The Science and Art of
                      Profitable Consumer Portfolios
                                       CFSA 20...
Why am I here?

  When someone comes to your store or website it
   is the end of one process (acquisition) and the
      ...
A Growing Opportunity
  Growing opportunity for Alternative Financial Service Centers:

  A growing population1:

        ...
A Growing Opportunity
  Growing opportunity for Alternative Financial Service Centers:

  A reduced supply:

  Banks are a...
Sources of Credit
                                                                          Thick File,              Thick...
A Growing Risk

                                       •   Median household income has
                                   ...
A Growing Risk




Source: Bureau of Labor Statistics                     Partial Source: American Bankruptcy Institute


...
How can I maximize the opportunity?
•     Understand why the consumer is there and what has lead them to you

•     Your m...
Industry Drivers
Top 3 reasons underbanked households use payday loans

•     43.2% - easier to get a payday loan than to ...
The unknowns
•     Beyond the Primary Request what else could you do and could you do this
      better than their provide...
Knowing the unknowns
    •      Unknowns represent risk as well as opportunity
    •      If you know what is unknown to y...
Using data
Leveraging your data assets:
• Capture
• Collate
• Protect
• Mine
• Supplement
• Deploy

•     There is no unif...
A Diverse Geographical Market
                                     Geographical Loss Rates




Confidential and Proprietar...
Using data
The realities of leveraging your data assets:

•     You will incur expense by using internal or external data
...
Theory vs. Practice
•     Have an expert analyze your
       • Population (store DNA)
       • Marketing
       • Process
...
What to look at
•     Use your own IP & data and the best external IP & data

•     Deploy it on the best enterprise wide ...
Methodology
•     Is a continuous process



                                                 Evaluate




               ...
Credit Solutions Footprint

  •     Near-prime credit performance records on over 10 million unique consumers
  •     More...
Colin Reid

                  CL Verify, LLC
  3030 N Rocky Point Dr, Ste 670, Tampa FL 33611

                           ...
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The Science And Art Of Profitable Underserved Consumer Portfolios

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Presentation from CFSA, March 2010

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The Science And Art Of Profitable Underserved Consumer Portfolios

  1. 1. The Science and Art of Profitable Consumer Portfolios CFSA 2010 Annual Conference Confidential and Proprietary Confidential and Proprietary Confidential and Proprietary © 2010 CL Verify Credit Solutions™ © 2010 CL Verify Credit Solutions™ © 2010 CL Verify Credit Solutions™
  2. 2. Why am I here? When someone comes to your store or website it is the end of one process (acquisition) and the start of another. If you’ve already invested the time, energy and money attracting that consumer shouldn’t you then maximize your opportunity? Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  3. 3. A Growing Opportunity Growing opportunity for Alternative Financial Service Centers: A growing population1: One UNDERSERVED baby every 7 seconds 3 million new UNDERSERVED consumers every year One UNDERSERVED foreign migrant every 27 seconds 1 Source: Washington Credit Union League and Affiliates Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  4. 4. A Growing Opportunity Growing opportunity for Alternative Financial Service Centers: A reduced supply: Banks are abandoning this audience • 5% of all bank loans are 3 months past due, the highest since records began1 • 140 banks failed in 2009, 702 are currently at extreme risk1 • Banks registered biggest decline in total loans outstanding since 19421 • Banks are closing large numbers of retail locations in attempts to reduce overhead2 1 Source: FDIC 2 Source: Wall Street Journal 3-3-10 Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  5. 5. Sources of Credit Thick File, Thick File, No File Thin File Low FICO High FICO < 3 tradelines Definition No record on bureau Mainly inquiries FICO < 680 FICO > 680 Credit Options: 2nd Tier Traditional Top Tier Traditional SHORT TERM LENDERS Financial Institutions Financial Institutions Pre-Crisis Credit Options: Top Tier Traditional Post-Crisis and SHORT TERM LENDERS Financial Institutions Card Act Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  6. 6. A Growing Risk • Median household income has reached lowest amount in over a decade • Economic trends have pushed more and more Americans into economic distress: – Declining housing market – Unemployment rate of over 10% – Job loss – Mortgage troubles Source: Census Bureau Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  7. 7. A Growing Risk Source: Bureau of Labor Statistics Partial Source: American Bankruptcy Institute • Unemployment rate has consistently increased • January 2010 saw first decrease in rate since early 2008 • The #1 reason for bankruptcy filings from 2007 – 2009 is job loss – At the end of 2009, bankruptcy filings were up 34% over 2008 Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  8. 8. How can I maximize the opportunity? • Understand why the consumer is there and what has lead them to you • Your most important responsibility is to service and fulfill their Primary Request efficiently and effectively yet profitability • Two examples of a Primary Request: • Short term unsecured loan • Check Cashing Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  9. 9. Industry Drivers Top 3 reasons underbanked households use payday loans • 43.2% - easier to get a payday loan than to qualify for a bank loan • 25.9% - the payday loan place is more convenient • 16.0% - don’t qualify for a bank loan Top 3 reasons underbanked households use check cashing services: • 55.6% - the place is more convenient • 17.6% - to get money faster • 10.6% - don’t have a bank account Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  10. 10. The unknowns • Beyond the Primary Request what else could you do and could you do this better than their provider? • Is there an upsell or cross sell opportunity? • Have they been elsewhere? • What do they use elsewhere? • What was their performance elsewhere? • Do they have an open line of credit elsewhere? • What is their product behavior elsewhere and so what is your opportunity? • This question is the same for both new and returning customer • it is not just “have I seen you before and what happened when I did?” • it is also “what has happened since I last saw you?” Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  11. 11. Knowing the unknowns • Unknowns represent risk as well as opportunity • If you know what is unknown to your competitor you can out perform them and build broader, deeper and more profitable customer relationships • To know the unknowns you need to use data • Your data is one of your biggest assets, perhaps even a fixed asset • Buildings depreciate in 37½ years • IT depreciates in 3 years • Data depreciates in just 24 months1 • In UK if a B2C database has not been fully refreshed in 36 months it is not considered to have any value for list rental2 • Use your data or lose the value of one of your fixed assets 1 Source: Direct Marketing Association 2 Source: Audit Bureau of Circulation Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  12. 12. Using data Leveraging your data assets: • Capture • Collate • Protect • Mine • Supplement • Deploy • There is no uniform pull or solution • The US consists of multiple diverse markets • What works in one place is not guaranteed to work in another Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  13. 13. A Diverse Geographical Market Geographical Loss Rates Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  14. 14. Using data The realities of leveraging your data assets: • You will incur expense by using internal or external data • You may turn down more consumers • You will be more efficient • Better decisions • Consistent decisions • Faster decisions • You will reduce storefront and operating expense • You will deliver a better customer experience leading to higher retention and repeat rates • You will make more money Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  15. 15. Theory vs. Practice • Have an expert analyze your • Population (store DNA) • Marketing • Process • Results • All are linked it is not just about credit risk and underwriting rules • An experienced risk analyst has the ability to do this and create the opportunity but use one that has seen it , done and deployed it in this market. • Your GM / COO / CMO must execute and operationalize the opportunity Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  16. 16. What to look at • Use your own IP & data and the best external IP & data • Deploy it on the best enterprise wide system • Third parties like CL Verify can help you create, build and deploy it but you must operationalize and adopt it • There is a hard and soft investment for you to make • Does it work? • CL Verify’s check cashing solution when deployed gave a nationwide operator a $15:1 ROI and was paid off in two weeks • CL Verify’s Credit Risk tools gave a nationwide storefront lender a $14:1 ROI and was paid off within 6 weeks of implementation Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  17. 17. Methodology • Is a continuous process Evaluate Measure ≤6 month cycle Test Deploy Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  18. 18. Credit Solutions Footprint • Near-prime credit performance records on over 10 million unique consumers • More than 60 million inquiry and performance records in aggregate, representing more than $21B in loan decisions • Each month the file grows by: – 1.5 - 2 million discrete inquiries – 250-300,000 new SSNs – 500-600,000 new loan records • $8 Billion in near-prime loans in 2009 • See over 70% of the online and roughly 30% of the retail storefront near- prime loan applications • Established new credit trade lines on over 3.5 million consumers Confidential and Proprietary © 2010 CL Verify Credit Solutions™
  19. 19. Colin Reid CL Verify, LLC 3030 N Rocky Point Dr, Ste 670, Tampa FL 33611 T: 1-813-466-1704 E: creid@clverify.com Confidential and Proprietary © 2010 CL Verify Credit Solutions™

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