©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or re...
2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Estimated annual card-to-
card consumer ...
3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
 State of the economy
 Credit card mar...
4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Unemployment rates forecast to come down...
5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Bankcard late stage delinquency rates
0....
6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Personal bankruptcies peaked in 2010 and...
7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Outstanding debt trends
Real estate
Home...
8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Outstanding debt trends
Non-real estate
...
9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Debt-to-Income InsightSM trends
11.5%
12...
10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Distribution of bankcard loan originati...
11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
 U.S. Total Credit Card Debt in
Novemb...
12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Balance transfer
Two sides of the coin
...
13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Estimated annual card-to-card consumer ...
14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
The consumer:
 Manage cash flows
 Opp...
15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Typical balance transfer offer
 Zero o...
16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Intuitively
 Consumers with revolving ...
17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Balance Transfer IndexSM propensity mod...
18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Balance transfer activity can be identi...
19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Objective:
 Gain an overview of the ba...
20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
20
Balance Transfer IndexSM
On bank per...
21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Balance Transfer IndexSM
Sample bank co...
22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
0%
5%
10%
15%
20%
25%
30%
35%
300 -
350...
23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Balance Transfer IndexSM
On bank perfor...
24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Balance Transfer IndexSM
On bank perfor...
25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Balance Transfer IndexSM
On bank perfor...
26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Balance Transfer IndexSM
On bank perfor...
27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Estimated annual card-to-card consumer ...
28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
 Propensity modeling can help identify...
29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
For additional information, please cont...
30©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Visit the Experian Expert Bar to learn ...
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Vision 2014: Capturing and Protecting Balances

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Gain an overview of the balance transfer market in the United States and compare where your business stands in respect to the industry. Experian® developed a powerful tool that uses trended data and custom attributes to identify consumers likely to transfer balances. In this session, we will discuss the identification and segmentation of these consumers, as well as the overlay of other data and products that will aid in targeting your most profitable current and future consumer relationships.

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Vision 2014: Capturing and Protecting Balances

  1. 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. Capturing and protecting balances Uzma Aziz Experian Brodie Oldham Experian #vision2014
  2. 2. 2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Estimated annual card-to- card consumer balance transfer activity: $40B
  3. 3. 3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  State of the economy  Credit card market trends  Balance transfer – risk and opportunity  Balance transfer drivers  Segmentation and predictive modeling  Deep dive analysis  Recommendations and summary  Q&A Agenda and objectives
  4. 4. 4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Unemployment rates forecast to come down Source: Bureau of Labor Statistics January 2014, Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, December 2013 0% 2% 4% 6% 8% 10% 12% 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Unemployment rate FOMC forecast Feb 2014: 6.7% Oct 2009 10.0% Apr 2000 3.8% Dec 1982 10.8%
  5. 5. 5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Bankcard late stage delinquency rates 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 Percent balances 60-89 DPD 90-180 DPD 4Q13 HighLow 0.70%0.43%
  6. 6. 6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Personal bankruptcies peaked in 2010 and declined 12% in 2013 State of the economy – declining bankruptcies 700 900 1,100 1,300 1,500 1,700 2007 2008 2009 2010 2011 2012 2013 Personal bankruptcy filings on a decline 2010: 1,538,033 2013: 1,072,807
  7. 7. 7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Outstanding debt trends Real estate Home Equity Outstanding Debt ($BN) $0 $200 $400 $600 $800 2007 2010 2013 HE loan HELOC Mortgage Outstanding Debt ($BN) $0 $2,000 $4,000 $6,000 $8,000 $10,000 2007 2010 2013 Mortgage
  8. 8. 8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Outstanding debt trends Non-real estate $0 $200 $400 $600 $800 $1,000 2007 2010 2013 Non-real estate outstanding debt ($B) Auto Bank Card Student Other Non-RE
  9. 9. 9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Debt-to-Income InsightSM trends 11.5% 12.0% 12.5% 13.0% 13.5% 14.0% 14.5% 15.0% 15.5% 2007 2008 2009 2010 2011 2012 2013
  10. 10. 10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Distribution of bankcard loan originations By VantageScore® band Super Prime Prime Near Prime Subprime Deep Subprime 0% 10% 20% 30% 40% 50% 2007 2008 2009 2010 2011 2012 2013 New Card Origination was 20% higher in 2013 year over year & over 90% of these were in the Super prime to Near prime segments $- $30 $60 $90 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 $BNs New card originations
  11. 11. 11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  U.S. Total Credit Card Debt in November 2013 – $856.9 billion  U.S. households that have a credit card balance – 46.7%  Americans who carry card debt from month to month – 39%  Average debt per credit card that carries a balance – $8,220 State of the market – credit card debt Source: Federal Reserve
  12. 12. 12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Balance transfer Two sides of the coin Revolving balances are down which means fewer dollars open for transfers The good news is outstanding debt is concentrated in the prime segment as lenders have written off most of the bad debt According to Experian research an estimated $35-$40 billion dollars were transferred between credit cards in 2012 The bad news is if you’re not the recipient of these, you’re on the losing end…
  13. 13. 13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Estimated annual card-to-card consumer balance transfer: $35-$40 B Balance transfer The risk and the opportunity Percentage of customer balance transfer activity < 1% 59%21% 20% Balance transfer destination Bank XYZ Other banksBank XYZ Other banks Balance transfer source Bank XYZOther banksOther banks Bank XYZ 59% Key opportunity areas On average, nearly 60% of a bank’s card customer BT $ activity is undetectable “off bank” activity
  14. 14. 14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. The consumer:  Manage cash flows  Opportunity to pay off debt  Improve credit The lender:  Gain new customers  Grow portfolio balance Balance transfer The driver
  15. 15. 15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Typical balance transfer offer  Zero or near zero percent APR for an introductory period  Low APR may or may not be applicable to new purchases  Extended introductory period with balance transfer fee  No balance transfer fee with a shorter introductory period Lenders are definitely catering to the customer need…
  16. 16. 16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Intuitively  Consumers with revolving balance  Time it right / strike when the iron’s hot – post holiday season?  Good credit risk Let’s find out  Are you getting the expected response rates on your Balance Transfer offers?  Would you like to improve these? Balance transfer Who are lenders targeting?
  17. 17. 17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Balance Transfer IndexSM propensity model key components Balance Transfer IndexSM Model component overview Model Target Experian tradeline level data and variables Historical consumer balance transfer activity  Model predicts likelihood that a consumer will initiate a balance transfer within the subsequent six months  Score output from 100-990: Higher score = higher likelihood of balance transfer  Generic trended and custom attributes utilized  Key predictors: balance transfer history, historical balance transfer amounts, cards carried and utilized, payments and spend  Experian developed logic identifies historical card to card balance transfer activity using Experian tradeline level data
  18. 18. 18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Balance transfer activity can be identified by pairing spend and payment data  Defining balance transfers Balance Transfer IndexSM Model component overview Key criteria  Logic searches for pairing of spend and payment activity between trade lines ► Identifies one-to-one and many-to-one money movements  Material change in spend, payment and/or balance activity required ► Additional rules regarding balance behavior following the balance transfer Experian data leveraged  Trades linked month to month to capture variations in tradeline attributes  Both reported and inferred tradeline payment and spend data used  Minimum of six months of raw trade data required Tradeline 1 Tradeline 2 Payment Spend Balance Payment Spend Balance Month 1 $ 6,000 $ 1,000 Month 2 $ 100 $ 200 $ 6,100 $ 100 $ 300 $ 1,200 Month 3 $ 6,100 $ 200 $ 200 $ 2,200 $ 6,200 $ 5,200 Month 4 $ 100 $ 1,000 $ 1,100 $ 200 $ 1,000 $ 6,000 Month 5 $ 100 $ 800 $ 1,800 $ 1,000 $ 500 $ 5,500 Month 6 $ 100 $ 500 $ 2,200 $ 100 $ 300 $ 5,700 Money move tagged as balance transfer Payment and spend information enable visibility to balance transfer  Tradeline 1 payment of $6,100  Tradeline 2 total spend of $6,200
  19. 19. 19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Objective:  Gain an overview of the balance transfer market in the U.S.  Discuss the identification and segmentation of these consumers  Overlay of other data and products that will aide in targeting your most profitable current / future consumer relationships Balance Transfer IndexSM – analysis design December 2012 Observation period June 2013 6-month performance window Sample bank and overall industry populations
  20. 20. 20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 20 Balance Transfer IndexSM On bank performance 0% 20% 40% 60% 80% 100% 120% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Balance Transfer Index In the Market Model Base Line 0 10 20 30 40 50 60 Balance Transfer Index In the Market Model KSModel performance Cumulativepercentconsumerresponders Percent of population More likely to balance transfer Less likely to balance transfer
  21. 21. 21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Balance Transfer IndexSM Sample bank consumer performance 600 650 700 750 800 850 900 100 - 150 150 - 200 200 - 250 250 - 300 300 - 350 350 - 400 400 - 450 450 - 500 500 - 550 550 - 600 600 - 650 650 - 700 700 - 750 750 - 800 800 - 850 Balance Transfer IndexSM correlation Avg. VantageScore3.0 Avg. In the Market Model_Bankcard Balance Transfer IndexSM More likely to balance transfer Less likely to balance transfer 0% 5% 10% 15% 20% 100 - 150 150 - 200 200 - 250 250 - 300 300 - 350 350 - 400 400 - 450 450 - 500 500 - 550 550 - 600 600 - 650 650 - 700 700 - 750 750 - 800 800 - 850 Estimated interest rate
  22. 22. 22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 5% 10% 15% 20% 25% 30% 35% 300 - 350 350 - 400 400 - 450 450 - 500 500 - 550 550 - 600 600 - 650 650 - 700 700 - 750 750 - 800 800 - 850 VantageScore® 3.0 Sample Bank VantageScore3.0 Overall VantageScore3.0 VantageScore® 3.0 Sample bank vs. overall VantageScore® 3.0 HighLow
  23. 23. 23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Balance Transfer IndexSM On bank performance (sample bank) – using segmentation to identify balance transfer appetite 0 50 100 150 200 250 300 Deep subprime 300-499 Subprime 500-600 Near Prime 601 -660 Prime 661-780 Super Prime 781 - 850 Average balance transfer score
  24. 24. 24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Balance Transfer IndexSM On bank performance (sample bank) – using segmentation to identify balance transfer appetite Balance Transfer Index < 152 VantageScore3.0 < 660 VantageScore3.0 > 660 ITMM<700 %Consumers 6.2% EIRC 15.29% Avg. Monthly Spend $366 Avg. Income $53K ITMM>700 %Consumers 46.24% EIRC 4.93% Avg. Monthly Spend $800 Avg. Income $60K ITMM<700 %Consumers 33.30% EIRC 3.44% Avg. Monthly Spend $929 Avg. Income $60K ITMM>700 %Consumers 11.79% EIRC 13.59% Avg. Monthly Spend $292 Avg. Income $50K .3% 2.6%1.5%.6% Percent balance transfer activity
  25. 25. 25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Balance Transfer IndexSM On bank performance (sample bank) – using segmentation to identify balance transfer appetite Percent balance transfer activity Balance Transfer Index > 152 VantageScore3.0 < 660 VantageScore3.0 > 660 ITMM<700 %Consumers .01% EIRC 41.58% Avg. Monthly Spend $1382 Avg. Income $85K ITMM>700 %Consumers 2.02% EIRC 14.02% Avg. Monthly Spend $2095 Avg. Income $73K ITMM<700 %Consumers .03% EIRC 25.95% Avg. Monthly Spend $2365 Avg. Income $100K ITMM>700 %Consumers .4% EIRC 27.29% Avg. Monthly Spend $1376 Avg. Income $70K 1.5% 72.1%9.5%12.1%
  26. 26. 26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Balance Transfer IndexSM On bank performance (sample bank) – using segmentation to identify balance transfer appetite Balance Transfer Index < 152 VantageScore3.0 < 660 VantageScore3.0 > 660 ITMM<700 %Consumers 6.21% EIRC 15.29% Avg. Monthly Spend $366 Avg. Income $53K ITMM>700 %Consumers 46.24% EIRC 4.93% Avg. Monthly Spend $800 Avg. Income $60K ITMM<700 %Consumers 33.30% EIRC 3.44% Avg. Monthly Spend $929 Avg. Income $60K ITMM>700 %Consumers 11.79% EIRC 13.59% Avg. Monthly Spend $292 Avg. Income $50K .3% 2.6%1.5%.6% Percent balance transfer activity Percent balance transfer activity Balance Transfer Index > 152 VantageScore3.0 < 660 VantageScore3.0 > 660 ITMM<700 %Consumers .01% EIRC 41.58% Avg. Monthly Spend $1382 Avg. Income $85K ITMM>700 %Consumers 2.02% EIRC 14.02% Avg. Monthly Spend $2095 Avg. Income $73K ITMM<700 %Consumers .03% EIRC 25.95% Avg. Monthly Spend $2365 Avg. Income $100K ITMM>700 %Consumers .4% EIRC 27.29% Avg. Monthly Spend $1376 Avg. Income $70K 1.5% 72.1%9.5%12.1% ~84% of balance transfer activity
  27. 27. 27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Estimated annual card-to-card consumer balance transfer: $35-$40 B Balance transfer The risk and the opportunity Percentage of customer balance transfer activity < 1% 59%21% Balance transfer destination Bank XYZ Other banksBank XYZ Other banks Balance transfer source Bank XYZOther banksOther banks Bank XYZ Key opportunity areas On average, nearly 60% of a bank’s card customer balance transfer $ activity is undetectable “off bank” activity 71%
  28. 28. 28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Propensity modeling can help identify customers with high appetite for balance transfer  Balance Transfer IndexSM combined with behavioral segmentation can identify profitable customers that help ► Grow portfolio balance ► Identify off portfolio transfer activity ► Reduce balance attrition Summary
  29. 29. 29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. For additional information, please contact: Uzma.Aziz@experian.com Brodie.Oldham@experian.com Hear the latest from Vision 2014 in the Daily Roundup: www.experian.com/vision/blog @ExperianVision | #vision2014 Follow us on Twitter
  30. 30. 30©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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