look somewhat different to the popular stereotypes. Myth 1: BNPL is used only for low-value purchases According to our analysis, most BNPL purchases, 95 percent are for items costing $300 or less.2 Some of it is low-value, but not all. In fact, we found that the average purchase using BNPL was similar to that of a credit card, at $132.Average transaction sizes have increased 10 percent year-over-year, and we now see BNPL purchases for goods costing well over $1,000. We also see that consumers take out an average of 5 BNPL loans in a year and 23 percent of them have loans with more than one BNPL provider at a time. Myth 2: BNPL is simply an easier payment method Consumers see BNPL as a simple, quick and convenient way to pay. But, as shoppers receive goods for which payment is deferred, it’s also a form of credit. However, unlike short-term high-interest loans, BNPL credit comes at zero cost to the borrower, with some, but not all BNPL fintech providers charging late payment fees – fueling many borrowers’ sense that it’s an easy way to pay, rather than a loan. Myth 3: Only Gen Z shoppers aged 25 and below are using BNPL Younger shoppers are slightly more represented in the data transactions, but our analysis shows consumers of all ages use BNPL. BNPL is going mainstream, and its appeal is widening. The average age of BNPL consumers is 36 years old, with an average credit history of 9 years.2 The ease of use of these services at the checkout means they have a broad appeal. Over half of U.S. adults have reported using a BNPL service at least once. Despite Millennials and Gen Z having used BNPL financing the most, Gen Xers are not too far behind in usage, with 52% having used it.2 We anticipate that in the use of BNPL will continue to grow as more customers become more familiar with the benefits, and the diversification of products continues. Understanding the opportunities this growth presents to both consumers and lenders is critical to protecting their interests. And helping to facilitate access to credit, enabling responsible spending, while also limiting risks and providing services that consumers can afford is also critical. Download the full guide for additional myths we’re exposing We will take a deep dive into what our early data analysis suggests about the market and the BNPL myths our analysis is exposing. Additionally, we will examine: Why BNPL data matters to providers and lenders How BNPL data can improve visibility of consumers’ creditworthiness Ways in which transparency of BNPL data could benefit consumers 1The Buy Now, Pay Later (BNPL) Opportunity,” Forrester Report, April 29, 2022.2Experian data and analytics derived from 130M+ BNPL transactions

There’s an undeniable link between economic and fraud trends. During times of economic stress, fraudsters engage in activities specifically designed to target strained consumers and businesses. By layering risk management and fraud prevention tools, your organization can manage focus on growing safely. Download infographic Review your fraud strategy  

What Is Identity Proofing? Identity proofing, authentication and management are becoming increasingly complex and essential aspects of running a successful enterprise. Organizations need to get identity right if they want to comply with regulatory requirements and combat fraud. It's also becoming table stakes for making your customers feel safe and recognized. 63 percent of consumers expect businesses to recognize them online, and 48 percent say they're more trusting of businesses when they demonstrate signs of security. Identify proofing is the process organizations use to collect, validate and verify information about someone. There are two goals — to confirm that the identity is real (i.e., it's not a synthetic identity) and to confirm that the person presenting the identity is its true owner. The identity proofing process also relates to and may overlap with other aspects of identity management. Identity proofing vs identity authentication Identity proofing generally takes place during the acquisition or origination stages of the customer lifecycle — before someone creates an account or signs up for a service. Identity authentication is the ongoing process of re-checking someone's identity or verifying that they have the authorization to make a request, such as when they're logging into an account or trying to make a large transaction. How does identity proofing work? Identity proofing typically involves three steps: resolution, validation, and verification. Resolution: The goal of the first step is to accurately identify the single, unique individual that the identity represents. Resolution is relatively easy when detailed identity information is provided. In the real world, collecting detailed data conflicts with the need to provide a good customer experience. Resolution still has to occur, but organizations have to resolve identities with the minimum amount of information. Validation: The validation step involves verifying that the person's information and documentation are legitimate, accurate and up to date. It potentially involves requesting additional evidence based on the level of assurance you need. Verification: The final step confirms that the claimed identity actually belongs to the person submitting the information. It may involve comparing physical documents or biometric data and liveness tests, such as a comparison of the driver's license to a selfie that the person uploads. Different levels of identity proofing may require various combinations of these steps, with higher-risk scenarios calling for additional checks such as biometric or address verification. Service providers can implement a range of methods based on their specific needs, including document verification, database validation, or knowledge-based authentication. Building an effective identity proofing strategy By requiring identity proofing before account opening, organizations can help detect and deter identity fraud and other crimes. You can use different online identity verification methods to implement an effective digital identity proofing and management system. These may include: Document verification plus biometric data: The consumer uploads a copy of an identification document, such as a driver's license, and takes a selfie or records a live video of their face. Database validations: The proofing solution verifies the shared identifying information, such as a name, date of birth, address and Social Security number against trusted databases, including credit bureau and government agency data. Knowledge-based authentication (KBA): The consumer answers knowledge-based questions, such as account information, to confirm their identity. It can be a helpful additional step, but they offer a low level of assurance, partially because data breaches have exposed many people's personal information. In part, the processes you'll use may depend on business policies, associated risks and industry regulations, such as know your customer (KYC) and anti-money laundering (AML) requirements. But organizations also have to balance security and ease of use. Each additional check or requirement you add to the identity proofing flow can help detect and prevent fraud, but the added friction they bring to your onboarding process can also leave customers frustrated — and even lead to customers abandoning the process altogether. Finding the right amount of friction can require a layered, risk-based approach. And running different checks during identity proofing can help you gauge the risk involved. For example, comparing information about a device, such as its location and IP address, to the information on an application. Or sending a one-time password (OTP) to a mobile device and checking whether the phone number is registered to the applicant's name. With the proper systems in place, you can use high-risk signals to dynamically adjust the proofing flow and require additional identity documents and checks. At the same time, if you already have a high level of assurance about the person's identity, you can allow them to quickly move through a low-friction flow. Experian goes beyond identity proofing Experian builds on its decades of experience with identity management and access to multidimensional data sources to help organizations onboard, authenticate and manage customer identities. Our identity proofing solutions are compliant with National Institute of Standards and Technology (NIST) and enable agencies to confidently verify user identities prior to or during account opening, biometric enrollment or while signing up for services. Learn more   This article includes content created by an AI language model and is intended to provide general information.

Machine learning (ML) is a powerful tool that can consume vast amounts of data to uncover patterns, learn from past behaviors, and predict future outcomes. By leveraging ML-powered credit risk models, lenders can better determine the likelihood that a consumer will default on a loan or credit obligation, allowing them to score applicants more accurately. When applied to credit decisioning, lenders can achieve a 25 percent reduction in exposure to risky customers and a 35 percent decrease in non-performing loans.1 While ML-driven models enable lenders to target the right audience and control credit losses, many organizations face challenges in developing and deploying these models. Some still rely on traditional lending models with limitations preventing them from making fast and accurate decisions, including slow reaction times, fewer data sources, and less predictive performance. With a trusted and experienced partner, financial institutions can create and deploy highly predictive ML models that optimize their credit decisioning. Case study: Increase customer acquisition with improved predictive performance Looking to meet growth goals without increasing risk, a consumer goods retailer sought out a modern and flexible solution that could help expand its finance product options. This meant replacing existing ML models with a custom model that offers greater transparency and predictive power. The retailer partnered with Experian to develop a transparent and explainable ML model. Based on the model’s improved predictive performance, transparency, and ability to derive adverse action reasons for declines, the retailer increased sales and application approval rates while reducing credit risk. Read the case study Learn about our custom modeling capabilities 1 Experian (2020). The Art of Decisioning in Uncertain Times

"Out with the old and in with the new" is often used when talking about a fresh start or change we make in life, such as getting a new job, breaking bad habits or making room in our closets for a new wardrobe. But the saying doesn't exactly hold true in terms of business growth. While acquiring new customers is critical, increasing customer retention rates by just 5% can increase profits by up to 95%.1 So, what can your organization do to improve customer retention? Here are three quick tips: Stay informed Keeping up with your customers’ changing interests, behaviors and life events enables you to identify retention opportunities and create personalized credit marketing campaigns. Are they new homeowners? Or likely to purchase a vehicle within the next five months? With a comprehensive consumer database, like Experian’s ConsumerView®, you can gain granular insights into who your customers are, what they do and even what they will potentially do. To further stay informed, you can also leverage Retention TriggersSM, which alert you of your customers changing credit needs, including when they shop for new credit, open a new trade or list their property. This way, you can respond with immediate and relevant retention offers. Be more than a business – be human Gen Z's spending power is projected to reach $12 trillion by 2030, and with 67% looking for a trusted source of personal finance information,2 financial institutions have an opportunity to build lifetime loyalty now by serving as their trusted financial partners and advisors. To do this, you can offer credit education tools and programs that empower your Gen Z customers to make smarter financial decisions. By providing them with educational resources, your younger customers will learn how to strengthen their financial profiles while continuing to trust and lean on your organization for their credit needs. Think outside the mailbox While direct mail is still an effective way to reach consumers, forward-thinking lenders are now also meeting their customers online. To ensure you’re getting in front of your customers where they spend most of their time, consider leveraging digital channels, such as email or mobile applications, when presenting and re-presenting credit offers. This is important as companies with omnichannel customer engagement strategies retain on average 89% of their customers compared to 33% of retention rates for companies with weak omnichannel strategies. Importance of customer retention Rather than centering most of your growth initiatives around customer acquisition, your organization should focus on holding on to your most profitable customers. To learn more about how your organization can develop an effective customer retention strategy, explore our marketing solutions. Increase customer retention today 1How investing in cardholder retention drives portfolio growth, Visa. 2Experian survey, 2023.

Alternative credit scoring has become mainstream. Lenders that use alternative credit scores can find opportunities to expand their lending universe without taking on additional risk and more accurately assess the credit risk of traditionally scoreable consumers. Obtaining a more holistic consumer view can help lenders improve automation and efficiency throughout the customer lifecycle. What is alternative credit scoring? Alternative credit scoring models incorporate alternative credit data* that isn't typically found on consumer credit reports. These scores aren't necessarily trying to predict alternative outcomes. The goal is the same — to understand the likelihood that a borrower will miss payments in the future. What's different is the information (and sometimes the analytical techniques) that inform these predictions.Traditional credit scoring models solely consider information found in consumer credit reports. There's a lot of information there — Experian's consumer credit database has data on over 245 million consumers. But although traditional consumer data can be insightful, it doesn't necessarily give lenders a complete picture of consumers' creditworthiness. Alternative credit scores draw from additional data sources, including: Alternative financial services: Credit data from alternative financial services (AFS) can tell you about consumers' experiences with small-dollar installment loans, single-payment loans, point-of-sale financing, auto title loans and rent-to-own agreements. Buy Now Pay Later: Buy Now Pay Later (BNPL) borrowing is popular with consumers across the scoring spectrum, and lenders can use access to open BNPL loans to better assess consumers' current capacity. Rental payments: Landlords, property managers, collection companies, rent payment services and consumer-permissioned data can give lenders access to consumers' rent payment history. Full-file public records: Credit reports generally only include bankruptcy records from the previous seven to ten years. However, lenders with access to full-file public records can also learn about consumers' property deeds, address history, and professional and occupational licenses. READ: Take a deep dive into Experian's State of Alternative Credit Data report to learn more about the different types of alternative credit data and uses across the loan lifecycle. With open banking, consumers can now easily and securely share access to their banking and brokerage account data — and they're increasingly comfortable doing so. In fact, 70% would likely share their banking data for better loan rates, financial tools or personalized spending insights.Tools like Experian Boost allow consumers to add certain types of positive payment information to their Experian credit reports, including rent, utility and select streaming service payments. Some traditional scores consider these additional data points, and users have seen their FICO Score 8 from Experian boosted by an average of 13 points.1 Experian Go also allows credit invisible consumers to establish a credit report with consumer-permissioned alternative data.  The benefits of using alternative credit data The primary benefit for lenders is access to new borrowers. Alternative credit scores help lenders accurately score more consumers — identifying creditworthy borrowers who might otherwise be automatically denied because they don't qualify for traditional credit scores. The increased access to credit may also align with lenders' financial inclusion goals.Lenders may additionally benefit from a more precise understanding of consumers who are scoreable. When integrated into a credit decisioning platform, the alternative scores could allow lenders to increase automation (and consumers' experiences) without taking on more credit risk. The future of alternative credit scoring Alternative credit scoring might not be an alternative for much longer, and the future looks bright for lenders who can take advantage of increased access to data, advanced analytics and computing power.Continued investment in alternative data sources and machine learning could help bring more consumers into the credit system — breaking barriers and decreasing the cost of basic lending products for millions. At the same time, lenders can further customize offers and automate their operations throughout the customer lifecycle. Partnering with Experian Small and medium-sized lenders may lack the budget or expertise to unlock the potential of alternative data on their own. Instead, lenders can turn to off-the-shelf alternative models that can offer immediate performance lifts without a heavy IT investment.Experian's Lift PlusTM score draws on industry- leading mainstream credit data and FCRA-regulated alternative credit data to provide additional consumer behavior insights. It can score 49% of mainstream credit-invisible consumers and for thin file consumers with a new trade, a 29% lift in scoreable accounts. Learn more about our alternative credit data scoring solutions. Learn more * When we refer to “Alternative Credit Data," this refers to the use of alternative data and its appropriate use in consumer credit lending decisions as regulated by the Fair Credit Reporting Act (FCRA). Hence, the term “Expanded FCRA Data" may also apply in this instance and both can be used interchangeably.1Experian (2023). Experian Boost

E-commerce digital transactions are rapidly increasing as online shopping becomes more convenient. In fact, e-commerce is projected to exceed 17% of all retail sales worldwide by 2027. As a result, opportunities for fraudsters to exploit businesses and consumers for monetary gain are reaching high levels. Businesses must be aware of the risks associated with card not present (CNP) fraud and take steps to protect themselves and their customers. What is card not present fraud? CNP fraud occurs when a criminal uses a stolen or compromised credit card to make a purchase online, over the phone, or through some other means where the card is not physically present at the time of the transaction. This type of fraud can be particularly difficult to detect and prevent, as it relies on the use of stolen card information rather than the physical card itself. CNP fraud can yield significant losses for businesses — these attacks are estimated to reach a staggering $28 billion in losses by 2026. Many have adopted various fraud prevention and identity resolution and verification tools to better manage risk and prevent fraud losses. Since much of the success or failure of e-commerce depends on how easy merchants make it for consumers to complete a transaction, incorporating CNP fraud prevention and identity verification tools in the checkout process should not come at the expense of completing transactions for legitimate customers. What do we mean by that? Let’s look at false declines. What is a false decline? False declines occur when legitimate transactions are mistakenly declined due to the business's fraud detection system incorrectly flagging the transaction as potentially fraudulent. This can not only be frustrating for cardholders, but also for merchants. Businesses may lose the sale and also be on the hook for any charges that result from the fraudulent activity. They can also result in damage to the business's reputation with customers. In either case, it is important for businesses to have measures in place to mitigate the risks of both. How can online businesses increase sales without compromising their fraud defense? One way to mitigate the risk of CNP fraud is to implement additional security measures at the time of transaction. This can include requiring additional verification information, such as a CVV code or a billing zip code to further authenticate the card holder’s identity. These measures can help to reduce the risk of CNP fraud by making it more difficult for fraudsters to complete a transaction. Machine learning algorithms can help analyze transaction data and identify patterns indicating fraudulent activity. These algorithms can be trained on historical data to learn what types of transactions are more likely to be fraudulent and then be used to flag potentially fraudulent transactions before it occurs. Businesses require data and technology that raise confidence in a shopper’s identity. Currently, the data merchants receive to approve transactions is not enough. A credit card owner verification solution like Experian Link fills this gap by enabling online businesses to augment their real-time decisions with data that links customer identity to the credit card being presented for payment to help verify the legitimacy of a transaction. Using Experian Link, businesses can link names, addresses and other identity markers to the customer’s credit card. The additional data enables better decisions, increased sales, decreased costs, a better buyer experience and better fraud detection. Get started with Experian Link™ - our frictionless credit card owner verification solution. Learn more