Tag: economic outlook

This series will explore our monthly State of the Economy report, which provides a snapshot of the top monthly economic and credit data for financial service professionals to proactively shape their business strategies. The U.S. economy remains on solid footing, as GDP grew at a healthy 2.8% rate in Q3, driven by consumer spending. Alongside growth, inflation ticked up, while the labor market eased across several measures. In response to these developments, the Federal Reserve announced a quarter-point cut in November, with another cut penciled in for December. The November State of the Economy report fills in the rest of the macroeconomic story. This month’s highlights include: Annual headline inflation ticked up from 2.4% to 2.6%. 12,000 jobs were added in October, amid hurricane and strike impacts. Retail sales increased by 0.4% in October. Check out the full report for a detailed analysis of the rest of this month’s data, including the latest trends in originations, job openings, and growth. Download November's report As our economy continues to fluctuate, it’s critical to stay updated on the latest developments. Subscribe to our new series, The Macro Moment, for economic commentary from Experian NA’s Chief Economist, Joseph Mayans, with additional economic resources, including our new Election Eve’s Scenario Forecasts report. For more economic trends and market insights, visit Experian Edge.

This series will dive into our monthly State of the Economy report, providing a snapshot of the top monthly economic and credit data for those in financial services to proactively shape their business strategies. As we near the end of the first quarter, the U.S. economy has maintained its solid standing. We're also starting to see some easing in a few areas. This month saw a slight uptick in unemployment, slowed spending growth, and a slight increase in annual headline inflation. At the same time, job creation was robust, incomes continued to grow, and annual core inflation cooled. In light of the mixed economic landscape, this month’s upcoming Federal Reserve meeting and their refreshed Summary of Economic Projections should shine some light on what’s in store in the coming months. Data highlights from this month’s report include: Annual headline inflation increased from 3.1% to 3.2%, while annual core inflation cooled from 3.9% to 3.8%. Job creation remained solid, with 275,000 jobs added this month. Unemployment increased to 3.9% from 3.7% three months prior. Mortgage delinquencies rose for accounts (2.3%) and balances (1.8%) in February, contributing to overall delinquencies across product types. Check out our report for a deep dive into the rest of March’s data, including consumer spending, the housing market, and originations. To have a holistic view of our current environment, we must understand our economic past, present, and future. Check out our annual chartbook for a comprehensive view of the past year and download our latest forecasting report for a look at the year ahead. Download March's State of the Economy report  Download latest forecast For more economic trends and market insights, visit Experian Edge.

This series will dive into our monthly State of the Economy report, providing a snapshot of the top monthly economic and credit data for those in financial services to proactively shape their business strategies. In February, economic growth and job creation outperformed economists’ expectations, likely giving confirmation to the Federal Reserve that it remains too early to begin cutting rates. Data highlights from this month’s report include: U.S. real GDP rose 3.3% in Q4 2023, driven by consumer spending and bringing the average annual 2023 growth to 2.5%, the same as the five-year average growth prior to the pandemic. The labor market maintained its strength, with 353,000 jobs added this month and unemployment holding at 3.7% for the third month in a row. Consumer sentiment rose 13% in January, following a 14% increase in December, as consumers are feeling some relief from cooling inflation. Check out our report for a deep dive into the rest of February’s data, including inflation, the latest Federal Reserve announcement, the housing market, and credit card balances. To have a holistic view of our current environment, we must understand our economic past, present, and future. Check out our annual chartbook for a comprehensive view of the past year and register for our upcoming Macroeconomic Forecasting webinar for a look at the year ahead. Download report Register for webinar For more economic trends and market insights, visit Experian Edge.

This series will dive into our monthly State of the Economy report, providing a snapshot of the top monthly economic and credit data for those in financial services to proactively shape their business strategies.  As 2024 unfolds, the economy is beginning to shift from last year’s trends. Instead of focusing on rate hikes, we’re looking at the potential for rate cuts. Our labor market is beginning to ease, and inflation is moving closer to the Federal Reserve’s 2% mark. Each month’s data gives us a clearer picture of our economic trajectory and the Federal Reserve’s (Fed) policy moving forward, as well as new and direct implications on credit metrics. Data highlights from this month’s report include: The U.S. economy added 216,000 jobs in December, but after November and October levels were revised, three-month average job creation now sits below the pre-pandemic level. While there was no change in November, annual core inflation, which excludes the volatile food and energy components, cooled in December from 4.0% to 3.9%. Consumer sentiment rose 14% in December, reversing the past four monthly declines, driven by increased optimism toward the trajectory of inflation. Check out our report for a deep dive into the rest of this month’s data, including student loans, consumer spending, the housing market, and delinquencies. To have a holistic view of our current environment, we must understand our economic past, present, and future. Keep an eye out for this year’s chartbook for a comprehensive view of the past year and download our latest forecast for a view of what’s to come. Download report View forecast For more economic trends and market insights, visit Experian Edge.

How businesses respond to economic uncertainty can determine whether they get ahead or fall behind. To better prepare for the coming months, you must remain up to date on the latest economic developments to better understand and evolve with changing consumer needs. With insight into critical macroeconomic and consumer trends, you can proactively manage your portfolio, enhance your decisioning and seize new opportunities. Grab a cup of coffee and join Experian's Shawn Rife, Client Executive, and Josee Farmer, Economic Analyst, during our fireside chat on February 16 @ 1 P.M. ET/10 A.M. PT. Our expert speakers will provide a view of the latest economic and market trends, their impact on consumers, and how financial institutions can survive and thrive. Highlights include: Macroeconomic and consumer credit trends Economic implications on consumer behavior How financial institutions can adapt Register now

The only thing constant is change. And as 2022 wraps up and businesses and consumers look toward 2023, the need for insights and data is at an all-time high to help forge the path ahead. With recent slowing economic growth, and uncertain macroeconomic and geopolitical climates, leading organizations are turning to credit, market, and economic trends, to help shape and inform future strategies. The challenge? With so many sources of information, it can be overwhelming to determine which information is relevant.  Experian Edge, our new thought leadership hub, compiles proprietary Experian data, and economic, credit and market trends in a single, easy-to-consume place. Covering the automotive, financial services, healthcare, retail and small business sectors, Experian Edge helps businesses navigate tomorrow with today’s insights.   Featured Publication: 2022 Experian Edge Chartbook  The data stories told during 2022 - particularly credit and economic trends - run the full gamut. From economic growth and the labor market, to consumer health and inflation, there is no shortage of insights to glean. The inaugural 2022 Experian Edge Chartbook compiles those key insights giving a comprehensive look at economic and credit trends and what they could mean for 2023. Download 2022 Experian Edge Chartbook Want more insights? Examples of what else you’ll find on Experian Edge include:  State of the Automotive Finance Market Report: Exclusive quarterly report on the latest trends and analysis of the U.S. automotive finance market. State of Alternative Credit Data Report: A deep dive into the uses of alternative data in consumer and small business lending.  State of Claims: 200 executive healthcare professionals shed light on the current claims environment.  Holiday Retail Guide 2022: Learn what types of behaviors you can expect to see from consumers this holiday shopping season. Beyond the Trends Report: Quarterly insights and commentary on economic conditions and future small business performance. Visit and bookmark Experian Edge for the latest intel you need to propel your business forward.  Visit Experian Edge

The collections landscape is changing due to shifting consumer behaviors, demands, regulations and an economy that’s in a constant state of flux. As the market evolves, the need for greater insight and analysis grows. Matthew Baltzer, Experian’s Senior Director of Product Marketing, discusses challenges facing the collections industry and how you can continue to build a profitable portfolio. For more information on enhancing your collections strategy, view our full Q&A video. Q: Which macroeconomic trends should debt collectors be the most aware of and why? A:While we are still seeing a reasonably healthy consumer, there are trends to monitor. The first would be employment, which continues to be strong. Laid-off individuals are typically able to move back into the labor force. Second, we're seeing strong consumer spending, with rates higher than in the past three years and high origination activity. A third is declining savings rates. During the pandemic, consumers stored away extra cash, which has since come to a halt. Part of that is likely due to inflation, but it could also point to signs of financial strain. Q: How could these trends impact debt collections strategies moving forward? A: At a portfolio level, they’re good news. The average consumer’s ability to pay has yet to degrade significantly. So, collectors should be able to continue collecting payments. However, six months from now, the impact of inflation and interest rates could take a toll, and settlement offers, or higher upfront payments, may be important tools to consider. Due to increasing interest rates, many households will send money to creditors, leaving less for everyday spending. Q: How has the average consumer been affected by inflation? A: As I mentioned, both consumer spending and overall debt are up. However, when it comes to spending, certain ‘categories’ are more impacted by inflation than others. Of course, home equity and mortgages are higher, which while important, is less impactful for debt collectors. In our recent webinar, ‘Economic Outlook and the Influence on Debt Collections,’ we highlighted the uneven impact inflation has on lower earners in categories such as rent, food and energy. Due to this, collectors may see a rise in delinquency rates, particularly in unsecured personal loans and potentially automotive loans. Q: How should consumers' response to inflation impact collections efforts? A: There may be an increase in opportunities in certain trades, such as utilities, automotive and unsecured personal loans. Are you positioned as an organization to target and serve those markets? For those in the industry, the real potential for an economic weakness should present an opportunity to evaluate your collection strategy. How will you adapt to a 20 to 30% increase in volume? What about working accounts with smaller balances, which we've seen more of since the last larger recession? Experian offers software and decisioning solutions that help debt collectors optimize their strategies for an improved return on investment. Q: What consumer specific data can help lenders better predict distressed consumers? A: As an originator, the first approach to consider should be leveraging new types of data that were not available during the last recession, such as trended, third-party and alternative credit data. Supplementary data can provide leading indicators that risk is increasing before a consumer goes delinquent and their accounts are past due. Additionally, advanced analytics scoring models can help you determine which accounts are more likely to be recoverable. Experian has a new scoring model that uses a complex blend of attributes to assess each trade's history and position in wallet to better predict the likelihood of that account self-curing and separate accounts that need the most attention from those that may need more time. Finally, with accurate consumer contact data, you can enhance your digital engagement strategy and reach the right person, at the right time, on the channel they prefer There’s no time like the present to equip yourself with a successful debt management strategy. With a more holistic consumer view, you can improve account prioritization, predictability and right-party contact rates. Learn more about our debt management solutions here. Watch on-demand webinar

Today’s mortgage market is challenging. Mortgage lenders and servicers will need to focus on product expansion to continue to grow their business. In a recent Q&A session, Susan Allen, Head of Product for Experian Mortgage, shared best practices for leveraging data for profitable growth.Q: At a high level, how can mortgage lenders and servicers grow their businesses?A: There are a lot of options to increase pipeline. One best practice we’re seeing now is to consider expanding both your product suite and your footprint. Very few lenders offer a comprehensive set of solutions in a national footprint. But demand is strong for solutions that go beyond traditional 30-year fixed-rate mortgages, including options to tap home equity. These types of products can help you grow your business by exposing you to new borrowers and broadening your relationships with clients. For example, we see several clients, even non-banks, venturing into credit cards and personal loans to meet their customers’ broader financial needs.Q: You mentioned demand for home equity solutions is strong. What should lenders consider when it comes to home equity loan growth strategies?A: The current record level of untapped equity makes home equity lines of credit (HELOCs) attractive for borrowers to use for debt consolidation, remodeling or to add to their rainy-day fund. For lenders to decide whether HELOCs would be profitable for their business, they should look broadly at data about borrowers, volumes and indicators of profitability, such as credit lines and utilization.Q: It’s one thing to talk about the HELOC market, but does Experian have any home equity data to show what’s happening in this space?A: Absolutely. We’re seeing several things when it comes to home equity data. First, HELOC volumes have doubled since January 2021, which indicates strong borrower interest. Second, we know that home prices are at record highs across the board, and we see this record of “tappable” equity translating into credit lines well over $100,000. What’s more, we’re seeing borrowers drawing down consistently at $37,000 on average, which is a healthy and profitable utilization rate. Lastly, greater than 90% of HELOC borrowers have a prime or super prime credit score. Our data shows HELOC borrowers have higher credit scores than new purchase borrowers. Additionally, conventional wisdom says that HELOCs are for seasoned homeowners, but according to the data, the younger generation of homeowners has tripled their HELOC originations. I’ve been in this industry for a long time, and to be honest, this shocked me. This makes it clear that it’s always important (especially for industry veterans) to constantly update our understanding of current market dynamics. Q: Wow, it sounds like expansion into home equity solutions is a no-brainer. What am I missing? A: HELOCs are a strong and growing market segment. But it’s not sufficient to look only at opportunity. We must also use the best data at our disposal to evaluate risk. With HELOC performance impacted by property values, recent concern over the stability of home prices is causing some lenders to pause. Clients tell us they would like to expand their HELOC offerings but aren’t sure when or where to start. Q: So, what’s the answer here?A: Data is key to taking the guesswork out of decisions. When it comes to HELOC expansion, lenders voice concern specifically about home price forecasts. Although it is notoriously hard to forecast home prices, you can use actual, current data to inform decisions about where and when to expand a home equity portfolio. For example, lenders can use listing data to gauge markets shifting from a “seller’s market” to a “buyer’s market.”Q: Susan, this has been a great discussion. Any final thoughts? A: As I’ve shared, great opportunities exist. With best-in-class data and analytics, lenders can find these opportunities and propel their businesses forward. Be sure to read the other blog posts in this series:Getting Ahead with a Proactive Mortgage Outreach and Engagement StrategyLead Conversion Through Tailored Messaging and a Multichannel Mortgage Marketing Strategy To learn about Experian Mortgage solution offerings, click here.

As lenders and consumers emerge from the pandemic, predicting the attributes of the “new normal” will be difficult. Consumer demand, credit characteristics and economic conditions have all been affected by the pandemic – changing the way we think about doing business. Regulators and legislators have also developed new priorities and expectations for financial institutions. Clint Ivester, Experian’s Solutions Consultant and VP of Sales, joined Lee Gilley and Jonathan Kkolodziej, Partners for Bradley, to share their observations from the past year at AFSA’s 2021 Independents Conference. They also discussed recommendations financial institutions should consider to achieve the best possible posture with respect to compliance and business readiness. Here are a few Q&A highlights: Q: How are stimulus packages and increased government spending affecting economic conditions? A: [Ivester]: Our Experian forecast shows that the economy will grow 6% in 2021. That is well above the 2.5% average we have seen over the last four decades and highest rate since 1983. While the economy is oriented toward growth, how strong that growth is going to be will really depend on how well things go when the “training wheels” are taken off, how robust the recovery is for lower-income workers, and how consumer spending habits have been altered by the pandemic. *Data sources include Bureau of Economic Analysis and Experian’s “COVID-19 Economics Scenarios” April 2021 Report Q: How should businesses be assessing future consumer demand, conditions, and broader economic conditions over the next few quarters? A: [Ivester]: To answer this question, we should consider some factors including unemployment. What happens with lower income workers will have a big impact on where consumer spending goes post-stimulus. While the overall economy is set for solid growth there are still 8 million people out of work with the vast majority being lower income workers. Employment for lower income workers is still down more than 20%. These workers are set to lose the most by the phase out of the federal pandemic unemployment programs and are the highest risk to lose all unemployment benefits. However, if we see a strong jobs recovery – as is very possible – in bars, restaurants, hotels and other industries, these individuals will return to more normal spending habits and consumer spending should remain robust. *Data source includes Opportunity Insights Economic Tracker Watch the full session to hear more about the discussion. For more resources and content on this topic, please visit our Look Ahead Resources page or contact us for more information.  

New challenges created by the COVID-19 pandemic have made it imperative for utility providers to adapt strategies and processes that preserve positive customer relationships. At the same time, they must ensure proper individualized customer treatment by using industry-specific risk scores and modeled income options at the time of onboarding As part of our ongoing Q&A perspective series, Shawn Rife, Experian’s Director of Risk Scoring, sat down with us to discuss consumer trends and their potential impact on the onboarding process. Q: Several utility providers use credit scoring to identify which customers are required to pay a deposit. How does the credit scoring process work and do traditional credit scores differ from industry-specific scores? The goal for utility providers is to onboard as many consumers as possible without having to obtain security deposits. The use of traditional credit scoring can be key to maximizing consumer opportunities. To that end, credit can be used even for consumers with little or no past-payment history in order to prove their financial ability to take on utility payments. Q: How can the utilities industry use consumer income information to help identify consumers who are eligible for income assistance programs? Typically, income information is used to promote inclusion and maximize onboarding, rather than to decline/exclude consumers. A key use of income data within the utility space is to identify the eligibility for need-based financial aid programs and provide relief to the consumers who need it most. Q: Many utility providers stop the onboarding process and apply a larger deposit when they do not get a “hit” on a certain customer. Is there additional data available to score these “no hit” customers and turn a deposit into an approval? Yes, various additional data sources that can be leveraged to drive first or second chances that would otherwise be unattainable. These sources include, but are not limited to, alternative payment data, full-file public record information and other forms of consumer-permissioned payment data. Q: Have you noticed any employment trends due to the COVID-19 pandemic? How can those be applied at the time of onboarding? According to Experian’s latest State of the Economy Report, the U.S. labor market continues to have a slow recovery amidst the current COVID-19 crisis, with the unemployment rate at 7.9% in September. While the ongoing effects on unemployment are still unknown, there’s a good chance that several job/employment categories will be disproportionately affected long-term, which could have ramifications on employment rates and earnings. To that end, Experian has developed exclusive capabilities to help utility providers identify impacted consumers and target programs aimed at providing financial assistance. Ultimately, the usage of income and employment/unemployment data should increase in the future as it can be highly predictive of a consumer’s ability to pay For more insight on how to enhance your collection processes and capabilities, watch our Experian Symposium Series event on-demand. Watch now Learn more About our Experts: Shawn Rife, Director of Risk Scoring, Experian Consumer Information Services, North America Shawn manages Experian’s credit risk scoring models while empowering clients to maximize the scope and influence of their lending universe. He leads the implementation of alternative credit data within the lending environment, as well as key product implementation initiatives.

The financial services industry is not always synonymous with innovation and forward-thinking. While there are some exceptions with top-10 banks and some savvy regionals, as a whole, the sector tends to fall on the latter half of the diffusion of innovation curve, usually slotting in the late majority or laggard phase. Conversely, the opposite is true for fintechs who have been an enormously disruptive force of change in financial services over the past 10 years.   For many businesses, the pandemic has created uncertainty and an inability to conduct or generate business. However, the silver lining with COVID-19 might just be that it’s driving digital innovation across industries. Andreesen Horowitz, a venture capital firm, estimates businesses of all kinds are experiencing at least two years’ worth of digitization compressed into the last six months. And while they have been significantly impacted, for fintechs who were already pushing the envelope and challenging existing business models, COVID-19 suddenly accelerated financial services innovation into overdrive. Here are three challenges fintechs are answering in the wake of the COVID-19 health crisis. Digital Banking   The first lockdowns flipped the digital switch in financial services. Seemingly overnight, banking moved digital. In April, new mobile banking registrations increased 200%, while mobile banking traffic rose 85%. Likewise, Deloitte reported online banking activity has increased 35% since the pandemic started. Being mobile-first or digital-only has allowed many fintechs to win in offering presentment, activation, underwriting, and a contextual digital interface, all capabilities that will only become more relevant as the pandemic stretches on. At Square, direct deposit volumes grew by three times from March to April, up to $1.3 billion; Chime saw record signups. Continued social distancing will only serve to accelerate customers’ use of mobile and online platforms to manage their finances.  Contactless Payments  Similar to digital banking as a whole, the health crisis has accelerated the necessity for contactless payments. Whereas convenience and a seamless customer experience may have been drivers for payments innovation in the past, now, many customers may view it as a life or death health concern. Phones, wearables and even connected vehicles are empowering customers to participate in commerce while avoiding handling cash or coming in contact with an infected surface. Through their adoption of IOT-powered contactless payments, fintechs are accelerating this area of financial services to keep customers safe.  Financial Inclusion and Speeding Economic Relief  Any disaster disproportionally affects the underbanked and those living at the poverty line, and COVID-19 is no different. While it will undoubtedly contribute to an increase in unbanked households, the pandemic may also provide an opportunity to innovate through this problem. Financial inclusion was already a focus for many fintechs, who’ve made it their mission to bring equity by offering basic financial services in a transparent way. Unencumbered by legacy systems and business models, fintechs are well positioned to work across the financial ecosystem, from financial services, retail and government to efficiently and more quickly distribute benefits to at-risk groups and impacted businesses.   From their ability to quickly ingest new and novel data sources, to a focus on using a digital-first approach to delight customers, fintechs will continue to harness their strengths to disrupt financial services, even during the pandemic. How is your fintech driving innovation and customer experience during the health crisis?   Learn more

In today’s uncertain economic environment, the question of how to reduce portfolio volatility while still meeting consumers’ needs is on every lender’s mind.  With more than 100 million consumers already restricted by traditional scoring methods used today, lenders need to look beyond traditional credit information to make more informed decisions. By leveraging alternative credit data, you can continue to support your borrowers and expand your lending universe. In our most recent podcast, Experian’s Shawn Rife, Director of Risk Scoring and Alpa Lally, Vice President of Data Business, discuss how to enhance your portfolio analysis after an economic downturn, respond to the changing lending marketplace and drive greater access to credit for financially distressed consumers. Topics discussed, include: Making strategic, data-driven decisions across the credit lifecycle Better managing and responding to portfolio risk Predicting consumer behavior in times of extreme uncertainty Listen in on the discussion to learn more. Experian · Effective Lending in the Age of COVID-19

Today, Experian and Oliver Wyman launched the Ascend Portfolio Loss ForecasterTM, a solution built to help lenders make better decisions – during COVID-19 and beyond – with customized forecasts and macroeconomic data. Phrases like “the new normal,” “unprecedented times,” and “extreme economic volatility” have flooded not only media for the last few months, but also financial institutions’ strategic discussions regarding plans to move forward. What has largely been crisis response is quickly shifting to an urgent need to answer the many questions around “Will we survive this crisis?,” let alone “What’s next?” And arguably, we’ve entered a new era of loss forecasting. After the longest period of economic growth in post-war U.S. history, previously built models are not sufficient for the unprecedented and sudden changes in economic conditions due to COVID-19. Lenders need instant insights to assess impact and losses to their portfolios. The Ascend Portfolio Loss Forecaster combines advanced modeling from Oliver Wyman,  pandemic-specific insights and macroeconomic scenarios from Oxford Economics, and Experian’s quality data to analyze and produce accurate loan loss forecasts. Additionally, all of the data, including the forecasts and models, are regularly updated as macroeconomic conditions change. “Experian’s agility and innovative technologies allow us to help lenders make informed decisions in real time to mitigate future risk,” said Greg Wright, chief product officer of Experian’s Consumer Information Services, in a recent press release. “We’re proud to work with our partners, Oxford Economics and Oliver Wyman, to bring lenders a product powered by machine learning, comprehensive data and macroeconomic forecast scenarios.” Built using advanced modeling and expert scenarios, the web-based application maximizes the more than 15 years of Experian’s loan-level data, including VantageScore® credit score, bankruptcy scores and customer-level attributes.  Financial institutions can gauge loan portfolio performance under various scenarios. “It is important that the banks take into account the evolving credit behaviors due to the COVID-19 pandemic, in addition to the robust modeling technique for their loss forecasting and strategic decisioning,” said Anshul Verma, senior director of products at Oliver Wyman, also in the release. “With the Ascend Portfolio Loss Forecaster, lenders get robust models that work in the current conditions and take into account evolving consumer behaviors,” Verma said. To watch Experian’s webinar on portfolio loss forecasting, please click here and to learn more about the Ascend Portfolio Loss Forecaster, click the button below. Learn More

This is the next article in our series about how to handle the economic downturn – this time focusing on how to prevent fraud in the new economic environment. We tapped two new experts—Chris Ryan, Market Lead, Fraud and Identity and Tischa Agnessi, Go-to-Market Lead, Decisioning Software—to share their thoughts on how to keep fraud out of your portfolio while continuing to lend. Q: What new fraud trends do you expect during the economic downturn? CR: Perhaps unsurprisingly, we tend to see high volumes of fraud during economic downturn periods. First, we anticipate an uptick in third-party fraud, specifically account takeover or ATO. It’ll be driven by the need for first-time users to be forced online. In particular, the less tech-savvy crowd is vulnerable to phishing attacks, social engineering schemes, using out-of-date software, or landing on a spoofed page. Resources to investigate these types of fraud are already strained as more and more requests come through the top of the funnel to approve new accounts. In fact, according to Javelin Strategy & Research’s 2020 Identity Fraud Study, account takeover fraud and scams will increase at a time when consumers are feeling financial stress from the global health and economic crisis. It is too early to predict how much higher the fraud rates will go; however, criminals become more active during times of economic hardships. We also expect that first party fraud (including synthetic identity fraud) will trend upwards as a result of the deliberate abuse of credit extensions and additional financing options offered by financial services companies. Forced to rely on credit for everyday expenses, some legitimate borrowers may take out loans without any intention of repaying them – which will impact businesses’ bottom lines. Additionally, some individuals may opportunistically look to escape personal credit issues that arise during an economic downturn. The line between behaviors of stressed consumers and fraudsters will blur, making it more difficult to tell who is a criminal and who is an otherwise good consumer that is dealing with financial pressure. Businesses should anticipate an increase in synthetic identity fraud from opportunistic fraudsters looking to take advantage initial financing offers and the cushions offered to consumers as part of the stimulus package. These criminals will use the economic upset as a way to disguise the fact that they’re building up funds before busting out. Q: With payment stress on the rise for consumers, how can lenders manage credit risk and prevent fraud? TA: Businesses wrestle daily with problems created by the coronavirus pandemic and are proactively reaching out to consumers and other businesses with fresh ideas on initial credit relief, and federal credit aid. These efforts are just a start – now is the time to put your recession readiness plan and digital transformation strategies into place and find solutions that will help your organization and your customers beyond immediate needs. The faceless consumer is no longer a fraction of the volume of how organizations interact with their customers, it is now part of the new normal. Businesses need to seek out top-of-line fraud and identity solutions help protect themselves as they are forced to manage higher digital traffic volumes and address the tough questions around: How to identify and authenticate faceless consumers and their devices How to best prevent an overwhelming number of fraud tactics, including first party fraud, account takeover, synthetic identity, bust out, and more. As time passes and the economic crisis evolves, we will all adapt to yet another new normal. Organizations should be data-driven in their approach to this rapidly changing credit crisis and leverage modern technology to identify financially stressed consumers with early-warning indicators, predict future customer behavior, and respond quickly to change as they deliver the best treatment at the right time based on customer-specific activities. Whether it’s preparing portfolio risk assessment, reviewing debt management, collections, and recovery processes, or ramping up your fraud and identity verification services, Experian can help your organization prepare for another new normal. Experian is continuing to monitor the updates around the coronavirus outbreak and its widespread impact on both consumers and businesses. We will continue to share industry-leading insights to help financial institutions differentiate legitimate consumers from fraudsters and protect their business and customers. Learn more About Our Experts [avatar user="ChrisRyan" /] Chris Ryan, Market Lead, Fraud and Identity Chris has over 20 years of experience in fraud prevention and uses this knowledge to identify the most critical fraud issues facing individuals and businesses in North America, and he guides Experian’s application of technology to mitigate fraud risk. [avatar user="tischa.agnessi" /] Tischa Agnessi, Go-to-Market Lead, Decisioning Software Tischa joined Experian in June of 2018 and is responsible for the go to market strategy for North America’s decisioning software solutions. Her responsibilities include delivering compelling propositions that are unique and aligned to markets, market problems, and buyer and user personas. She is also responsible for use cases that span the PowerCurve® software suite as well as application platforms, such as Decisioning as a ServiceSM and Experian®One.

  Many small businesses in the hardest-hit states missed out on the first round of federal relief through the recently created Paycheck Protection Program (PPP). The Coronavirus Aid, Relief, and Economic Security (CARES) Act established the PPP in order to disburse $349 billion in forgivable loans to small businesses hurt by the COVID-19 outbreak. However, the program’s funding limit and first-come, first-serve method for accepting loan applications put an immense strain on the financial institutions tasked with getting the money out the door. This resulted in many small businesses unable to get their applications submitted, approved, and funded before the program ran out of money after only two weeks. Where did the money go? The latest data from the Small Business Administration shows that the most populous states received the largest number of PPP loans. This is unsurprising, as states with higher populations tend to have a greater number of small businesses. One way to get a better picture of the impact of PPP loans on communities is to examine what percentage of a state’s small businesses received PPP loans (Figure 1). When viewed through this lens, the results are a quite striking - many of the coastal areas and larger markets missed out, while the rural, north-central states won out. Less than 4% of small businesses in California, Florida, and New York – three of the top five largest markets – were approved for PPP loans. While more than 12% of small businesses in North Dakota, Nebraska, and South Dakota received support.       What happened? There are several factors that could have played a part in the uneven distribution of PPP loans. One explanation may be that some financial institutions in highly populated urban areas did not have the capacity to process such a large volume of loan applications in such a short amount of time. There may also be an urban-rural divide to how relationship banking occurs. Rural communities and small businesses with close-knit ties to area financial institutions may have had easier access to getting their PPP applications submitted and approved. In line with this, Figure 2 shows the top five and bottom five states in terms of financial institutions (banks and credit unions) per 100,000 people. The states with the highest prevalence of financial institutions were also the top states for PPP small business loan share. While the states with the lowest prevalence of financial institutions were the states with the smallest share. Another factor may have been the extent that shelter-in-place rules were being enforced. North Dakota, Nebraska, and South Dakota – the three top states for loan share – are part of the handful of states that still do not have statewide lockdowns. California, on the other hand, was the first state in the country to issue shelter-in-place measures. Why it matters The first round of stimulus through the Paycheck Protection Program provided relief for many small businesses around the country. However, the first-come, first-serve method of distributing loans may have resulted in some small business communities having easier access to the program than others. Insights as to why these differences occurred and why small businesses in the larger markets received a lower share of PPP loans can inform future stimulus efforts and ensure that recovery among the states is as even and broad as possible.   Figure 1 Sources: Small Business Administration Paycheck Protection Program Report 4/16/2020, Census Bureau SUSB and NES Statistics. Author’s calculations. Figure 2 Sources: Experian data on financial institutions, Census Bureau population estimates. Author's calculations.