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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.
Customer Data Connectivity - What can it do for me?
Around the world, lenders are using multiple external data sources to enhance the credit risk assessment of an individual or company, especially for cross-border lending and multi-national organisations wanting to standardise their risk assessment approach.
With differing data types, formats and quality, and the technical challenges of creating and maintaining data links, accessing and using external data sources effectively can be a challenge.
How can we help you?
Experian's Connectivity service allows national and international organisations to access multiple credit bureaux from a single consistent system.
A few key facts
- Connectivity services allow organisations to access, consolidate and aggregate data from multiple credit bureaux and other sources within and across national borders.
- The system enables organisations to connect to credit bureaux.
- Every time an organisation interacts with Experian's Connectivity service it can implement decision rules and provide consistent data.
- Organisations that operate across multiple countries can access credit bureaux around the world, while taking into account the necessary local requirements, enabling standardisation of risk assessment systems and processes.
Experian's Connectivity services allow national and international organisations to access multiple credit bureaux from a single consistent system.
- Creation of predictive summary variables
- Creation and integration of multi-bureau scorecards
- Desktop control over which bureaux is accessed and when
- Consistent interpretation of data from different sources
Connectivity system enables organisations to connect to credit bureaux
Organisations that operate across multiple countries can access credit bureaux around the world, while taking into account the necessary local requirements, enabling standardisation of risk assessment systems and processes.
Data requests from clients is passed through the service, which accesses and gathers data from one or more external data sources across multiple countries.
Every time an organisation interacts with Experian’s Connectivity system it can implement decision rules that determine the most relevant credit bureaux to access, how much data should be retrieved and which secondary bureaux should be used if the primary source is not available or the data returned is not sufficient.
Connectivity can provide consistent data by creating standard summary variables for blocks of information retrieved from similar credit bureaux, making it easier to compare data from different sources. In addition, data can be passed back to the host system in each bureau standard format, with raw data records retrieved as required.
Experian hosted, web-enabled service
Experian’s Connectivity system is deployed as a hosted web-enabled service. This removes the need for capital investment, infrastructure changes and technical support, while policy and business process control remains with the organisation.
The system integrates into existing software and processes and can be installed anywhere in the world. It is flexible and scalable to meet operational needs and local market requirements.
By working together in partnership the solution can be configured to meet specific business and market requirements regarding access, interpretation and the use of credit reference information.
This customised solution can incorporate many value-added services based on specific requirements and dependant on the market of operation.
Delivered as a hosted solution, Experian’s Connectivity system has a proven architecture to enable organisations to reduce costs and infrastructure overheads, while operating fast, accurate and stable credit risk management. It allows organisations to access, consolidate and aggregate data from multiple credit bureaux and other sources within and across national borders by accessing a single system.
Experian is a pioneer in understanding data and, working closely with partners around the world, has developed local expertise in many countries.
With over 200 existing interfaces to data sources, including over 80 credit bureaux, Experian’s unique system encapsulates this expertise to deliver a rapid and robust solution.
The need for Credit Bureaux
In many countries around the world lenders have access to database information to help them assess the creditworthiness of an applicant for credit. The organisations that gather the data and operate these services are known as Credit Bureaux, Credit Information Services, Credit Registries, Credit Reporting Agencies or Consumer Credit Reference Agencies.
Relevant information is gathered from public records, statutory information, identity information, credit applications and credit accounts on the individual consumers and businesses. The lender accesses the service in the form of a credit report and uses it to assess the application risk prior to underwriting the credit. The credit line may be for anything from a house or a car to a credit card or a mobile telephone account.
The existence of a Credit Bureau in a country assists growth by stimulating the consumer credit economy. Borrowers can be assessed for risk in an objective way based on credit payment history so credit can be allocated more efficiently. Borrowing by high risk borrowers is controlled and the market is opened for new low risk borrowers.
Lenders, consumers, businesses, government and central banks all benefit from Credit Bureaux. This is why the World Bank, IFC and USAID organisations are all promoting and facilitating the development of efficient and capable Credit Bureau services around the world. The effectiveness of a Credit Bureau varies depending on a number of factors including data availability, data quality, operating ability and legislation. Supportive legislation and a sound technical infrastructure are crucial to effective operation.
The service provided by a Credit Bureau always starts with a basic credit report containing all relevant data within the bounds of the prevailing legislation. To keep pace with the developing market, more The need for Credit Bureaux advanced services such as scoring and fraud prevention need to follow quickly.
To maintain useful representative data in the Credit Bureau it is important to constantly encourage further data sharing between users of the services. The most important stage in the development of the database is the persuasion of lenders to share not just accounts with poor payment history (negative data) but also those with good payment history (positive data).
The sharing of positive data is a trigger to the development of more advanced and effective products and services that help both lenders and consumers. Consumers with good credit histories can borrow to more equitable limits, receive lower interest rates, and get access to more credit products.
Lenders can make better lending decisions, use risk-based pricing methods more effectively, actively manage credit lines, collect debt more successfully and reduce fraud. Because the overall level of the consumer’s indebtedness can be calculated it is easier to determine the probability of default and the potential loss, both aspects that help in adherence with Basel II.
Credit Bureaux are well positioned to be at the forefront of application fraud prevention. The information held by a Credit Bureau is invaluable to identify fraudulent consumer behaviour at the time of application before any loss is incurred. It is important to be aware of the warning signs of the need to improve Credit Bureau services in a country.
If improvements can be executed in a timely manner then consumer lending can be controlled whilst continuing to stimulate the consumer credit economy.
The establishment of a Credit Bureau represents a significant undertaking and success will be governed by providing simple and efficient access to predictive data. Consideration should be given to seeking consulting from an organisation with expertise in these matters.
Similarly, such organisations can offer software solutions that can be customised to meet local requirements.
This paper is therefore intended for:
- Those interested in establishing a Credit Bureau
- Those wishing to determine whether improvements are needed to an existing Credit Bureau
- Those wishing to know where to go for help to achieve either of the above
- The need for Credit Bureaux and what they do is discussed; the paper describes what services they should offer and where help is likely to be needed to establish the services.
- Credit Bureau services across the world vary greatly in their ability to fulfil the requirements of their market but most ultimately aim to satisfy the same basic requirements regardless of where they are.