Analyst firm IDC expects 2014 to be a defining year for credit providers. Having emerged from the economic crisis leaner and more efficient than ever, UK lenders are expected to focus on innovation this year.
Our own conversations with providers across the industry support IDC’s assertion. Growth is back on the agenda. While the main focus now more on responsible lending, many providers are open to doing things in different ways in order to meet their new challenges.
Indeed, with economic activity picking up, lenders are now looking to reinvigorate projects that have remained dormant over recent years. We are seeing lenders upgrading legacy platforms with investments in technology and data to enhance their understanding of the consumer, enabling faster reporting, the ability to handle new communication channels and to develop highly customised strategies.
Single Customer View
The pace of technological change in the wider world means that it is now significantly more difficult for lenders to get quality face time with their customers. When they do they are dealing with people who expect organisations to have a joined up view of their relationship.
That’s why achieving a single customer view (SCV) is a challenge some lenders have been trying to address for more than 20 years. It has long been recognised that credit risk and customer management activities can also be managed more effectively and deliver fairer treatment of a customer when using a holistic view.
The desire to finally address this once and for all has been sharpened partly through new regulatory requirements, but also through a wider need for re-engaging with customers and improving loyalty.
Transformation projects are focusing on greater integration with third party solutions such as Experian’s ExPin solution. This pools data from across an organisation’s many product lines and divisions with Experian’s own unique data and matching technology.
Highly precise segmentation
This more precise view of the consumer enabled through new data sources and SCV projects has unlocked the ability of institutions to achieve far more accurate customer segmentation.
That’s why segmentation has been at the heart of large consumer businesses for many years, and financial institutions are no different. Conduct Risk has been a driver for better segmentation, however, it also makes good business sense for institutions looking to generate greater customer loyalty by offering more precisely tailored and suitable services to customers.
In addition, even small percentage improvements in credit losses, up-sell rates or the cost to serve can help financial institutions become dramatically more efficient, utilise funds more effectively and push back against the squeeze on profitability.
Break-through data sources
New data sharing schemes are a major step in the right direction. Growing momentum for our new Rental Exchange, for example, amongst social landlords means that banks, financial services firms and other creditors will soon be able to use a trusted record of rental payment performance to help assess credit risk.
A number of large housing associations and arm’s length management organisations (ALMOs) have already given notice to tenants that they will share their rental records with Experian. This will dramatically improve the insight available to creditors, improving assessment of those without mainstream credit products and helping them to meet responsible lending requirements.
Returning to innovation
We see plenty of evidence to corroborate the assertion from analysts that 2014 will see a far greater degree of innovation in banking and financial services.
One way lenders are doing this is by vastly improving their understanding of their customers, enabling a more sophisticated approach to customer segmentation and undertaking more sensitive and effective strategies for engagement.
For more Experian innovation visit our dedicated Innovation in Data site.
Are you planning any future innovation projects, and do you see 2014 as a year to ramp up innovation? Please let us know your thoughts below.
About the author
Head of Data Innovation Group, Experian
Justin has worked for many years consulting with some of the world’s leading private sector organisations to help them understand how data can be employed to drive business advantage.
During his career at Experian he has worked across the customer lifecycle within both marketing and risk. Most recently he heads up a team creating innovative solutions based around Experian’s unique data assets.