The Simple Ways Lenders Can Find Hidden Opportunities

From record inflation and rising interest rates, to wavering consumer spending power and a potential hiring slowdown, the ever-changing economic conditions can impact consumer financial health and a lender’s loan portfolio. Even during these complex economic headwinds, lenders still need to fuel profitable growth. That is why we are providing ways lenders can move the needle when it comes to navigating hidden risks and finding unique opportunities.

1- Use alternative consumer financial data to expand your view of  high-value customers

Over 91.5 million consumers have thin files or are credit invisible/ Yet, many of these consumers have other financial transactions that lenders can use to uncover more qualified applicants. This alternative data can help reveal risks and opportunities within an existing portfolio.

Alternative data provides many data points that lenders can use to deepen a lender’s view of a consumer such as:

• Employment and income data — Which can show changes in expected cash inflow.

• Payment data for telecom, Pay TV, and utilities accounts — Which can show a day-to-day bill pay behavior.

• Payment history for borrowers that use specialty finance services — Which can reveal creditworthy, non-prime accounts.

• Consumer-permissioned bank transaction data, as well as statement data for utility and telecom bills — Which can deliver additional insight on day-to-day financial behaviors.

• Optimized risk scores — Which can offer enhanced differentiation for credit card and personal loan accounts.

2- Find new pockets of opportunity with consumer financial and economic insight

Gain the opportunity to boost eligibility for Prescreen offers. Boost eligibility by using non-FCRA financial capacity measures. These measures allow you to differentiate consumers who have the same credit score, but differing financial resources. Grow your opportunity to expand your audiences while still managing risk.

Digital Targeting Segments based on consumer financial profiles can provide greater insight. For example, they can enable you to better target online audiences such as:

• The 24.1% of households are likely to respond to a credit card offer*
• The 20.3% of households are likely to have an income between $125K - $250K*
• The 4.3% of households are Millennials with a high ability to pay*
• The 9.4% of households are very likely in market for an auto loan*
• The 9.0% of households are likely to have a financial durability rating of most resilient.*

This is especially important when you consider that credit is only one piece of the financial wallet. FinTechs should be factoring in a consumer’s assets, income, and spending power in order to get a more complete picture of their financial situation. Did you know that among consumers with a 580 credit score, 10% have household assets over $400,000 or total income over $178,000? (Equifax analysis)

3- Reach Prescreen audiences through email and digital channels

Today’s consumers are all about digital. This means that Prescreen offers also need to go digital. Serving prescreen messages via display, mobile ads, and social platforms allows FinTechs to expand their omni-channel approach, while also being more targeted with who sees their message.

In fact, one insurance company who used this tactic, gained 200 incremental quotes. They also gained an incremental $900,000 in potential lifetime value as part of a small campaign. The campaign reached its prescreen audience because paid search advertising on Google.

4- Better assess account health with insights on a consumer’s financial durability

To further deepen account reviews, lenders can incorporate data that sheds light on a consumer’s financial durability — namely, their financial resources and resilience to meet credit obligations. Financial durability is based on non-FCRA, anonymized measures such as estimated income, spending power, ability to pay, and wealth. Use these measures to differentiate consumers beyond credit alone, especially during times of economic stress. Resulting in an ability to:

• Identify consumers with less robust resources. 1 in 6 consumers with a healthy credit score of 700+ have low financial durability*

• Reduce delinquency risk. Low-durability households have delinquency rates up to 13 times higher than those with the highest durability*

• Adjust treatment for delinquent accounts. Accounts with high credit scores (660+), and high durability were 13% more likely to become current again on their obligations after going delinquent*

A more holistic look at accounts via Financial durability may reveal some surprises that can enhance your account treatment and cross-sell strategies.

5-Review your loan accounts more frequently with consumer credit attributes

A customer’s financial situation can change fast— especially as record inflation reduces spending power. With more frequent account reviews, you can take action faster to prevent losses and better help consumers manage their credit.

Credit data gives you the foundation you need to identify accounts that are performing well and those that may be at risk. Did you know there are thousands of credit attributes available? Broaden your choice of attributes to enhance your reviews such as:

• Ability to pay, accommodations, distressed, and risk attributes

• Product-specific attributes for credit card, unsecured lending, mortgage

• Trended attributes that show 24 months of credit behavior

The results from using the most current credit and data attributes are impressive. The latest from Equifax provides a 15% lift on average and up to a 94% increase in performance over our legacy attributes.* Besides, frequent reviews can help you catch newly-troubled accounts.

6- Respond fast to customer status changes and competitive threats with automatic alerts

To help stay informed, lenders can be notified of changes to a consumers’ credit and employment or income with automatic alerts. FinTechs can leverage alerts to speed responses that help mitigate losses and protect market share.  In fact, one credit issuer that integrated notifications into its account management process, increased the number of credit files reviewed per month by over 225%.*

7- Explore pay for performance marketing programs

Acquisition campaigns can be expensive. As an alternative, lenders can explore pay-for-performance prescreen campaign programs in order to transfer upfront campaign costs, and only pay for new customers acquired. Performance marketing programs give an ability to surpass acquisition goals.

Deciding to enroll in a program like this is a viable option for many lenders. In fact, 30 million potential new consumers were reached as part of a wireless provider’s pay-for-performance test campaign. This surpassed acquisition goals by over 20%.*

8- Leverage historical data to better manage risk

People say the best indicator of future behavior is past behavior— and we agree. With access to over 50 years of historical credit and geographical data, lenders can study past trends and economic conditions. This comprehensive data enables analysts to:

• Better assess account and portfolio risk

• Validate existing risk models

• Examine hypotheses for future market scenarios

Tools like these can provide concrete results for lenders. One lender turned to Equifax archived credit data to validate risk and acquisition models of a newly acquired credit card portfolio. This validation allowed them to gain confidence before transitioning cardholders to a new version of the card.

Lenders must take into account that today’s credit-seekers have changed. Many have experienced huge changes in their finances. For example, credit seekers have adapted how they manage their transactions. In addition, they have higher expectations for personalized marketing than ever before. Access to resources helps identify hidden risks and opportunities. These resources can make a difference in your growth trajectory and profitability.

 

*(Equifax analysis)

**Financial durability measures are non-FCRA and are not intended to be used for the extension of credit to any individual, nor may they be used for purposes of determining an individual’s creditworthiness or for any other purpose contemplated under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.