Keys to extract value from the data analytics life cycleGrant Thornton LLP
Regulatory mandates driving transparency and financial objectives requiring accurate understanding of customer needs have heightened the importance of data analytics to unprecedented levels making it a critical element of doing business.
When it comes to scrutinizing costs, most insurance companies can say “Been there, done that. Got the t-shirt.” Managers are familiar with the refrain from above to trim here and cut there. The typical result is flirtation with the latest management trends like lean, outsourcing and offshoring, and others. However, the results tend to be the same. Budgets reflect last year’s spend plus or minus a couple of percent in the same places.
Keys to extract value from the data analytics life cycleGrant Thornton LLP
Regulatory mandates driving transparency and financial objectives requiring accurate understanding of customer needs have heightened the importance of data analytics to unprecedented levels making it a critical element of doing business.
When it comes to scrutinizing costs, most insurance companies can say “Been there, done that. Got the t-shirt.” Managers are familiar with the refrain from above to trim here and cut there. The typical result is flirtation with the latest management trends like lean, outsourcing and offshoring, and others. However, the results tend to be the same. Budgets reflect last year’s spend plus or minus a couple of percent in the same places.
How Credit Departments Can Build Relationships and Drive GrowthDun & Bradstreet
As Finance organizations increasingly become drivers of growth, Credit departments can take a lead role in data strategy and management. With smart data on customers and prospects, Credit can be a powerful force in contributing to sales and identifying new business opportunities.
Broken links: Why analytics investments have yet to pay off, sponsored by ZS, draws on the survey findings, interviews with senior corporate executives and desk research to explore the current state of sales and marketing analytics.
Beyond the secular forces that we describe in our Future of Insurance series1, more immediate and cyclical issues will be shaping the insurance executive agenda i n 2 016 .2 Commercial insurers (including reinsurers) face tough times ahead with underwriting margins that are being pressured by softening prices and a potentially volatile interest rate environment.
Global megatrends are escalating the war for top talent and reshaping business as we know it. To stay ahead, organizations are innovating at warp speed. The problem is, in most organizations business innovation dramatically outpaces talent innovation. And when your business strategy and talent strategy are out of sync, you can't drive top business performance. By creating talent innovations that accelerate your top business goals and integrating them throughout your entire organization, you will establish talent as a strategic advantage.
Anti-Bribery and Corruption Compliance for Third PartiesDun & Bradstreet
In this white paper, Kelvin Dickenson, Managing Director of D&B Global Compliance Solutions, discusses thoughtful approaches to buidling a scalable, effective and proportionate anti-corruption program for third-party due dilligence.
Enterprises face unprecedented challenges, and finance is at the epicenter. Increasing business risk and volatility are evidenced by accelerating business disruption through
disintermediation, virtualization and technical innovation. As a result, new competitors, changing business models and changing customer expectations have emerged.
Seizing the regulatory opportunity: A Deloitte perspective on how financial i...Deloitte Canada
Financial institutions that look for opportunities in compliance rather than resign themselves to it can position themselves ahead of the competition. The energy they put into understanding the impact of new regulations on their businesses, customers and risks can be used to drive operational changes.
Developing a Preventative and Sustainable P-card ProgramCaseWare IDEA
Andrew Simpson from CaseWare Analytics talks about how educational institutions can implement a continuous monitoring program for their p-cards (purchase card) and the benefits.
SLIDESHARE: www.slideshare.net/CaseWare_Analytics
WEBSITE: www.casewareanalytics.com
BLOG: www.casewareanalytics.com/blog
TWITTER: www.twitter.com/CW_Analytic
Over the past decade, a combination of new providers, technology, and capabilities have made global payroll administration a possibility – at least conceptually. The key stumbling block in this debate is the perceived need, on the one hand, for tailored services that are compliant with local regulations, and on the other hand standardization for cost reasons. So, where does that leave payroll?
Imagine … internal auditors identifying risks + opportunities from data. Internal auditors can + need to grasp this opportunity to transform their role and industry. More >> grantthornton.com/data-analytics
Supervisory Review Readiness post CCAR March 2015 Results- Somanshu JendSomanshu Jend
Supervisory Review Readiness post CCAR March 2015 Results.
A preliminary inspection of the CCAR Stress Test Results released by Federal Reserve Board on March 2015.
Raises some questions that the BHCs management should be asking while reviewing CCAR results.
The new ‘A and B’ of the Finance Function: Analytics and Big Data - -Evolutio...Balaji Venkat Chellam Iyer
Published in 2013, this White Paper discusses how the finance function would evolve with the combined forces of Big Data and Analytics and the levers that could help catalyze the change and has drawn upon the Global Trend Study conducted by Tata Consultancy Services (TCS) on how companies were investing in Big Data and deriving returns from it.
How Credit Departments Can Build Relationships and Drive GrowthDun & Bradstreet
As Finance organizations increasingly become drivers of growth, Credit departments can take a lead role in data strategy and management. With smart data on customers and prospects, Credit can be a powerful force in contributing to sales and identifying new business opportunities.
Broken links: Why analytics investments have yet to pay off, sponsored by ZS, draws on the survey findings, interviews with senior corporate executives and desk research to explore the current state of sales and marketing analytics.
Beyond the secular forces that we describe in our Future of Insurance series1, more immediate and cyclical issues will be shaping the insurance executive agenda i n 2 016 .2 Commercial insurers (including reinsurers) face tough times ahead with underwriting margins that are being pressured by softening prices and a potentially volatile interest rate environment.
Global megatrends are escalating the war for top talent and reshaping business as we know it. To stay ahead, organizations are innovating at warp speed. The problem is, in most organizations business innovation dramatically outpaces talent innovation. And when your business strategy and talent strategy are out of sync, you can't drive top business performance. By creating talent innovations that accelerate your top business goals and integrating them throughout your entire organization, you will establish talent as a strategic advantage.
Anti-Bribery and Corruption Compliance for Third PartiesDun & Bradstreet
In this white paper, Kelvin Dickenson, Managing Director of D&B Global Compliance Solutions, discusses thoughtful approaches to buidling a scalable, effective and proportionate anti-corruption program for third-party due dilligence.
Enterprises face unprecedented challenges, and finance is at the epicenter. Increasing business risk and volatility are evidenced by accelerating business disruption through
disintermediation, virtualization and technical innovation. As a result, new competitors, changing business models and changing customer expectations have emerged.
Seizing the regulatory opportunity: A Deloitte perspective on how financial i...Deloitte Canada
Financial institutions that look for opportunities in compliance rather than resign themselves to it can position themselves ahead of the competition. The energy they put into understanding the impact of new regulations on their businesses, customers and risks can be used to drive operational changes.
Developing a Preventative and Sustainable P-card ProgramCaseWare IDEA
Andrew Simpson from CaseWare Analytics talks about how educational institutions can implement a continuous monitoring program for their p-cards (purchase card) and the benefits.
SLIDESHARE: www.slideshare.net/CaseWare_Analytics
WEBSITE: www.casewareanalytics.com
BLOG: www.casewareanalytics.com/blog
TWITTER: www.twitter.com/CW_Analytic
Over the past decade, a combination of new providers, technology, and capabilities have made global payroll administration a possibility – at least conceptually. The key stumbling block in this debate is the perceived need, on the one hand, for tailored services that are compliant with local regulations, and on the other hand standardization for cost reasons. So, where does that leave payroll?
Imagine … internal auditors identifying risks + opportunities from data. Internal auditors can + need to grasp this opportunity to transform their role and industry. More >> grantthornton.com/data-analytics
Supervisory Review Readiness post CCAR March 2015 Results- Somanshu JendSomanshu Jend
Supervisory Review Readiness post CCAR March 2015 Results.
A preliminary inspection of the CCAR Stress Test Results released by Federal Reserve Board on March 2015.
Raises some questions that the BHCs management should be asking while reviewing CCAR results.
The new ‘A and B’ of the Finance Function: Analytics and Big Data - -Evolutio...Balaji Venkat Chellam Iyer
Published in 2013, this White Paper discusses how the finance function would evolve with the combined forces of Big Data and Analytics and the levers that could help catalyze the change and has drawn upon the Global Trend Study conducted by Tata Consultancy Services (TCS) on how companies were investing in Big Data and deriving returns from it.
Stewarding Data : Why Financial Services Firms Need a Chief Data OfficierCapgemini
The C-suite could soon start to feel a little crowded, with Chief Digital Officers, Chief Innovation Officers, Chief Risk Officers
and Chief Data Officers joining the more established functional leaders. To avoid C-suite proliferation, companies need to
decide whether to elevate a new functional role to “chief” based on the strategic importance of the issue for the organization and its sector. For example, in many organizations, marketing will be so essential to performance that few would deny the need for a CMO. In financial services, data has become so mission-critical that the role of Chief Data Officer is simply essential.
Stepping into the cockpit- Redefining finance's role in the digital agePwC
Insurance finance functions have been refining their
operating models to better align with business partner
demands, as well as adopting leading practices on how
to best utilize people, process and technology. The
challenge is that the business landscape is continuously
shifting and the pace of change is rapidly accelerating.
PwC's - Redefining finance's role in the digital-ageTodd DeStefano
Finance functions within insurance companies are evolving and assisting supported businesses with actionable data and developing "what if" situations for mid course corrections to navigate the business through turbulant economic and competitive scenarios.
Innovation and Transformation in Financial ServicesCertus Solutions
Historically, financial services firms have struggled to target and tailor their product offerings to the customer journey. Often only traditional demographic information – gender, age, occupation – is collected with no real insight as to what life stage a customer is in and how this could influence their financial activity.
To compete in a consumer-empowered economy, it is increasingly clear that financial services firms must leverage their information assets to gain a comprehensive understanding of markets, customers, channels, products, regulations, competitors, suppliers, employees and more.
We are very excited to share our first edition of our OpenInsight. This is the first of a regular series of updates which will include insights covering extending the value of data within your business, tips and tricks on the use of the RAPid platform and generic articles on business analytics.
We are very excited to share our first edition of our OpenInsight. This is the first of a regular series of updates which will include insights covering extending the value of data within your business, tips and tricks on the use of the RAPid platform and generic articles on business analytics.
The third edition of the BoardMatters Quarterly explores how big data and analytics emerge as game-changers for business. This edition also explores how we can tackle corruption, boosting internal control mechanisms.
In the business of money, there can be no errors. That goes doubly so for keeping your customers. With PNA's finance data analytics, discover the hidden patterns that customers give you, and learn the language needed to retain them.
Similar to NPT July_August 2016 Broader Use of Alt Data 1 page (20)
NPT July_August 2016 Broader Use of Alt Data 1 page
1. 24 Non-Prime Times July/August 2016 nafassociation.com
Could a Potential Economic
Downturn Lead to Broader Use
of Alternative Data?
Alternative Data
O
rigination volumes in auto financ-
ing have been high and steadily
increasing in recent years. New
market entrants and more generous credit
terms have created an intensely competitive
environment.Nowwithconcernsofapoten-
tial economic downturn ahead, the smarter
andmoreexperiencedautofinancingsources
are building a stronger foundation for their
credit and loss management strategies.
One of the strategies often evaluated is
the incorporation of alternative data in deci-
sioning processes. The topic lands on most
industry conference agendas, including the
recent National Auto Finance Association
(NAF) event in Plano. While there are many
risk management and financial incentives
encouragingfinancialserviceproviderstoana-
lyze alternative data, a number of obstacles
should be considered before a provider can
determine if alternative data adds value and
more importantly, where to source it.
Over the next several issues of Non-Prime
Times, we’ll explore the obstacles to using
alternativedatainriskand/orportfolio man-
agement. Let’s start with one of the most
common obstacles.
“I am not sure how to effectively test
and evaluate alternative data.”
Foryears,autofinancingsourceshaveused
traditional credit reporting data and scores.
Over the years, financial service providers
began implementing custom scoring with
traditionalbureauscoresusedasonecompo-
nent of the model. The scores also serve as a
benchmarkingtoolforportfoliocomparisons
for investors. These methods are tried-and-
true underwriting disciplines they built their
businesses on.
Today,however,thesemethodsarecoming
into question as not being robust and com-
prehensive enough to include all potential
consumers looking to buy and finance new
and used vehicles. Talk of alternative data (not
to be confused with alternative lending or
marketplace lending) or non-traditional data
canbeheardallaround,butmostnon-prime
auto financing sources struggle to accurately
assess the sheer amount of data available to
them. By looking at the businesses currently
enjoying the benefits of alternative data, we
can learn how they generated a credible cost-
benefit analysis.
The key to a successful analysis involves
starting with a proper input file, creating a
comprehensive data set and streamlining the
list of potential alternative data providers to
a manageable group.
Key components for the input file
Financial service providers are wise to
create a single file for evaluating multiple
data sources. By utilizing one file, providers
cansetastandardperformancedefinitionfor
measuring the impact of alternative data. In
addition,astandardfileremovestheimpactof
seasonality and the confusion created by dif-
ferences in performance across multiple files.
A well-constructed data file should include
the following:
• Relevant sample size – More is better with
agenerousrepresentationofapplicationsthat
are funded or approved but not funded, as
well as those that are denied. By including
all types of application outcomes, financial
serviceprovidersarebetterabletodefinitively
measure the impact a data source offers.
• Performance indicators – Financial ser-
vice providers who provide granular detail
on performance of funded loans are better
positioned to understand how ancillary data
mayhavechangedtheirdecision.Inaddition,
aserviceproviderprovidingthestatusofloans
maybeabletobetteranticipatefuturetrends.
A comprehensive data set
To best realize the value of any potential
data provider, it’s best to provide as much
dataaspossibleintheinbounddataset.Asan
example,consumerstabilitydata,information
aroundaconsumer’saddress,phonenumber,
e-mail address and the frequency of change
within those fields, is highly predictive. If a
financial service provider captures applicable
data on a consumer, it should be included
in the file.
Clear data test goals and objectives
When testing alternative data, it is incum-
bent on financial service providers to have
the endgame in mind. Service providers are
generally seeking to qualify more consum-
ers, eliminate risk, improve acceptance, or
risk adjust pricing. The better both parties
(the financing source and the data provider)
understand the task at hand, the more likely
the objective will be met.
Forexample,inarecentdatastudy,acredit
card provider who sought to increase accep-
tance by utilizing third-party data to qualify
marginal consumers found that consumer
presence in the vendor’s database resulted
in a 58 percent increase in default. While
that number was eye opening, it wasn’t the
objective – and the financial service provider
never acted on it.
Measurements
Companies that have successfully imple-
mentedstrategiesutilizingalterativedatahave
firstcalculatedtheimpactontheirriskopera-
tions via several measurements.
Hit rate – Number of applicants who
would have been present in the alternative
data file at the time of application.
In a recent conversation with a CRO of a
non-primeautofinancialserviceprovider,we
were given the standard measure applied for
presence of data sources, “Unless one in five
of my consumers has a hit, I cannot seriously
consideraddingthecostofprogrammingand
integrating.”
Scott Brackin
2. nafassociation.com July/August 2016 Non-Prime Times 25
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Alternative Data
If the data source has an adequate cover-
age then the requirement shifts to the utility
of the data.
Disparity – Measure of how much lift is
provided.
Even in the instance of high hit rate alter-
native data sources, often including public
recordtypeservices,disparityisn’tguaranteed.
If a data source has near universal presence
but offers minimal separation, there is only
increased cost to implement and access the
data service.
One non-prime auto financial service
provider shared the results of a data test she
conductedwhere consumers matchedbythe
third-party service defaulted 300 percent
more frequently than the general popula-
tion. As earth shattering as that sounds, the
alternative data only showed up in 2 percent
of inquiries.
Impact – Measure of how implementing
the data effects the entire operation.
Whiletheprocesssoundssimple,oftenthe
results are not clear.
A financial service provider recently con-
ductingadatastudyonbankbehaviorfound
that while there was a relevant hit rate and
the disparity of performance was profound,
the ability to realize the potential savings was
mitigated by the cost.
Implementation strategy – The practical
application of data.
Recently, an installment financial service
providersharedthattheresultsshowntohim
by a data vendor were “too good to be true.”
When asked to clarify, he shared, “we were
shown a huge savings potential but my CFO
can’t see how we realize that if at the expense
of so much loan volume.”The challenge for
executives is that while they realize there is
data available from sources outside the tradi-
tional CRAs, they often are unable to create
a live environment where the existing model
worksinconcertwithadditionaldatasources.
Auto financing sources that successfully
negotiate the implementation process do so
by evaluating how they can identify upside
opportunities, as well as, obvious declines
within the framework of their existing
operation. For example, a non-prime auto
finance company reduced its instance of first
payment default by 50 percent in the ini-
tial six months, but later realized additional
value by utilizing positive trades as a means
to separate consumers with equal traditional
credit scores.
For the remainder of this series of articles,
we will look into other common objections
to the use of alternative data including legal
and regulatory obstacles, the inability or lack
of desire to report data, as well as technology
and resource challenges.
We will also share past experiences of auto
financingsourcestoprovidesomeinsightand
success stories that will help readers figure
outtheeasiestwaytodetermineifalternative
data has a role in their business and to what
degree. Stay tuned…
Scott Brackin is vice president, Auto Finance,
for FactorTrust. Scott has more than 20 years of
experienceintheconsumercreditindustry.Heis
currentlyfocusedonprovidinginnovativeinfor-
mation solutions to automotive finance service
providerstodrivegrowthwhilemanagingrisks.