Data & Analytics

This is the second in a three-part interview between Experian’s Tom Whitfield and Dr. Michael Turner, founder, president and CEO of the Policy and Economic Research Council (PERC)—a non-partisan, non-profit policy institute devoted to research, public education, and outreach on public and economic policy matters. Dr. Turner is a prominent expert on credit access, credit reporting and scoring, information policy, and economic development. Mr. Whitfield is the Director of Marketing for Experian’s Telecommunications, Energy and Cable practice. In this post Dr. Turner explains how full-file credit reporting actually benefits consumers and why many communications providers haven’t yet embraced it. _____________________________ Why is full-file credit reporting good for communications customers? Approximately 54 million Americans either have no credit report, or have very little information in their credit reports to generate a credit score. Most of these “thin-file/no-file” persons are financially excluded and many of them are media and communications customers. By having their payment data fully reported to a credit bureau and included in their credit reports, many will be able to access affordable sources of mainstream credit for the first time; others will be helped by repairing their damaged credit. In this way, consumers will save by not relying on high-cost lenders to have their credit needs met. Why don’t providers embrace reporting like other major industries/lenders? A major reason is inertia—providers haven’t done it before and are not sure how they would benefit from change. Just recently, PERC released a major study highlighting the business case for fully reporting customer payment data to one or more nationwide credit bureaus. This includes customer survey results, peer survey results and case studies. The results all point to tremendous upside from fully reporting payment data, with only manageable downsides—including external communications and regulators.   Misperceptions and misunderstandings Another significant reason is regulator misperceptions and misunderstandings. State public service and public utility commissions (PSCs and PUCs) aren’t experts in credit reporting or the regulatory framework around credit-information sharing. Many mistakenly believe the data is unregulated and can be used for marketing. Not wanting to contribute to an increase in commercial mail and telemarketing calls, some regulators have a knee-jerk reaction when the topic of credit reporting is raised by an interested media, communications or utility company. PERC has been working to educate regulators and has had success in their outreach efforts. PERC can be a resource to firms interested in full-file reporting in direct communications with regulators. Part 3: Wednesday, June 29 Next, in the concluding post of this interview with PERC founder, president and CEO Dr. Michael Turner, the doctor discusses mandatory credit-information sharing for communications companies, and the value of engaging and educating state regulators. Agree, disagree or comment Whether you agree with Dr. Turner’s assertions or not, we’d love to hear from you. So please, take a moment to share your thoughts about full-file credit reporting in the communications industry.

This is the first in a three-part interview between Experian’s Tom Whitfield and Dr. Michael Turner, founder, president and CEO of the Policy and Economic Research Council (PERC)—a non-partisan, non-profit policy institute devoted to research, public education, and outreach on public and economic policy matters. Dr. Turner is a prominent expert on credit access, credit reporting and scoring, information policy, and economic development. Mr. Whitfield is the Director of Marketing for Experian’s Telecommunications, Energy and Cable practice. In this post Dr. Turner discusses how communications providers and their customers can both benefit from full-file credit reporting. Comments, suggestions and differing viewpoints are welcome.   _____________________________ Why is full reporting to the bureaus so critical for communication providers? PERC’s research has found at least three good business reasons for media and communications companies to consider this practice: 1) Improved cash flow. In a survey of nearly 1,000 heads of household (those with primary bill paying responsibility), media and communications payments ranked below payments that were fully reported to credit bureaus. When asked how credit reporting would impact bill payment prioritization, half of all respondents indicated they would be “much more likely” or “more likely” to pay their media and communications bills on time. Such an outcome would represent a significant cash flow improvement. In fact, case study results substantiate this, and demonstrate further benefits from reduced delinquencies and charge offs. 2) Cost savings. In a survey of media, communications, and utilities the perceived costs of reporting payments to a bureau were, in fact, substantially greater than actual costs incurred, and perceived benefits significantly lower than actual benefits. In most cases, the actual benefits reported by firms fully reporting payment data to one or more nationwide credit bureaus were multiples higher than the actual costs, which were reported as being modest as a ratio of IT and customer service expenditures. 3) More customer loyalty, less churn. In a competitive deregulated environment, telling customers about the benefits of fully reporting payment data (building a good credit history, reducing costs of credit and insurance, increasing credit access and credit limits, improving chances of qualifying for an apartment rental or job) could result in increased loyalty and less churn. How do providers stand to benefit from reporting? Providers benefit because fully reporting payment data to a nationwide credit bureau for inclusion in credit reports actually changes customer behavior. Reporting negative-only data doesn’t affect customers in the same way, and, in the vast majority of cases, does not affect payment behavior at all, as consumers are entirely unaware of reporting or see it as a “black list.” By communicating the many customer benefits of fully reporting payment data to a credit bureau for inclusion in a credit report, the provider benefits from improved cash flow, reduced charge offs, and improved customer loyalty. Part 2: Monday, June 27 In Part 2 of this interview, Dr. Turner explains how full-file credit reporting actually benefits consumers and why many communications providers haven’t yet embraced it. The primary reason uncovered in PERC’s research may surprise you, so be sure to come back for Part 2. Agree, disagree or comment Whether you agree with Dr. Turner’s assertions or not, we’d love to hear from you. So please, take a moment to share your thoughts about full-file credit reporting in the communications industry.

This paraphrased lament from Coleridge’s Rime of the Ancient Mariner may loosely reflect the predicament facing many communications companies today: afloat on vast sea of customer information, yet, lacking resources or expertise, unable to draw from it much new or actionable intelligence. Not that data mining is ever a small or insignificant task. It isn’t. Even when resources are plentiful, obstacles can loom large—especially across numerous lines of business, where risk can multiply exponentially. Siloed data, disparate customer records and other challenges also make the work difficult, as do: The dynamic nature of consumer information Inconsistent data quality and match logic throughout the enterprise The inability to reliably link active and inactive accounts failing to identify existing customer relationships at the point of application The missing link Experian has seen many communications companies overcome these issues through database linking—that is, connecting, integrating and packaging customer information from several sources into a more cohesive and accessible structure. Linking reduces risk by identifying overlap of consumers with multiple accounts across several lines of business. It also reveals duplicate records, as well as active accounts that may be current in one line of business, but delinquent or inactive in another. The benefits The broader perspective gained through database linking can drive new efficiencies and profitability in many vital areas of your business, from fraud prevention to skip tracing and collections. Should the need arise, newly linked information can also be used to locate elusive customers or former employees for legal purposes. What you can do right now Even if resources are currently limited you can still begin discovery—the process of identifying precisely what data you have, where it resides within the enterprise, how it’s being used, and by whom. This information, perhaps combined with guidance from an experienced external service, can provide a solid foundation from which to begin leveraging (and if indicated, supplementing) existing customer data. We know communications clients who have identified millions of dollars in uncollected bad debt that was linked directly to current, active customers, using a couple of “next generation” data tools. Like the old Mariner, your in-house data has a big story to tell. Question is, are you equipped to hear it? If you like this topic, click here to read the post entitled “Leveraging Internal Data to Create a Holistic View of Your Customers.

In an attempt to out-innovate competitors, today’s communications companies seem busier than ever. The number of new products, services, devices and bundles continues to skyrocket, giving consumers more shiny new options than ever before. A double-edged sword More choices means greater opportunity to cross-sell, upsell or otherwise optimize customer value. But there is also increased risk, due to process or information gaps between internal acquisition, billing, account management and collections teams. There are also threats from the outside. Avoid being hit by “cyclers” These include hard-to-monitor, multiple-account households, and high-risk account “cyclers” who attempt to game the system by manipulating personal data; for example, providing different information when opening an account, buying a device or activating service. Undetected, such activity can severely impact corporate profitability. Fortunately, you can gain a clearer picture of both positive and negative activity by using assets and resources you already own. Extra benefits. No extra cost. The first step is working with IT to better mine internal data by linking disparate databases together (tips and best practices will be presented in future posts). This will give you a holistic view of all accounts. Experian recently did this with greater-than-expected success. In a similar effort, one utility we know identified more than $2.5 million in uncollected bad debt from current, active customers. What benefits can you expect? Besides gaining insight into driving the full value of multi-product customers, linking together internal data sources also enables you to: Illuminate resell/cross-sell opportunities and unfulfilled revenue potential Mitigate risk by identifying low value, high risk customers, and fraudulent behaviors Help in-house credit professionals “bridge the gap” with marketing and work in a more collaborative and integrated fashion Improve the customer experience across sales and support Best practices yield best results You already own the data you need. The secret to success is linking it together and putting it to work—without burdening already overworked teams. A structured set of best practices can make it happen. So what say you? What challenges does your communications company face with regard to customer data?

By: Wendy Greenawalt On any given day, US credit bureaus contain consumer trade data on approximately four billion trades. Interpreting data and defining how to categorize the accounts and build attributes, models and decisioning tools can and does change over time, due to the fact that the data reported to the bureaus by lenders and/or servicers also changes. Over the last few years, new data elements have enabled organizations to create attributes to identify very specific consumer behavior. The challenge for organizations is identifying what reporting changes have occurred and the value that the new consumer data can bring to decisioning. For example, a new reporting standard was introduced nearly a decade ago which enabled lenders to report if a trade was secured by money or real property. Before the change, lenders would report the accounts as secured trades making it nearly impossible to determine if the account was a home equity line of credit or a secured credit card. Since then, lender reporting practices have changed and, now, reports clearly state that home equity lines of credit are secured by property making it much easier to delineate the two types of accounts from one another. By taking advantage of the most current credit bureau account data, lenders can create attributes to capture new account types.  They can also capture information (such as: past due amounts; utilization; closed accounts and derogatory information including foreclosure; charge-off and/or collection data) to make informed decisions across the customer life cycle.

This post is a feature from my colleague and guest blogger, Barry Timm, Senior Process Architect in Advisory Services at Baker Hill, a part of Experian. 2008 has proven to be an unbelievably challenging year for the economy as a whole, let alone the financial industry.  Never before have we experienced the type and degree of turmoil that we did in 2008, even since the “Great Depression”. These economic challenges have been quick, severe and widespread; and, from large corporations to the individual consumer, all have been impacted to some degree.  The stock market is down, unemployment up, consumer confidence down, delinquencies up ….not exactly a pleasant roller coaster ride. And, there is no longer any projecting as to when the “bubble” is going to burst.  It happened.   Decreased real estate values have occurred not only in high impact geographic regions but throughout the country.  While home equity products have traditionally been the “golden child” of consumer loan product offerings, recent economic changes have caused a shift in that perspective.  As a result, tightened underwriting standards have limited the availability of the product as a whole.  In some markets the product offering has even been temporarily halted. We frequently hear the terminology “bailout” being used in the news.  While we all have expectations as it relates to the bailout approach, I thought I would “Google” the word “bailout” to see what would magically appear.  Interestingly enough, the first listing was titled “Walk away from your home”, with a link to the home page for a mortgage default legal team.  This is not exactly what I was expecting to find, but is definitely reflective of the times. And, according to the FDIC, there have been 25 failed financial instituions in the year 2008.  This single year number equates to the total number of failed financial institutions between the prior periods 2001 through 2007. Okay … enough doom and gloom.  In spite of all that has occurred within the economy, some financial institutions continue to maintain a strong credit quality position in their consumer portfolios and have maintained profitability throughout all of the market volatility. What are the strong survivors doing that differentiates themselves from the others? 1. They understand their portfolio.   Advisory Services frequently assists clients with various types of portfolio management analysis and often presents those findings to senior management.  We often hear that management is surprised by the results of that analysis. The point is that high-level management reporting is not enough these days. Additional detail and depth are necessary. More specifically, as opposed to evaluating payment performance at the portfolio level, it is important to consider the following: Do you know your delinquency numbers at the product level? How do delinquencies compare to your product approval rates? Do you routinely compare approval/decline rates and delinquencies to scorecard results and/or credit bureau scores? Do you know where pricing exceptions are being made and are you receiving sufficient return for the level of risk? 2. A focused strategy is in place. It is important to re-emphasize the specific, strategic direction and focus of your defined market.  Now is not the time to be “pushing the envelope” and extending into untested waters.  There is something to be said about focusing on your strengths, staying within your defined footprint and meeting the needs of your core, proven line of business while following sound financial risk management. 3. The underwriting process is under control. This does not automatically mean that a “tightening” of underwriting standards is necessary.  It does mean, however, that stronger attention to detail is warranted.  It is important that underwriting criteria is reviewed and that you are sure that defined underwriting practices are consistently applied.  As noted in item number one above, this may require digging a little deeper and reviewing current and past decisioned loans (preferably with a critical eye of an independent third party).  Assessing the underwriting process becomes increasing complex and more critical with a decentralized underwriting approach. Focus on the positive Now that 2008 is behind us, let’s continue to focus on the positives to come in 2009.  Reflect on the past, but strive to center your attention on ongoing portfolio monitoring, financial risk management assessments and improvements for the future.