Risk in an open-data world

In our last White Paper: Rethinking affordability, we explored the increasing role of affordability in lending.

At Experian, we welcome the FCA’s distinction between credit risk and affordability(1). While a customer may have the means to make repayments, doing so may place a strain on their finances and negatively impact on other commitments further down the line. As an industry, there is an opportunity to get a better understanding of that while also remaining competitive, meeting regulation and enabling the best customer outcomes.

Today, both businesses and regulators are striving for a sustainable future. There is also a unique opportunity to make this happen for everyone. Advanced analytics can equip you to become experts on your customers. Re-connecting people to finance, helping millennials be better prepared for retirement for example can ensure the future does not become tarnished by any decisions of the past.

Today we need to consider the impact of each decision.

The challenge for many however, is where to start. In this paper we explore the most effective roadmap, alongside the biggest opportunities.

In this paper we will look at credit risk in today’s open data world.

 

 

 


What does the whitepaper cover?

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Consumer attitudes and their impact

When making a decision, regulation now requires businesses to look at credit risk (or willingness to pay) as well as affordability (or capacity to pay). Willingness is about track record – what’s known about an individual’s past behaviour. Previous good performance shows there is a good chance that an individual will honour credit commitments going forward, for example.

Our recent research shows that customers themselves often overestimate how much they can afford to pay. Our calculations revealed that the amount people believe they can afford to repay on a mortgage each month is around 40% less than their actual mortgage payments are likely to be. In addition, we can see how most people have little if any accessible savings, or long-term savings in the form of a pension. While many are concerned about their financial future, they are optimistic in their behaviours.

It is important to understand both actual and future trends, behaviours and attitudes, in the entire lending criteria. By understanding this – something that’s now possible through data analytics – you can then produce appropriate models that are reflective of the audience you
want to engage with.

We explore trends and variables from our latest research in this whitepaper.

 

 

 


Authors

Allie Davidge – Director of Global Client Insight

Allie has worked in the customer engagement and research space for 26 years and specifically in client loyalty and experience across the last eighteen. She worked with Satmetrix, co-creators of the Net Promoter system, helping international organisations develop successful client feedback, VoC and NPS programs. After launching a client
experience programme for global banking software provider, Temenos, she joined Experian in January 2013. Her focus at Experian is to move global client experience to the next level, and support with insight led projects which can help focus strategic developments.

 

 

Alastair Luff – Product Director

Alastair Luff is the Director of Products for Experian’s Consumer Information business. Consumer Information provides a range of products and services, specifically related to Experian’s Consumer Bureau. From Acquisition
to Customer Management, Debt Collection to Automotive/Insurance, Consumer Information provides a diverse portfolio of products and services supporting clients across multi sectors. Driving new innovation in products and services is key to maintaining Experian’s leading reputation and our data underpins that innovation.

 

 

 

Chris Curtis – Head of Bureau Analytics

Chris is the Head of Bureau Analytics within the Experian Analytics Centre of Expertise, giving him responsibility for development of value added bureau products that cover the whole of the credit life cycle. With 30 years experience in the credit industry Chris has undertaken diverse analytical and consultancy roles within Experian, working with many of Experian’s largest clients.

 

 

 

Mark Pearce – Strategic Business Development Director

development initiatives and has over a decade’s experience in data and innovation led projects. Mark has progressed through his career in varying roles including equity analyst and investment management, but today focusses on data and technology to unearth new opportunities for growth and focus. More recently Mark has led
various strategic projects where his vital analysis has helped uncover the reality of financial inclusion and the opportunities presented from new data combinations.

 

 

 

1. FCA Consultation Paper CP17/27 Assessing Creditworthiness in Consumer Credit