Tag: customer management

Do you know where your customers stand? Not literally, of course, but do you know how recent macroeconomic changes and their personal circumstances are currently affecting your portfolio? While refreshing your customers’ credit data quarterly works for some aspects of portfolio management, you need more frequent access to fresh data to quickly respond to risky customer behavior and new credit needs before your portfolio takes a hit. Use triggers to improve portfolio management Event-based credit triggers provide daily or real-time alerts about important changes in your customers’ financial situations. You can use these to manage risk by promptly responding to signs of changing creditworthiness or to prevent attrition by proactively reaching out to customers who are shopping for credit. Risk Triggers℠ and Retention Triggers℠ offer a real-time solution that can be customized to fit your needs for daily portfolio management. What are Risk Triggers? Experian’s Risk Triggers alert you of notable information, such as unfavorable utilization rate changes, delinquencies with other lenders and recent activity with high-interest, short-term loan products. This solution allows you to monitor how your customers manage accounts with other lenders to get ahead of potential risk on your book. You can use Risk Triggers to get daily insights into your customers’ activity — allowing you to quickly identify potentially risky behavior and take appropriate action to limit your exposure and losses. Types of Risk Triggers Choose from a defined Risk Triggers package that could help you identify high-risk customers, including: New trades Increasing credit utilization or balances over limit New collection accounts An account is charged-off A credit grantor closes an account New delinquency statuses (30 to 180 days past due) Consumers seeking access to short-term, high-risk financing options Bankruptcy and deceased events How to use Risk Triggers You can use the daily alerts from Risk Triggers to help inform your account management strategy. Depending on the circumstances, you might: Decrease credit limits Close or freeze accounts Accelerate payment requests Continue monitoring accounts for other signs of risk Spotlight on Experian’s Clarity Services events Included in Risk Triggers are events from Experian’s Clarity Services, which draw on expanded FCRA-regulated data* from a leading source of alternative financial credit data.  For example, you could get an alert when someone has a new inquiry from non-traditional loans. These triggers provide a broader view of the customer – offering added protection against risky behavior. What are Retention Triggers? Experian’s Retention Triggers can alert you when a customer improves their creditworthiness, is shopping for new credit, opens a new tradeline or lists property. Proactively responding to these daily alerts can help you retain and strengthen relationships with your customers — which is often less expensive than acquiring new customers. Types of Retention Triggers Choose from over 100 Retention Triggers to bundle, including: New trades New inquiries Credit line increases Property listing statuses Improving delinquency status Past-due accounts are brought current or paid off How to use Retention Triggers You can use Retention Triggers to increase lifetime customer value by proactively responding to your customers’ needs and wants. You might: Increase credit limits Offer promotional financing, such as balance transfers Introduce perks or rewards to strengthen the relationship Append attributes for improved decisioning  By appending credit attributes to Risk and Retention Trigger outputs, you can gain greater insight into your accounts.  Premier AttributesSM is Experian's core set of 2,100-plus attributes. These can quickly summarize data from consumers' credit reports, allowing you to more easily segment accounts to make more strategic decisions across your portfolio.  Trended 3DTM attributes can help you spot and understand patterns in a customer's behavior over time. Integrating trended attributes into a triggers program can help you identify risk and determine the next best action. Trended 3D includes more than 2,000 attributes and provides insights into industries such as bankcard, mortgage, student loans, personal loans, collections and much more.  By working with both triggers and attributes, you'll proactively review an account, so you can then take the next best action to improve your portfolio's profits. Customize your trigger strategy When you partner with Experian, you can bundle and choose from hundreds of Risk and Retention Triggers to focus on risk, customer retention or both. Additionally, you can work with Experian’s experts to customize your trigger strategy to minimize costs and filter out repetitive or unneeded triggers: Use cool-off periods Set triggering thresholds Choose which triggers to monitor Establish hierarchies for which triggers to prioritize Create different strategies for segments of your portfolio Learn more about Risk and Retention Triggers. Learn more *Disclaimer: “Alternative Financial Credit Data” refers to the use of alternative data and its appropriate use in consumer credit lending decisions, as regulated by the Fair Credit Reporting Act. Hence, the term “Expanded FCRA-Regulated Data” may also apply in this instance, and both can be used interchangeably.

For lenders, first payment default (FPD) is more than just financial jargon; it's a crucial metric in assessing credit risk. This blog post will walk you through the essentials of FPD,  from defining the term to exploring how you can prevent and mitigate its potential impact. Understanding first payment default FPD occurs when a consumer fails to make their initial payment on a loan or credit agreement, which is often perceived as an early signal of a potential cascade of risky behavior. Recognizing FPD is the starting point for lenders to address potential issues with new borrowers before they escalate. One important aspect to grasp is the timeline of FPD. It’s not just about missing the first payment; it's about "early" missing. The timing of defaults is often critical in assessing the overall risk profile of a borrower or group of borrowers. The earlier a borrower starts to miss payments, the riskier they tend to be. Examining the causes of FPD The roots of FPD are diverse and can be classified into two broad categories: External factors: These include sudden financial crises, changes in employment status, or unforeseen expenses. Such factors are often beyond the borrower's immediate control. Internal factors: This category covers more deliberate or chronic financial habits, such as overspending, lack of savings, or overleveraging on credit. It's often indicative of longer-term financial instability. Understanding the causes of early payment default is the first step in effective risk management and customer engagement strategies. Implications of FPD for lenders FPD doesn't just signal immediate financial loss for lenders in terms of the missed installment. It sets off a cascade of consequences that affect the bottom line and the reputation of the institution. Financial loss. Lenders incur direct financial losses when a payment is missed, but the implications go beyond the missed payment amount. There are immediate costs associated with servicing, collections, and customer support. In the longer term, repeated defaults can lead to write-offs, impacting the institution's profitability and regulatory standing. Regulatory scrutiny. Repeated instances of FPD can also draw the attention of regulators, leading to scrutiny and potentially increased compliance costs. Mitigating first payment default Mitigating FPD requires a multifaceted approach that blends data, advanced analytics, customer engagement, and agile risk management. Lenders need to adopt strategies that can detect early signs of potential FPD and intervene preemptively. Data-driven decision-making. Leveraging advanced analytics and credit risk modeling is crucial. By incorporating transactional and behavioral data, lenders can make more accurate assessments of a borrower's risk profile. Utilizing predictive models can help forecast which borrowers are likely to default on their first payment, allowing for early intervention. Proactive customer engagement. Initiatives that revolve around education, personalized financial planning advice, and flexible payment arrangements can help borrowers who might be at risk of FPD. Proactive outreach can engage customers before a default occurs, turning a potential negative event into a positive experience. Agile risk management. Risk management strategies should be dynamic and responsive to changing market and customer conditions. Regularly reviewing and updating underwriting criteria, credit policies, and risk assessment tools ensures that lenders are prepared to tackle FPD challenges as they arise. Using FPD as a customer management tool Lastly, and perhaps most importantly, lenders can use FPD as a tool to foster better customer management. Every FPD is a data point that can provide insights into customer behavior and financial trends. By studying the causes and outcomes of FPD, lenders can refine their risk mitigation tools and improve their customer service offerings. Building trust through handling defaults. How lenders handle defaults, specifically the first ones, can significantly impact customer trust. Transparent communication, fair and considerate policies, and supportive customer service can make a difference in retaining customers and improving the lender's brand image. Leveraging data for personalization. The increasing availability of data means lenders can offer more personalized services. By segmenting customers based on payment behavior and response to early interventions, lenders can tailor offerings that meet the specific financial needs and challenges of individual borrowers. How Experian® can help First payment default is a critical aspect of credit risk management that requires attention and proactive strategies. By understanding the causes, implications, and mitigation strategies associated with FPD, financial institutions can not only avoid potential losses but also build stronger, more enduring relationships with their customers. Learn more about Experian’s credit risk modeling solutions. Learn more This article includes content created by an AI language model and is intended to provide general information.

The average turnaround time to make a lending decision varies materially between financial institutions. Institutions with low-level automation are typically less competitive on price due to the higher cost of manual reviews. For customers, it leads to high levels of dissatisfaction, complaints and switching of institutions. To learn more practical insights and best practices for key areas of business banking and to look at the features of a leading-edge approach to customer management, download the full white paper. Source: Strategic customer management for business banking portfolios by Experian's Global Consulting Practice.

By: Wendy Greenawalt Large financial institutions have acknowledged for some time that taking a more consumer-centric versus product-centric approach can be a successful strategy for an organization. However, implementing such a strategy can be difficult, because inherently organizations want to promote a specific product for one reason or another. With the current economic unrest, organizations are looking for ways to improve customer loyalty with their most profitable and lowest risk customers. They are also looking for ways to improve offers to consumers to provide segment of one decisioning, while satisfying organizational goals. Customer management, and specifically cross-sell or up-sell strategies, are a great example of where organizations can implement what I call “segment of one decisioning”.  In essence, this refers to identifying the best possible decision or outcome for a specific consumer when given multiple offers, scenarios and objectives. Marketers strive to identify the best strategies to maximize decision-making, while minimizing costs. For many, this takes the form of models and complex strategy trees or spreadsheets to identify the ideal offering for a segment of consumers. While this approach is effective, algorithm-based decisioning processes exist that can help organizations identify the optimal decisioning strategies, while considering all possible options at a consumers level. By leveraging an optimization tool, organizations can expand the decision process by considering all variables and all alternatives to find the most cost effective, most-likely-to-be-successful strategies. By optimizing decisions, marketers can determine the ideal offer, while quantifying the ROI and adhering to budgetary or other campaign constraints. Many organizations are once again focusing on account growth and building strategies to implement in the near future. With the limited pool of qualified candidates and increased competition, it is more important than ever that each consumer offer be the best to increase response rates, achieve portfolio growth goals and build a profitable portfolio.

By: Kari Michel Bankruptcies continue to rise and are expected to exceed 1.4 million by the end of this year, according to American Bankruptcy Institute Executive Director, Samuel J. Gerdano.  Although, the overall bankruptcy rates for a lender’s portfolio is small (about 1 percent), bankruptcies result in high dollar losses for lenders.  Bankruptcy losses as a percentage of total dollar losses are estimated to range from 45 percent for bankcard portfolios to 82 percent for credit unions.  Additionally, collection activity is restricted because of legislation around bankruptcy.  As a result, many lenders are using a bankruptcy score in conjunction with their new applicant risk score to make better acquisition decisions. This concept is a dual score strategy.  It is key in management of risk, to minimize fraud, and in managing the cost of credit. Traditional risk scores are designed to predict risk (typically predicting 90 days past due or greater).  Although bankruptcies are included within this category, the actual count is relatively small.   For this reason the ability to distinguish characteristics typical of a “bankruptcy” are more difficult.  In addition, often times a consumer who filed bankruptcy was in “good standings” and not necessarily reflective of a typical risky consumer.   By separating out bankrupt consumers, you can more accurately identify characteristics specific to bankruptcy.  As mentioned previously, this is important because they account for a significant portion of the losses. Bankruptcy scores provide added value when used with a risk score. A matrix approach is used to evaluate both scores to determine effective cutoff strategies.   Evaluating applicants with both a risk score and a bankruptcy score can identify more potentially profitable applicants and more high- risk accounts.