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Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
Vision 2014: Reporting-alternative-data
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Vision 2014: Reporting-alternative-data

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  1. ©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Reporting alternative data? Understand the positive benefits to you and your customer Patrick Walker PERC Alpa Jain Experian #vision2014
  2. 2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Regulatory  Research  Impact to you and your customers  What Experian can do? Today’s agenda The three perspectives of full file reporting
  3. 3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Regulatory and research Patrick Walker PERC
  4. 4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  PERC advocates the inclusion of alternative data for use in credit granting  Alternative = regular bill payment data from telecoms, energy utilities, rental payments and other such non-financial services that are valuable inputs for credit decisions PERC’s Alternative Data Initiative (ADI)
  5. 5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Utilities, telecom providers, and other non-financial service providers typically only report negative data directly or via collections:  PERC wants these providers to also report positive data: Story behind negative-only reporting Consumer being penalized? Very late payments Charge-offs Collections Account open status On-time payment Age of account Mildly late payments
  6. 6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. What have we found?
  7. 7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Most recent study A New Pathway to Financial Inclusion: Alternative data, credit building, and responsible lending in the wake of the great recession June 2012
  8. 8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 2% 3% 3% 4% 48% 19% 5% 3% 2% 7% 2% 2% 3% 4% 6% 44% 19% 4% 3% 2% 11% 2% 0% 10% 20% 30% 40% 50% Decline >= 50 Decline between 25 and 49 Decline between 10 and 24 Decline less than 10 No change Increase less than 10 Increase between 10 and 24 Increase between 25 and 49 Increase >= 50 Can now be scored Remain a no score 2005 'Utility Sample' 2009 VantageScore® change with alternative data, all consumers Consistent credit score impacts Over time…
  9. 9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. VantageScore® tier changes with alternative data Rise one or more tiers No change Fall one or more tiers Entire sample  Including unscoreables 9% 88% 3%  Excluding unscoreables 4% 93% 3% Thin file  Including unscoreables 64% 35% 1%  Excluding unscoreables 25% 69% 6% Uses the ‘ABC’ tiers:  900-990 = A  800-899 = B  700-799 = C  600-699 = D  501-599 = F Unscoreable defined as lowest tier More tier rises than falls
  10. 10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 5% 10% 15% 20% 25% 30% < $20K $20-$29K $30-$49 $50-$99 $100K+ 2009/2010 2005/2006 (At 3% portfolio target default rate) Change in acceptance by household income
  11. 11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Average firm benefits of fully reporting are several times the costs ► Benefits include fewer delinquencies, decline in accounts in arrears, and improved cash-flow ► Costs include IT upgrades, conducting new processes, compliance procedures and new customer service demands  10% of firms in survey currently fully report to a bureau  89% currently refer delinquencies to a collections agency Firms: Impact of reporting Utility and telecom survey
  12. 12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Firms: Impact of reporting Benefits / costs of reporting to a credit reporting agency 0 1 2 3 Benefit = Costs Benefits 1 to 2 x Costs Benefits 2 to 5 x Costs Benefits 5 to 10 x Costs Benefits > 10 x Costs Utility and telecom survey: Benefits / costs of reporting to a credit bureau All firms reported benefits > costs, including compliance costs
  13. 13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Firms that fully report see changed consumer payment behavior Half of those surveyed indicated that if a non-financial obligation payment was reported to a credit bureau and would have an impact on their credit standing, they would be more likely to pay on time
  14. 14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. U.S. customer survey  About half of customers more likely to pay on time if payment reported was reported to a credit bureau and impact their credit files and credit scores ► Over a third would be much more likely Customers: Response to reporting
  15. 15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Firms that report are overwhelmingly satisfied with experience Level of satisfaction Number of respondents Very satisfied 2 Somewhat satisfied 5 Neutral / mixed 2 Somewhat unsatisfied 0 Very unsatisfied 0 Table D: Level of satisfaction from reporting experience PERC 2008 Data Furnisher’s Survey Responses
  16. 16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Firms overestimate perceived costs of credit reporting Response Number of respondents Large cost (> 30% of IT budget) 0 Medium cost (15-30% of IT budget) 0 Small cost (5-15% of IT budget) 2 Minimal / no cost (<5% of IT budget) 3 Don’t know 2 Prefer not to answer 1 Direct non-IT cost estimates Number of respondents Large cost (>30% CS budget) 0 Medium cost (15-30% CS budget) 0 Small cost (5-15% CS budget) 5 Minimal / no cost (<5% CS budget) 1 Don’t know 1 Prefer not to answer 1 * CS Budget = Customer Service BudgetPERC 2008 Data Furnisher’s Survey IT costs related to reporting Non-IT costs related to reporting
  17. 17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  89% of companies did not need to restructure their billing systems to facilitate reporting  56% of companies sought regulatory approval to report  88% did not believe regulatory approval was necessary Firms that fully report
  18. 18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. What it means to you and your customer? Alpa Jain Experian
  19. 19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Trade strength and content Today, tomorrow… Reporting has been an effective tool in payment prioritization for 30+ years It is important to bring alternative data into the credit ecosystem Over 97% of the national consumer loans are reported to Experian Banks and credit unions (All): Accounts for 100% of all financial institution loans 100% of the Top-100 mortgage providers report to Experian Mortgage: Top-100 mortgage providers Accounts for 99% of all mortgage loans serviced Over 95% of loans issued by the Top-50 issuers are reported to Experian Card issuers: Top-50 bank card issuers Accounts for 80% of all loans issued 149 of the Top-150 auto lenders, or 99%, report their data to Experian Auto Lenders: Top-150 auto lenders Accounts for 70% of all auto loans financed Represents 200–250M additional positive tradelines Energy and Telecoms High impact and Important alternative data
  20. 20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Consumers benefit from (and expect) consistent and transparent data reporting  Energy and communication spend is a meaningful monthly household obligation  Ranks high in terms of recurring household spend  Full-file reporting to credit bureaus (i.e. inclusive of “positive data”) will benefit majority of consumers  Inconsistent reporting of consumer data is proven to drive consumer confusion and ultimately disputes  U.S. credit reporting is a shared “ecosystem” available to all data contributors Mortgage Auto Personal loan Energy spend* Student loan*Estimated
  21. 21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Case study #1 Improving arrears01/03/05 03/28/05 06/20/05 09/12/05 12/19/05 03/13/06 06/05/06 09/11/06 12/04/06 02/26/07 05/21/07 08/27/07 11/19/07 02/11/07 650,000 630,000 610,000 590,000 570,000 550,000 Residential accounts in arrears – Rolling one-year average 670,000 An estimated reduction of 78K in arrears Estimated value of credit reporting = $33.6M * Based on a $432 average balance Location Industry Type Utility Midwest Total Residential Customers 2M+
  22. 22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Case study #2 Becoming the creditor of choice Key findings:  Slow paying customers may not be paying other lenders late ► 39% had 0-1 derogs on file ► 17% had 2-3 derogs on file  Unscoreable customers can benefit ► 17% of previously unscoreable consumers would receive a score ● Almost 10% had no trades on file previously ● Another 7% had a thin file (less than three trades) Experian provided a pre- reporting analysis for this utility to support the decision to report full file Location Industry Type Utility Northeast Total Residential Customers 2M+
  23. 23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Case study #3 Helping consumers “Many consumers have thin or no credit files, making them unscoreable.” Center for Financial Services Innovation Totalconsumers 5% to 6% of the consumers became scoreable with the additional utility trade 4% of the portfolios were new consumers Location Industry Type Utility Midwest Total Residential Customers 1M+
  24. 24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Case study #3 Helping consumers 60% 20% Totalrecords 81% scores had little or no change in scoreKey metric: 50+ pt increase in score 25-49 pt increase in score 10-24 pt increase in score < 10 pt increase in score No change < 10 pt decrease in score 10-24 pt decrease in score 25-49 pt decrease in score 50+ pt decrease in score 11% of all scores increased significantly with the additional trade Over 70% consumers who decreased in score already had two or more derogs on file 40% 0% Location Industry Type Utility Midwest Total Residential Customers 1M+
  25. 25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Case study #3 Helping consumers – thin file Generally positive impact to thin file consumers with the additional utility trade Similar distribution to all consumers 0% 100% 97% 90% 100% 0% 50% 100% Super Prime (900-999) Prime (800-899) Non-Prime (700-799) Sub Prime (600-699) Sub Zero Prime ( < 600) Consumers Positive scoreband changes – Thin file consumers Location Industry Type Utility Midwest Total Residential Customers 1M+
  26. 26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Impact from reporting 60 DPD rates by quarter Location Industry Type Utility Midwest Total Residential Customers 2M+
  27. 27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. What can Experian do to help? Alpa Jain Experian
  28. 28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Poll Question #1 What do you think would be the impact to your inbound call volume if you reported positive data? a) No increase b) Slight increase c) Moderate increase d) Heavy increase
  29. 29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Impact to disputes rates and customer assistance calls Client 2010 disputes 2011 disputes 2012 disputes 2013 disputes Northeast utility 0.26% 0.25% 0.24% 0.23% Midwest utility 0.11% 0.15% 0.16% 0.19% FY10 FY11 FY12 FY13 Experian dispute volumes 100% 20% 40% 60% 80% 0%
  30. 30©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Poll Question #2 In what areas is Experian prepared to help me? (check all that apply) a) Financial analysis, benchmarking and trending b) Data reporting – initial and ongoing c) Help insure positive customer experience d) PR / media relations support
  31. 31©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Experian support Your partner throughout the process Experian recognizes the importance of the energy and telecommunication industries SME dedicated resources: Analysts, data specialists, IT support, client services, and sales and marketing Research Internal case studies PERC supporter Resources Data reporting guidebook NCAC – Dispute support Pre-reporting analysis Support IT support for file conversion, secure data transfer, and data quality
  32. 32©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Brand enrichment RentBureau® press coverage experience It’s clearly a good thing for credit scores to contain more thorough and accurate information that truly reflects an individual’s willingness to pay their bills, and for that reason other credit reporting agencies should follow Experian’s lead. -Inching Forward on Credit Scores, The Huffington Post “ ”
  33. 33©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Benefits of reporting Improve your bottom line while helping consumers Increase cash flow Improve collections Enhance customer experience Assist consumers
  34. 34©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. For additional information, please contact: Alpa.Jain@experian.com Hear the latest from Vision 2014 in the Daily Roundup: www.experian.com/vision/blog @ExperianVision | #vision2014 Follow us on Twitter
  35. 35©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Visit the Experian Expert Bar to learn more about the topics and products covered in this presentation.

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