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A new approach to the SME credit lifecycle
Lenders need to consider whether they can automate many processes related to SME customers to reduce the high costs of servicing a small business portfolio.
Consultancy Services - What can it do for me?
Consulting enables the business potential of Decision Analytics and sits at the heart of every proposition created for clients. As well as building experience and expertise into Decision Analytics products and services, Experian also supports clients through the strategy design and implementation process, and beyond as their business develops.
How can we help you?
Consultants from Experian’s Decision Analytics division works with clients at every stage of the project, firstly to understand each client’s business, then helping to design and implement systems that deliver objectives.
Decision Analytics consulting has the overriding aim to prove and deliver quantifiable benefits to every business. It is practical and results driven, with systems and processes that are realistic to implement and maximise the benefits returned.
Experian has worked with clients in different industries around the world and has used this experience to create Decision Analytics specifically designed to address key business challenges.
Drawing on a unique understanding of business drivers, the complete propositions incorporate proven, leading practice to ensure clients can focus on what really adds value to their business. This ensures organisations can rapidly realise the benefits from Decision Analytics and maximise the return on investment.
A few key facts
- Following implementation, the consultants stay close to every organisation through a regular review programme to evolve and enhance strategies as needs change and the business grows.
- Most importantly, regular monitoring evaluates the benefits achieved, creating an environment for future improvements and increasing returns.
- Experian believes that the Decision Analytics delivery is only the beginning of the relationship, and builds a partnership to continue to support and enhance the solution through a regular programme of consulting and development.
Consultants work with clients at every stage of the project, firstly to understand each client’s business, then helping to design and implement systems that deliver objectives.
- Awareness of performance with benchmarks against industry and best practice
- Identification of opportunities and challenges throughout the organisation
- Fully analysed initiatives to lead to achievement of the organisation’s objectives
- Prioritised initiatives including quick wins for rapid improvements
- Fresh approach and innovative thinking with an independent review of operations
Experian consulting has the overriding aim to prove and deliver quantifiable benefits to every business. It is practical and results driven, with proposals that are realistic to implement and maximise the benefits returned.
Experian has worked with clients in different industries around the world and has used this experience to create Decision Analytics propositions specifically designed to address key business challenges. Drawing on a unique understanding of business drivers, the complete propositions incorporate proven, leading practice to ensure clients can focus on what really adds value to their business. This ensures organisations can rapidly realise the benefits from Decision Analytics and maximise the return on investment.
Decision Analytics consultants work with clients at every stage of the project, firstly to review the current situation by spending time in the business to fully understand organisational aims, goals, challenges and constraints. Then, together, the key strategic initiatives required by the business are identified, clarified and prioritised to ensure objectives are met and profits maximised.
Consultants assist in the definition of the business case and project scope, including analysis of the potential business benefits.
Establishing the scope of the project ensures that the maximum benefits are realised by identifying all the critical success factors.
Strategy consulting and review
Experian believes that the delivery is only the beginning of the relationship, and builds a partnership to continue to support and enhance the solution through a regular programme of consulting and development. The pressures of day-to-day management can interrupt a structured review plan; therefore a key part of the Decision Analytics proposition is a regular consulting programme of Strategy Reviews.
The aim is to create a culture of continuous improvement in each organisation and to make sure organisations realise the often significant benefits that can be achieved from regular reviews.
Whatever the client’s situation is, Strategy Reviews progress organisations through the evolution of strategy design, from experience based strategies, through to data driven strategy design and optimisation. The Strategy Review programme creates a working partnership to regularly design, review and implement customer decisioning strategies.
Consulting is an on-going investment to ensure a client’s customer decisions continue to add value to their business. Experian has provided Decision Analytics consulting services for hundreds of organisations, both in the design and implementation of Decision Analytics systems and in the review and improvement of existing systems and strategies.
The consultants apply an independent, rigorous, analysis driven review of an organisation’s situation at every level of the business, to develop practical recommendations and drive them through to implementation. By working closely in partnership with clients, Decision Analytics consultants are able to continually evolve the leading practice to meet the needs of an ever-changing business environment. The company is committed to innovation and is constantly challenging and refining practices and processes to move clients from ‘best practice’ to ‘next practice’, sharing knowledge and innovation through the publication of white papers and articles.
The Business Review
Reviews can encompassed core products, such as current account, overdraft, business loan and business credit card, with a primarily focus on understanding current performance with benchmarks against industry and best practice and an identification of opportunities and challenges.
The key questions being answered can include:
- What are the options for the tactical implementation of changes to both new and existing systems and processes?
- What are the longer term options for and what is the business case to support this investment?
- Where is the organisation benchmarked against leading practice including in areas such as automation of decision-making?
Market and Portfolio Insight
As an organisation’s business strategies evolve it is imperative to understand the impact these changes are having on the customer base. Detailed in-house monitoring of portfolios is invaluable, but are the results reflective of a change in strategy or macroeconomic factors and overall market trends?
This service takes the form of a quarterly consultancy review consisting of three elements:
This looks at your portfolios positions in comparison to their peers in the rest of the UK market. Key issues are identified and explored, interpreting the drivers behind trends and highlighting potential impacts. It first sets the macro-economic backdrop to the analysis, studying
UK and credit industry economic trends, focusing on credit appetite, delinquency levels, personal bankruptcy and debt servicing ratios.
This determines the likely future position of both your portfolios and the general markets trends. By drilling down into consumer segments, Experian Decision Analytics’ models and expertise are used to build profiles forecasting risk concentrations and segments vulnerable to indebtedness. This gives an insight into how current strategies may affect your business in terms of:
- Future levels of delinquency extrapolated from vintage analysis
- Forecast write-off and bad debt levels, using roll-rate and cure rate analysis
Credit Strategy Setting
This takes the benchmark reports and forecast performance and compares each of your portfolios against the rest of the market, identifying variations from industry norms and influencing factors. By overlaying forecasts to predict the impact of past strategies our consultants work in partnership with you to uncover opportunities for changes in performance and develop the optimal actions and strategies on-going to meet your business objectives.
Market and Portfolio Insight provides benchmarks and forecasts leading to strategic recommendations in the areas of:
- Analysis of overall marketing strategy and profile, its impact upon market share, ranking and quality, based on several key performance measures
- Origination strategy, in terms of the overall impact of a new scorecard implementation, application score cut off changes and the effectiveness of activation strategy
- Initial balance build and/or utilisation and sustainability
- Cross-sell and up-sell strategy, going on to identify candidate portfolio segments for the future
- Effectiveness of retention strategies and development of further initiatives to mitigate attrition and early settlement
- Effectiveness of limit management strategy for credit cards
- Loan term analysis and proportion repaid for personal loans
- Delinquency and default trends, balance at risk of default and debt per £ of exposure analysis Effectiveness of collections strategy
- Forecasting changes in delinquency and write-off and their likely impact upon debt provisioning
Enhancing collections for sophisticated water operator
"Experian is a trusted partner to our company and we looked to them to give us the market leading technology and business consulting expertise we needed for our business. The business review identified opportunities, ensured we understand the potential benefits and created a roadmap to leverage these opportunities across our organisation."
Martyn Oakley, Customer Services Director, Anglian Water
In an industry where customers have no choice of supply and utilities do not have the ability to disconnect services, water companies face unique challenges in the consumer marketplace. This makes collections in this industry a key function in order to manage bad debt. Water companies need to have a highly targeted collections strategy and the ability to carry out collections activities at maximum speed and minimal cost. Anglian Water wanted to substantiate the potential business benefits so it could secure investment and continue the transformation of its existing operation and processes.
Following the implementation of Experian’s Tallyman collections management system, Anglian Water invited Experian to carry out a consulting review of its end-to-end collections processes. The scope of the review covered collections functions across the organisation, including a review of policy, strategies and processes for early and late collections and litigation. It also looked at additional ways in which the client could leverage its investment in the Tallyman collections system. The main deliverable was a detailed report which highlighted opportunities to enhance capabilities in all areas and what level of investment would be required to realise the benefits identified.
- Increase efficiency and reduce costs by further leveraging the existing infrastructure and maximising resource use through streamlining and automating processes
- Enhance decisioning with a more analytical approach to collections strategy
- Improve case load targeting with scorecards within the collections process to prioritise cases
- Reduce debt ageing and target risk groups using a decision engine to implement scorecards and segmentation for accurate strategy
- Improve the customer experience for lower risk segments by appropriate targeting of collections actions
- Reduce provisioning and bad debt with more effective collections activities
Is there a need for a business review?
In the current market environment, increased levels of customer indebtedness is generating a substantial rise in the number of problematic accounts that organisations experience. There is a real requirement to effectively utilise available funds by offering the right products to the customers and ensure the lowest risk at the highest margin.
Currently, banks focus on the existing customer base and prioritise debt management to recover more funds, more quickly. There is also a need to invest in strategic projects with limited budgets in order to generate benefits in a very short term, to rationalise existing strategies and processes whilst ensuring that optimal decisions are made at each client contact point.
To meet the present challenging conditions, more and more financial institutions are performing business reviews with the aim of evaluating needs and opportunities to maximise the value created in their portfolios. Business reviews assess an organisation’s capacity to leverage on existing opportunities as well as identifying any additional capability that might be necessary to realise the increased benefits.
An effective business review covers the following four phases:
Problem definition: Establish and qualify what the key objectives of the organisation are, the most relevant issues to address, the constraints of the solution, the criteria for success and to summarise how value management fits into the company’s corporate and business unit strategies.
Benchmark organisation against leading practice: Strategies, Processes, Tools, Knowledge, and People have to be measured using a review toolset tailored to the organisations strategic objectives. The assessment should allow identification of gaps between current capability and desired future position, the strengths to be exploited and the weaknesses to be addressed. A sound benchmarking analysis has to be performed by a third party with a deep knowledge of the industry leading practice in comparison with the current organisation positioning.
Picture 1: Situational analysis delivered per business area
Picture 1 reports the results of the assessment of more than 30 companies. We observe that above all Collection departments are extremely far from the leading practice, especially in the strategic decisioning areas (Strategies, Models, and Decision engines).
Define the opportunities and create the roadmap: The elements required to implement the opportunities and migrating to the best practice should be scheduled in a phased strategic roadmap that includes the implementation plan of the proposed actions. Both 'Quick Wins' - easily implemented changes with limited work required as well as more complex changes that require longer timescales and efforts have to be defined, highlighting the difference between strategic changes, that generate great value, and 'nice to have' with lower cost-benefits ratio.
Achieve the benefits: An ROI-focused approach, founded on experience in peer organisations, will allow analysis of the cost-benefits of the recommended investments and quantify the potential savings and additional revenue generated. A continuous fine-tuning (i.e. impact of market changes, looking for the next competitive edge and proactively challenge solution boundaries) will ensure the benefits are fully achieved.
In the last year Experian Decision Analytics has delivered more than 50 business reviews for banks, financial services companies, telecoms and retailers with estimated clients benefits in excess of USD 100 Million.