CFSI Keynote Address - June 2012

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Steve Wagner's keynote address at CFSI

Steve Wagner's keynote address at CFSI

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  • Before the recession, consumers felt investment rich, banks were doing everything they could to satisfy demand…Today everything has changed…
  • Point #1:New York Times article: “Unemployment is bad enough; underbanked can be worse”WSJ: “New attempts to woo unbanked consumers”New Market Partners: “The new face of underbanked – your next generation of members?Point #2:Richard Corday from the CFPB “... transparency alone is not enough... it is important that these products (payday and other short-term loans) actually help consumers, rather than harm them.Point #3: From CFSI in 2011:…A survey of financial services providers that cater to the underbanked population found that 87 percent of respondents expect the underbanked market to grow in the next year, and 85 percent expect to expand their offerings to this segment in response to that growth….…The market for underbanked services is anticipated to grow in the next two years, and providers plan to expand their product offerings accordingly….SO IT MUST BE THAT WE KNOW EXACTLY WHO THESE PEOPLE ARE…RIGHT???
  • >>> And when they do get credit, they often pay more for it.
  • A lot of us think age has something to do with underbankedSome of us think whether you have a checking account or not qualifies you…….go through the points…We took 4 different approaches to answer this question…
  • We don’t have perfect data on all of these but I can tell you with certainty some things about them…Point about incomePoint about being ethnically diverseRegarding education: 40% of the no hits we were able to discern education on…and half of them had at least some college, if not a graduate degree!
  • Call out bold statements
  • We need to broaden our view of consumers and to do that effectively, we need to isolate each consumer and broaden our view of them individually…Understanding a consumer’s income mattersUnderstanding their potential banking relationships matterKnowing how they live mattersTwo main gaps in credit file today.Rental dataUtility data
  • Shift in marketing – consumer is doing more and more shopping and evaluating online. And in doing so, they are more empowered than ever before. You’re seeing a shift in marketing in the financial services industry where consumers are opting into being evaluated for marketing offers…even before they actually apply for a loan.Share credit history – consumers need safe and secure vehicles to share their credit data with the people they choose – like landlords, small business owners, etc.And finally, what Experian is finding is that consumers are asking for education about financial services, credit and banking. We receive millions of calls from consumers each year, and we have noticed the tone of the questions we receive changing. Consumers want to understand how their credit report – inquiries, late payments, utilization ratios impact their ability to get financing. So last year, we launched Credit Educator…We took the time to develop a CROA-compliant process……..And what really matters is what the consumers who receive the education do with it. And the early results are in.
  • They take action.On every measurable condition, consumers who receive credit education are taking action.
  • In summary, Our focus has shifted collectively in the United States around financial servicesUnderbanked consumers aren’t always who you think they are, they are often more wired in, capable, educated and engaged than you might expect, and many of them are creditworthy.If we are creative enough and we work hard enough there are ways for you to focus on, evaluate and ultimately empower them that is consistent with all of us doing better in our businesses.Thank you.

Transcript

  • 1. CFSI Keynote addressJune 2012Steve Wagner | Experian©2012 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.
  • 2. Session focus  Reinvigorated focus on the consumer  The underbanked community is important to all of us  What do we need to do?©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 2
  • 3. The consumer is more important today than ever before Pre-recession Today Bank Satisfying demand safety, soundness and profit Pipes wide open Empowered consumer©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 3
  • 4. The industry is buzzing  A consistent theme in the press  A focus of regulators  Recent research projects growth These consumers aren’t always who you think they are©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 4
  • 5. Underbanked market conditions An estimated 64 million consumers have little or no credit history and are unscoreable by most traditional credit These score models underserved consumers don’t always have access to the most cost effective credit products©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 5
  • 6. What population are we talking about?  Age  Banking status  Credit status  Interest level  Stability status  Citizenship status  Income/wealth status©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 6
  • 7. Who are underbanked consumers? Experian no hit analysis – March 2012  Income levels vary  Education levels ► 18% <=$24,999 ► 13% less than high school diploma ► 18% $35,000-$49,999 ► 9% high school diploma ► 23% $50,000-$74,999 ► 12% some college ► 28% >=$75,000 ► 6% bachelor or graduate degree  Ethnicity is diverse  Automobile data ► 27% Hispanic ► 73% no match or have 0 vehicles ► 21% Caucasian ► 11% have 1 vehicle ► 12% African American ► 16% have 2 or more vehicles©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 7
  • 8. Who are underbanked consumers? Demographics of money transfer remitters  Between 18-35 years old  Typically balanced gender – some skews by culture  Majority are single  80% have Internet access International sender – Higher proportion of married and born in other countries  Long-term residency in the U.S. Domestic sender – typically single and U.S. born International cultures – Latino / Hispanics, African Americans,  Africans, Asians, Eastern Europeans Some hold a high school degree  Receiver likely to be better educated than the Sender Sender model income bands $25 – 75k©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 8
  • 9. Who are underbanked consumers? Changing patterns and behaviors of unsecured short-term loan consumers  95% have an open bank account ( DDA)  16% have an open credit card trade  40% earn more than median income of $49,000  35% took out a payday loan to catch up on bills  34% took out a payday loan to pay for an unexpected event  38% identified as generally financially healthy but have fallen on hard times  33% bad credit, can’t get a loan anywhere else  Stable employment history 44% on job for 5+ years  67% recently denied for credit other than short-term loan market©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 9
  • 10. Who are underbanked consumers?©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 10
  • 11. What do we need to do?  Broaden our view of the consumer  Drive insight from data  Empower the consumer©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 11
  • 12. Broaden our view of the consumer©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 12
  • 13. Drive insight from data to provide lenders confidence to underwrite©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 13
  • 14. Empowering consumers While driving business results  Shift in marketing  Share credit history  Understand credit and its impact©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 14
  • 15. Empowering consumers Credit education works! | Consumers take action Educated Control Action group group Average VantageScore® Total number external collections trades Open revolving trades >100% utilization Balance on open revolving bankcards Trades voluntarily closed in last 6 months Number mortgage inquiries Directional, preliminary results©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 15
  • 16. In summary The focus has changed Underbanked consumers are sometimes different than you expect We can evaluate and empower them©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 16
  • 17. ©2012 Experian Information Solutions, Inc. All rights reserved. Experian Public. 17