Pre-delinquency: reducing bad debt before people miss a single payment

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Fraudscreen's pre-delinquency webcast, looking at …

Fraudscreen's pre-delinquency webcast, looking at
strategies and tactics for reducing bad debt before people miss a single payment. Aimed and collections and risk specialists. Pitched at a practitioner / expert level.

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  • Developed pre-delinquency strategy and prepare a process note considering how these will be more productionised as enhanced score cards are deployed in a production environment
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  • Some good ideas about how marketers can work with collections teams to improve levels of re-payment and reduce losses through bad debt.
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  • 1. WEBCAST The Life-cycle of a Debtor: Pre-Delinquency: Strategies and tactics for reducing bad debt before people miss a single payment
  • 2. © 2009. Copyright Fraudscreen Ltd. The three stages of debt... Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 2
  • 3. © 2009. Copyright Fraudscreen Ltd. The three stages of debt... Paper one: Pre-delinquency Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 2
  • 4. © 2009. Copyright Fraudscreen Ltd. The three stages of debt... Paper one: Paper two: Pre-delinquency Collections Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 2
  • 5. © 2009. Copyright Fraudscreen Ltd. The three stages of debt... Paper one: Paper two: Paper three: Pre-delinquency Collections Recoveries Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 2
  • 6. © 2009. Copyright Fraudscreen Ltd. Introducing the speakers Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 3
  • 7. © 2009. Copyright Fraudscreen Ltd. Introducing the speakers John Sharman Sales & Marketing Director, Fraudscreen Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 3
  • 8. © 2009. Copyright Fraudscreen Ltd. Introducing the speakers John Sharman Peter Taylor Sales & Marketing Credit & Collections Director, Fraudscreen Director, Fraudscreen Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 3
  • 9. © 2009. Copyright Fraudscreen Ltd. Introducing the speakers John Sharman Peter Taylor Helen McNab Sales & Marketing Credit & Collections Director Director, Fraudscreen Director, Fraudscreen ScorePlus Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 3
  • 10. © 2009. Copyright Fraudscreen Ltd. Agenda FRAMEWORK PRE-DELINQUENCY COLLECTIONS RECOVERIES Objectives Helen Data & Analytics Helen Strategy Design Helen Operational Peter Design Strategy Delivery Strategy Peter Evaluation Budget Definition Peter Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 4
  • 11. © 2009. Copyright Fraudscreen Ltd. Agenda FRAMEWORK PRE-DELINQUENCY COLLECTIONS RECOVERIES Objectives Helen Data & Analytics Helen Strategy Design Helen Operational Peter Design Strategy Delivery Strategy Peter Evaluation Budget Definition Peter Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 4
  • 12. © 2009. Copyright Fraudscreen Ltd. Programme framework See: Part One, p.6 Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 5
  • 13. © 2009. Copyright Fraudscreen Ltd. Programme framework FRAMEWORK Objectives Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, p.6 Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 5
  • 14. © 2009. Copyright Fraudscreen Ltd. Programme framework FRAMEWORK Objectives Objectives Data & Analytics Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, p.6 Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 6
  • 15. © 2009. Copyright Fraudscreen Ltd. Programme framework FRAMEWORK Objectives Objectives Data & Analytics Data & Analytics Strategy Design Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, p.6 Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 7
  • 16. © 2009. Copyright Fraudscreen Ltd. Programme framework FRAMEWORK Objectives Objectives Data & Analytics Data & Analytics Strategy Design Design Operational Design Strategy Delivery Delivery Strategy Evaluation Budget Definition See: Part One, p.6 Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 8
  • 17. © 2009. Copyright Fraudscreen Ltd. Programme framework FRAMEWORK Objectives Objectives Data & Analytics Data & Analytics Strategy Design Evaluation Design Operational Design Strategy Delivery Delivery Strategy Evaluation Budget Definition See: Part One, p.6 Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency 9
  • 18. © 2009. Copyright Fraudscreen Ltd. Programme framework FRAMEWORK Objectives Objectives Data & Analytics Data & Analytics Strategy Design Evaluation Design Operational Design Strategy Delivery Delivery Strategy Evaluation Budget Definition Budget See: Part One, p.6 Live web seminar: The Life-cycle of a Debtor 10 Webcast: pre-delinquency
  • 19. © 2009. Copyright Fraudscreen Ltd. Agenda FRAMEWORK PRE-DELINQUENCY COLLECTIONS RECOVERIES Objectives Data & Analytics Helen Strategy Design Operational Peter Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 11 Webcast: pre-delinquency
  • 20. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Tell me more about data & analytics FRAMEWORK Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 12 Webcast: pre-delinquency
  • 21. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Tell me more about data & analytics FRAMEWORK Objectives How can companies be sure that they are not wasting money on pre-delinquency Data & Analytics actions with ‘false positives’? Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 12 Webcast: pre-delinquency
  • 22. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 13 Webcast: pre-delinquency
  • 23. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK • Key issue: hard to identify, sufficiently well Objectives Making contact at the right time Avoiding un-necessary customer irritation Data & Analytics Avoiding wasted expense Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 13 Webcast: pre-delinquency
  • 24. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK • Key issue: hard to identify, sufficiently well Objectives Making contact at the right time Avoiding un-necessary customer irritation Data & Analytics Avoiding wasted expense Strategy Design Behavior Score: Chance of missing a Operational Design payment 65% Strategy Delivery 50% 45% Strategy Evaluation 36% 30% 23% Budget Definition 17% - - Live web seminar: The Life-cycle of a Debtor 13 Webcast: pre-delinquency
  • 25. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK • Key issue: hard to identify, sufficiently well Objectives Making contact at the right time Avoiding un-necessary customer irritation Data & Analytics Avoiding wasted expense Strategy Design Behavior Score: Chance of missing a Operational Design payment 65% Strategy Delivery 50% 45% Strategy Evaluation 36% 30% 23% Budget Definition 17% - - Live web seminar: The Life-cycle of a Debtor 13 Webcast: pre-delinquency
  • 26. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, p.8 Live web seminar: The Life-cycle of a Debtor 14 Webcast: pre-delinquency
  • 27. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK Objectives • Possible solutions: better discrimination Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, p.8 Live web seminar: The Life-cycle of a Debtor 14 Webcast: pre-delinquency
  • 28. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK Objectives • Possible solutions: better discrimination Strategic: bespoke models Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, p.8 Live web seminar: The Life-cycle of a Debtor 14 Webcast: pre-delinquency
  • 29. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK Objectives • Possible solutions: better discrimination Strategic: bespoke models Data & Analytics Tactical: integrating external data into existing models Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, p.8 Live web seminar: The Life-cycle of a Debtor 14 Webcast: pre-delinquency
  • 30. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Avoiding false positives FRAMEWORK Objectives • Possible solutions: better discrimination Strategic: bespoke models Data & Analytics Tactical: integrating external data into existing models Strategy Design Behaviour score External index risk percentile Chance of 1 - 20 21 - 40 41 - 60 61 - 80 81 - 100 missed payment Highest 20% Lowest 20% Operational Design 65% 73% 59% 63% 60% 56% 50% 56% 50% 50% 45% 39% Strategy Delivery 45% 51% 41% 40% 34% 34% 36% 46% 38% 31% 30% 28% Strategy Evaluation 30% 42% 30% 30% 28% 27% 23% 33% 26% 18% 17% 17% 17% 26% 14% 14% 14% 14% Budget Definition … … … … … … … … … … … … See: Part One, p.8 Live web seminar: The Life-cycle of a Debtor 14 Webcast: pre-delinquency
  • 31. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Tell me more about data & analytics FRAMEWORK Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 15 Webcast: pre-delinquency
  • 32. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Tell me more about data & analytics FRAMEWORK Objectives How do you design a scorecard that can deal with the short time horizons Data & Analytics needed in pre-delinquency? Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 15 Webcast: pre-delinquency
  • 33. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 34. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Key issue: traditional behaviour scores focus on account Objectives management or collection prospects do not ‘hit the mark’ for pre-delinquency purposes Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 35. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Key issue: traditional behaviour scores focus on account Objectives management or collection prospects do not ‘hit the mark’ for pre-delinquency purposes Data & Analytics Strategy Design Operational Design Strategy Delivery • Account management scorecard example: Strategy Evaluation current and active at observation Budget Definition 18 month outcome period Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 36. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Key issue: traditional behaviour scores focus on account Objectives management or collection prospects do not ‘hit the mark’ for pre-delinquency purposes Data & Analytics Strategy Design Operational Design Strategy Delivery • Account management scorecard example: Strategy Evaluation current and active at observation Budget Definition 18 month outcome period Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 37. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Key issue: traditional behaviour scores focus on account Objectives management or collection prospects do not ‘hit the mark’ for pre-delinquency purposes Data & Analytics Strategy Design Operational Design Strategy Delivery • Account management scorecard example: Strategy Evaluation current and active at observation Budget Definition 18 month outcome period Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 38. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Key issue: traditional behaviour scores focus on account Objectives management or collection prospects do not ‘hit the mark’ for pre-delinquency purposes Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 39. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Key issue: traditional behaviour scores focus on account Objectives management or collection prospects do not ‘hit the mark’ for pre-delinquency purposes Data & Analytics Strategy Design Operational Design Strategy Delivery • Entry to collections example: Strategy Evaluation one payment missed at observation Budget Definition 6-12 month outcome period Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 40. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Key issue: traditional behaviour scores focus on account Objectives management or collection prospects do not ‘hit the mark’ for pre-delinquency purposes Data & Analytics Strategy Design Operational Design Strategy Delivery • Entry to collections example: Strategy Evaluation one payment missed at observation Budget Definition 6-12 month outcome period Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 41. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Key issue: traditional behaviour scores focus on account Objectives management or collection prospects do not ‘hit the mark’ for pre-delinquency purposes Data & Analytics Strategy Design Operational Design Strategy Delivery • Entry to collections example: Strategy Evaluation one payment missed at observation Budget Definition 6-12 month outcome period Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 42. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 43. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Possible solutions: bespoke models Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 44. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Possible solutions: bespoke models Objectives dimensions reflect ‘use’: - development sample ‘prospects’ Data & Analytics - outcome periods Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 45. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Dealing with short time horizons FRAMEWORK • Possible solutions: bespoke models Objectives dimensions reflect ‘use’: - development sample ‘prospects’ Data & Analytics - outcome periods Strategy Design Operational Design Strategy Delivery Strategy Evaluation • Pre-delinquency scorecard example: Current and active, but high risk at observation Budget Definition 3 month outcome period Live web seminar: The Life-cycle of a Debtor Webcast: pre-delinquency
  • 46. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Tell me more about operational design FRAMEWORK Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 19 Webcast: pre-delinquency
  • 47. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Tell me more about operational design FRAMEWORK Objectives When it comes to operational design for pre-delinquency, what key action Data & Analytics could people take immediately? Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition Live web seminar: The Life-cycle of a Debtor 19 Webcast: pre-delinquency
  • 48. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Ask your team... FRAMEWORK Objectives Data & Analytics Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, pp.13-14 Live web seminar: The Life-cycle of a Debtor 20 Webcast: pre-delinquency
  • 49. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Ask your team... FRAMEWORK • Put the problem to an inter-disciplinary team Objectives customer services staff collections staff Data & Analytics marketers Strategy Design Operational Design Strategy Delivery Strategy Evaluation Budget Definition See: Part One, pp.13-14 Live web seminar: The Life-cycle of a Debtor 20 Webcast: pre-delinquency
  • 50. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Ask your team... FRAMEWORK • Put the problem to an inter-disciplinary team Objectives customer services staff collections staff Data & Analytics marketers • What customer triggers? Strategy Design cancelled direct debits reducing levels of payment? Operational Design returned cheques? Strategy Delivery Strategy Evaluation Budget Definition See: Part One, pp.13-14 Live web seminar: The Life-cycle of a Debtor 20 Webcast: pre-delinquency
  • 51. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Ask your team... FRAMEWORK • Put the problem to an inter-disciplinary team Objectives customer services staff collections staff Data & Analytics marketers • What customer triggers? Strategy Design cancelled direct debits reducing levels of payment? Operational Design returned cheques? • What should we say to the customers we identify? Strategy Delivery what marketing vision? how to avoid annoying the good payers whilst having a worthwhile Strategy Evaluation conversation with the bad payers Budget Definition See: Part One, pp.13-14 Live web seminar: The Life-cycle of a Debtor 20 Webcast: pre-delinquency
  • 52. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Ask your team... FRAMEWORK • Put the problem to an inter-disciplinary team Objectives customer services staff collections staff Data & Analytics marketers • What customer triggers? Strategy Design cancelled direct debits reducing levels of payment? Operational Design returned cheques? • What should we say to the customers we identify? Strategy Delivery what marketing vision? how to avoid annoying the good payers whilst having a worthwhile Strategy Evaluation conversation with the bad payers • How important is the pre-delinquency opportunity? Budget Definition See: Part One, pp.13-14 Live web seminar: The Life-cycle of a Debtor 20 Webcast: pre-delinquency
  • 53. © 2009. Copyright Fraudscreen Ltd. PRE-DELINQUENCY Ask your team... FRAMEWORK • Put the problem to an inter-disciplinary team Objectives customer services staff collections staff Data & Analytics marketers • What customer triggers? Strategy Design cancelled direct debits reducing levels of payment? Operational Design returned cheques? • What should we say to the customers we identify? Strategy Delivery what marketing vision? how to avoid annoying the good payers whilst having a worthwhile Strategy Evaluation conversation with the bad payers • How important is the pre-delinquency opportunity? Budget Definition • Is there an opportunity for a pilot scheme? See: Part One, pp.13-14 Live web seminar: The Life-cycle of a Debtor 20 Webcast: pre-delinquency
  • 54. © 2009. Copyright Fraudscreen Ltd. Find out more… www.fraudscreen.co.uk/lifecycle-part-one Paper one: Pre-delinquency Paper two: Collections Paper three: Recoveries Live web seminar: The Life-cycle of a Debtor 21 Webcast: pre-delinquency