In today’s rapidly changing financial services environment, it is vital for any business that the first interaction with a potential customer meets their expectations in service and speed.
With increasing competition and higher expectations, the customer acquisition system has to balance the needs of speed, with customers wanting rapid decisions, and risk management, ensuring that sufficient information is collected for an accurate assessment of risk, fraud detection and to create the most appropriate offer.
If an organisation takes too long to provide funds to the customer, their need for credit could be met from another source with a corresponding effect on profitability. However, without thorough risk assessment and fraud detection the lender’s results will suffer due to increased collections costs, bad debt write-off and fraud losses.
From the point of the first customer contact through to the final decision, the individual receives a smooth application experience.
Experian’s proposition for customer acquisition in unsecured lending brings together robust application processing, data connectivity, decisioning technology and predictive analytics with expert consulting.
Data capture screens allow the accurate input, validation and enrichment of application data to give the right depth of data for decisioning. Workflow functionality drives the application automatically through the process including fraud detection. The solution applies tailored policy rules and calculates multiple scores for objectives including credit risk, indebtedness, risk-based pricing, profitability and Basel II elements.
Once a decision is made to accept, segmentation enables appropriate terms of business to be assigned for each applicant with cross-sell and up-sell strategies implemented for targeted groups of customers.
Accept more applicants without reducing profitability, decline unacceptable risks and reduce both bad debt and write-offs.
Consulting is at the heart of every Decision Analytics delivery by Experian. Consultants work with clients at every stage of the project, firstly to fully understand the business and strategic direction, and then to help design and implement systems and processes that deliver objectives.
Following implementation, Experian consultants work with clients through a structured and regular review programme to continually evolve and enhance strategies so that organisations continue to gain maximum value as their needs change and the business grows.
Experian creates a partnership with clients to deliver a solution that addresses their business challenges for today, and in the future. Bringing a fresh approach and independent viewpoint to every business, it delivers practical solutions that deliver measurable results.
Experian’s application processing is a scalable and robust system that receives, validates and processes applications from multiple sources, with user controlled task orchestration and workflow driving operational and business procedures for both automated and manual decisioning.
Business users have complete control to define, test and manage business strategies without the need for programming resource.
They have operational and strategic control with lending strategies managed on the desktop.
Through simulation in the analytical environment and Champion- Challenger facilities in the operational environment, strategies can be evaluated, evolved and proved for maximum performance and then deployed across the organisation.
Seamlessly integrated with application processing is Hunter, the application fraud detection tool. Using detection rules it screens for, and highlights potentially fraudulent applications, enabling fraudsters to be stopped before the organisation suffers losses. Maximising the value of data from internal and external sources, it uses this information to screen and highlight suspicious cases, which can then be quickly investigated by the fraud team, and action taken accordingly.
Experian uses world-class analytical capabilities to create statistical models that turn data into intelligence, helping to make an informed decision on applicants. Application scoring predicts how a potential customer might behave in the future, and whether this is the type of customer the organisation wants to take on. Risk is not the only factor in this decision so scorecards can also measure potential lifetime value, profitability and objectives such as propensity to drive cross-sell strategies.
Generic and custom scorecards are developed using pooled data for robust and highly predictive models, according to a client’s requirements, data availability and timescales for delivery.
The integrated tools enable operational reporting and strategic monitoring to support both day-to-day management control and longer-term business improvement. Business users can gain access to monitoring and reporting at every level of the organisation to create valuable business intelligence.
Expert reports have been specifically designed to meet the key business requirements of monitoring new business quality, strategy and scorecard performance and Basel II. Each report provides high-level statistics, indices and alerts to highlight divergence from business goals.
The Connect+ service offers links to credit and fraud bureaux worldwide. Using an established, ready-to-use and secure environment, data is retrieved, merged and standardised from multiple sources for the most comprehensive applicant overview. The service supports a sophisticated data enrichment strategy, so that only the appropriate level of relevant data is retrieved, thereby controlling bureaux data costs.
The system has been designed and built for rapid implementation, with all the elements required for effective origination, along with the ability to customise elements to suit individual business requirements. The functionality in the technology has been designed to be modular so it can deliver the functionality needed today and meet the needs of the business tomorrow.
For many clients the system is integrated within their infrastructure. Alternatively, as part of the flexible approach to delivery, a hosted application service provider (ASP) option is offered. Integrating seamlessly with the existing infrastructure and systems, the web-enabled tools enable distributed working across the enterprise.
Experian integrates robust application processing, data connectivity, decisioning technology and predictive analytics with expert consulting to create a complete proposition for origination in unsecured lending.
Our expertise and advanced tools enable a lending organisation to automate and manage the entire application process. From the point of the first customer contact through to the final decision, the individual receives a smooth application experience.
Data capture screens allow the accurate input and validation of application data, which is enriched with additional data from internal and external sources including Credit Bureaux and existing customer databases to give the right depth of data for decisioning.
Workflow functionality drives the application automatically through the process including fraud detection, checking the application against known frauds, previous applications and other data sources.
The solution applies tailored policy rules and calculates multiple scores for objectives including credit risk, indebtedness, risk-based pricing, profitability and Basel II elements. Once a decision is made to accept, segmentation enables appropriate terms of business to be assigned for each applicant such as maximum loan amount, credit limit and card duration, with cross-sell and up-sell strategies implemented for targeted groups of customers.
Final conditions can be set, such as the need to request further identification, proofs or checks.
Where a manual review is required, the workflow routes the application to the appropriate level of underwriter with all the information presented for rapid resolution.
“We chose Experian to deliver its managed service because we were impressed that they could supply both the experience in the credit card sector from its global reach and the support and relationship from the local offices.”
“The support we have received has been critical to the success of the project and their extensive knowledge of the technology, market and sector has ensured the smooth deployment and operation of the application processing for Barclaycard. They have delivered, and continue to deliver, a robust and flexible service that is critical to our success in these markets.”
Barclaycard is a rapidly expanding global cards and lending business with 6.4m cards in issue outside of the UK and operations in over fifty countries and four continents. When looking at the launch of its credit card in Spain and Portugal, the lender recognised that it needed a flexible and scalable application processing system to be able to manage and process the applications quickly and securely.
The requirements of the system included the ability to have a consistent system across countries, with the flexibility to manage and change strategies locally and centrally by the risk management teams. Barclaycard determined that the best course of action was to use an outsourced managed service for its application processing. Barclaycard chose the managed application processing service from Experian.
Experian was chosen because it could offer its highly flexible application processing system as a managed service. Experian could also offer experience from working with credit card issuers worldwide, combined with the relationships in each country to offer the local support Barclaycard were looking for.
In today’s unsecured lending marketplace customer expectations are increasingly high and competition is fierce. As competition increases customers have dozens or even hundreds of credit offers and lenders to choose from.
This proliferation of offers can reduce brand loyalty and lenders will have to work much harder to attract, acquire and retain customers.
As the origination process often handles the very first interaction with the applicant, it is critical for an applicant to have a positive ‘buying experience’, which essentially equates to a fast turnaround time for the decision to be made coupled with the offering of the appropriate products and services at the expected terms of business (e.g. interest rates, limits, facilities). A swift decision with the customer receiving their requested credit facility promptly is the first step in turning applications into loyal and profitable customers.
A variety of pressures (market, regulatory, competitive) will continue to force change in the unsecured lending arena. In response to these challenges the strategies being deployed by leading organisations are becoming increasingly sophisticated.
Risk based pricing enables organisations to improve acceptance rates, write more business and satisfy customers’ demands. Regulatory developments have seen the presence of models to calculate the required elements of Basel II now featuring in origination systems.
This white paper discusses the requirements of an effective and efficient origination solution for unsecured lending covering the business model, application process and system set-up with the aim of enabling a rapid response to changing customer needs and market demands together with managing portfolio risk whilst delivering growth.
The concept of pricing according to risk isn’t new; it is common practice in the insurance industry and has been used in the credit industry for over a decade.
Risk-based pricing is the practice of considering the ‘risk’ of an applicant and applying different lending interest rates and terms based on their profile.
Those customers who are considered lower risk receive better terms, while those who are considered higher risk are offered higher interest rates, reflecting the potentially increased costs and losses associated with lending to those ‘riskier’ customers.
The adoption of risk-based pricing can bring many benefits to the financial institution implementing the strategy, the customers and financial market as a whole.
Lenders can increase volumes, take-up and bookings whilst reducing attrition and mitigating the effects of adverse selection.
For customers, those who are lower risk are rewarded for their good financial performance, with higher risk customers gaining more access to credit.
The financial market and economy benefits by more of the population being brought into the mainstream lending process.
However, risk based pricing has its critics, especially from some consumer protection organisations.
This paper reflects the many years of experience Experian has gained from working with financial lenders implementing risk management decision support and scoring systems.