Fintech

Credit reports and conventional credit scores give lenders a strong starting point for evaluating applicants and managing risk. But today's competitive environment often requires deeper insights. Experian develops industry-leading credit attributes and models using traditional methods, as well as the latest techniques in machine learning, advanced analytics and Alternative credit data — or expanded Fair Credit Reporting Act (FCRA)-regulated data)1 to unlock valuable consumer spending and payment information so businesses can drive better outcomes, optimize risk management and better serve consumers READ MORE: What is Alternative Credit Data? Turning credit data into digestible credit attributes Lenders rely on credit attributes — specific characteristics or variables based on the underlying data — to better understand the potentially overwhelming flow of data from traditional and non-traditional sources. However, choosing, testing, monitoring, maintaining and updating attributes can be a time- and resource-intensive process. Experian has over 45 years of experience with data analytics, modeling and helping clients develop and manage credit attributes and risk management. Currently, we offer over 4,500 attributes to lenders, including core attributes and subsets for specific industries. These are continually monitored, and new attributes are released based on consumer trends and regulatory requirements.2 Lenders can use these credit attributes to develop precise and explainable scoring models and strategies. As a result, they can more consistently identify qualified prospects that might otherwise be missed, set initial limits, manage credit lines, improve loyalty by applying appropriate treatments and limit credit losses. Using expanded credit data effectively Leveraging credit attributes is critical for portfolio growth, and businesses can use their expanding access to credit data and insights to improve their credit decisioning. A few examples: Spot trends in consumer behavior: Going beyond a snapshot of a credit report, Trended 3DTM attributes reveal and make it easier to understand customers' behavioral patterns. Use these insights to determine when a customer will likely revolve, transact, transfer a balance or fall into distress. Dig deeper into credit data: Making sense of vast amounts of credit report data can be difficult, but Premier AttributesSM  aggregates and summarizes findings. Lenders use the 2,100-plus attributes to segment populations and define policy rules. From prospecting to collections, businesses can save time and make more informed decisions across the customer lifecycle. Get a clear and complete picture: Businesses may be able to more accurately assess and approve applicants, simply by incorporating attributes overlooked by traditional credit bureau reports into their decisioning process. Clear View AttributesTM uses data from the largest alternative financial services specialty bureau, Clarity Services, to show how customers have used non-traditional lenders, including auto title lenders, rent-to-own and small-dollar credit lenders. The additional credit attributes and analysis help lenders make more strategic approval and credit limit decisions, leading to increased customer loyalty, reduced risk and business growth. Additionally, many organizations find that using credit attributes and customized strategies can be important for measuring and reaching financial inclusion goals. About 25 percent of U.S. consumers have a thin credit file (fewer than five credit accounts). And about 19 percent of consumers either don’t have a credit file or don’t have information for conventional scoring models to score them.3 Expanded credit data and attributes can help lenders accurately evaluate many of these consumers and remove barriers that keep them from accessing mainstream financial services. READ MORE: How Expanded FCRA Data Is Revolutionizing the Credit Universe There's no time to wait Businesses can expand their customer base while reducing risk by looking beyond traditional credit bureau data and scores. About 60 percent of U.S. financial institutions are already using or plan to use alternative data, machine learning, AI and advanced analytics in their credit decisioning.3 Download our latest e-book on credit attributes to learn more about what Experian offers and how we can help you stay ahead of the competition.  Download e-book  Learn more 1When we refer to “Alternative Credit Data," this refers to the use of alternative data and its appropriate use in consumer credit lending decisions, as regulated by the Fair Credit Reporting Act. Hence, the term “Expanded FCRA Data" may also apply in this instance and both can be used interchangeably. 2Experian (May 2021) Experian Credit Attributes. 3Oliver Wyman  (12, January 2022) Financial Inclusion and Access to Credit. 4 Forrester (April 2022) Opportunity Snapshot: A Custom Study Commissioned by Experian.

From awarding bonus points on food delivery purchases to incorporating social media into their marketing efforts, credit card issuers have leveled up their acquisition strategies to attract and resonate with today’s consumers. But as appealing as these rewards may seem, many consumers are choosing not to own a credit card because of their inability to qualify for one. As card issuers go head-to-head in the battle to reach and connect with new consumers, they must implement more inclusive lending strategies to not only extend credit to underserved communities, but also grow their customer base. Here’s how card issuers can stay ahead: Reach: Look beyond the traditional credit scoring system With limited or no credit history, credit invisibles are often overlooked by lenders who rely solely on traditional credit information to determine applicants’ creditworthiness. This makes it difficult for credit invisibles to obtain financial products and services such as a credit card. However, not all credit invisibles are high-risk consumers and not every activity that could demonstrate their financial stability is captured by traditional data and scores. To better evaluate an applicant’s creditworthiness, lenders can leverage expanded data sources, such as an individual’s cash flow or bank account activity, as an additional lens into their financial health. With deeper insights into consumers’ banking behaviors, card issuers can more accurately assess their ability to pay and help historically disadvantaged populations increase their chances of approval. Not only will this empower underserved consumers to achieve their financial goals, but it provides card issuers with an opportunity to expand their customer base and improve profitability. Connect: Become a financial educator and advocate Credit card issuers looking to build lifelong relationships with new-to-credit consumers can do so by becoming their financial educator and mentor. Many new-to-credit consumers, such as Generation Z, are anxious about their finances but are interested in becoming financially literate. To help increase their credit understanding, card issuers can provide consumers with credit education tools and resources, such as infographics or ‘how-to’ guides, in their marketing campaigns. By learning about the basics and importance of credit, including what a credit score is and how to improve it, consumers can make smarter financial decisions, boost their creditworthiness, and stay loyal to the brand as they navigate their financial journeys. Accessing credit is a huge obstacle for consumers with limited or no credit history, but it doesn’t have to be. By leveraging expanded data sources and offering credit education to consumers, credit card issuers can approve more creditworthy applicants and unlock barriers to financial well-being. Visit us to learn about how Experian is helping businesses grow their portfolios and drive financial inclusion. Visit us

Many financial institutions have made inclusion a strategic priority to expand their reach and help more U.S. consumers access affordable financial services. To drive deeper understanding, Experian commissioned Forrester to do new research to identify key focal points for firms and how they are moving the needle. The study found that more than two-thirds of institutions had a strategy created and implemented while one-quarter reported they are already up and running with their inclusion plans.1 Tapping into the underserved The research examines the importance of engaging new audiences such as those that are new to credit, lower-income, thin file, unbanked and underbanked as well as small businesses. To tap into these areas, the study outlines the need to develop new products and services, adopt willingness to change policies and processes, and use more data to drive better decisions and reach.2 Expanded data for improved risk decisioning The research underlines the use of alternative data and emerging technologies to expand reach to new audiences and assist many who have been underserved. In fact, sixty-two percent of financial institutions surveyed reported they currently use or are planning to use expanded data to improve risk profiling and credit decisions, with focus on: Banking data Cash flow data Employment verification data Asset, investments, and wealth management data Alternative financial services data Telcom and utility data3 Join us to learn more at our free webinar “Reaching New Heights Together with Financial Inclusion” where detailed research and related tools will be shared featuring Forrester’s principal analyst on Tuesday, May 24 from 10 – 11 a.m. PT. Register here for more information. Find more financial inclusion resources at www.experian.com/inclusionforward. Register for webinar Visit us 1 Based on Forrester research 2 Ibid. 3 Ibid.

Cryptocurrency scams are on the rise as digital currencies gain popularity. The decentralized nature of these currencies makes them equally attractive to both legitimate consumers and fraudsters. Businesses may find themselves in a difficult position as they seek to prevent cryptocurrency-related fraud and help protect consumers. What are cryptocurrency scams? Cryptocurrencies are virtual currencies often based on and secured by blockchain technology. However, this does not always translate into security for the individual consumer. Many individuals fall victim to either cryptocurrency investment scams or cryptocurrency theft. Cryptocurrencies are not yet well-regulated or backed by a sovereign entity, leaving consumers open to threats when purchasing funds. The deregulated nature of the currencies makes it easy for scammers to build what appear to be legitimate cryptocurrency projects before disappearing, similar to pump-and-dump stock schemes. Additionally, scammers will perpetrate romance or other relationship-based scams and convince the victim to send them funds in cryptocurrency form. Cryptocurrency theft follows a few traditional fraud patterns: The fraudster may use phishing or social engineering to steal credentials. A crime ring might leverage malware or keystroke loggers to do the same thing. A scammer might present a “reward” to an unsuspecting consumer and require access to their wallet in order to “gift” the reward. Scammers consistently find new ways to trick unsuspecting consumers, including a recent scam relying on QR codes to steal funds converted to cryptocurrency via an ATM. Other common scams utilize imposter websites, fake mobile apps, bad tweets, or scamming emails to steal information and funds. The impact of scams on consumers According to the FTC, investment cryptocurrency scam reports have skyrocketed, with nearly 7,000 people reporting losses totaling more than $80 million from October 2020 to March 2021, with a media loss of $1,900. In 2020 the Better Business Bureau Scam Tracker Risk Report ranked cryptocurrency scams as the seventh riskiest. In 2021, they jumped to the second riskiest scam. In Michigan alone 31 cryptocurrency scams were reported from January 2020 to March 2022, with reported loses from $350 all the way to $41,000. The impact of scams on businesses While the true impact of cryptocurrency scams on businesses is hard to measure, it’s easy to identify several areas for concern. First is the opportunity for the theft of personally identifiable information (PII) during a fraudulent cryptocurrency transaction. Once fraudsters have stolen funds, they may also funnel them through a legitimate business and turn them into a regulated form of currency for easy of use. Businesses with legitimate cryptocurrency interactions may also suffer from spoofed apps or websites, causing reputational damage when consumers are taken in by a scam. Preventing the fallout from scams As companies debate accepting cryptocurrency as a form of payment, it’s important to consider that funds may be stolen or accessed by a malicious party. One way to protect your organization is to have a strong device identification strategy that can help ensure the entity accessing an account and the funds within is the true owner. By layering in this protection with other fraud defenses, businesses can be better prepared as consumer payment preferences shift. Additionally, financial institutions and other organizations should keep consumers informed about how to protect their own data and signs of scams. To learn more about how Experian is helping businesses develop and maintain effective fraud and identity solutions, visit us or request a call. And keep an eye out for additional in-depth explorations of our Future of Fraud Forecast. Request a call Future of Fraud Forecast

Experian’s latest Global Insights Report found that more than half of consumers have increased their online spending in the last three months, and 50% say it will increase in the next three months. Life online is here to stay, and consumer expectations have shifted, giving businesses and opportunity to sink or swim when building trust and gaining loyalty. This spring, Experian surveyed 6,000 consumers and 2,000 businesses across all industries to learn more about how, why, and where consumers are interacting with businesses online. Our research found that: Experience is top of mind, with 81% of consumers saying that a positive online experience makes them think more highly of a brand Digital payment options are on the rise with 62% of consumers using mobile wallets and 57% considering buy now, pay later as a replacement for their credit card Security is still a big factor, but 73% of consumers say the onus is on businesses to protect them online Download the report to get all the latest insights into consumer sentiment and how recent changes are impacting business priorities and investments. Download the report

The Marketing Rule of Seven means it usually takes at least seven impressions before a consumer is compelled to act. When extending firm offers of credit to consumers, lenders have long relied on direct mail and more recently email to reach their intended audiences. But what if there are more ways to deliver a credit offer? Let’s explore how digital display retargeting can help you maximize your campaign performance and profitability. What is digital display retargeting? Digital display retargeting allows lenders to present a firm offer of credit on digital and mobile to complement a direct mail or email prescreen campaign. This solution takes credit marketing to a whole new level — instead of relying solely on direct mail or email, lenders can amplify firm offers of credit on channels like social media or authenticated websites to maximize their reach. With spending more time on these channels, digital display retargeting can provide them  with an additional opportunity to respond. Reaching the right consumers with the right offer While echoing the same credit offer on multiple channels can help elicit higher response rates, how do lenders decide to which consumer to extend that offer to? Experian’s credit database provides lenders with fresh consumer information to help them determine what kind of credit offers may be most appealing to each unique individual. Through Amplified Prospecting, lenders can then gain accurate consumer identification and matching in digital display channels to ensure offers are reaching consumers most likely to respond. Maximize your campaign reach With the combined strengths of Experian’s consumer credit data and Amplified Prospecting, lenders can extend firm offers of credit to prescreened consumers across multiple touchpoints, helping them to achieve greater visibility and higher response rates. To learn more about how Experian can help you level up your credit marketing campaigns, visit us today. Learn more

It's one thing to make a corporate commitment to financial inclusion, but quite another to set specific goals and measure outcomes. What goals should lenders set to make financial inclusion a reality? How can success be quantified? What actionable steps must be taken to put policy into practice? The road to financial inclusion may feel long, but this step-by-step checklist can help you measure diversity and achieve goals to become more inclusive as an organization. Step 1: Set quantifiable goals with realistic outcomes Start by defining what you plan to achieve with a financial inclusion strategy. When setting goals, Alpa Lally, Experian's Vice President of Data Business at Consumer Information Services, recommends organizations "assess the strategic opportunity at the enterprise level." "It is important that KPIs are aligned across each business unit and functional groups in order to understand the investment opportunity and what the business must achieve together," said Lally. "The key focus here is 'together', the path to financial inclusion is a journey for all groups and everyone must participate, be committed and be aligned to be successful." Figuring out your short- and long-term goals should be the first step to kickstarting a financial inclusion strategy. But equally important is driving towards outcomes. For instance, if the goal is to increase the number of loans made to previously overlooked or excluded consumers, you may want to start by examining your declination population to better understand who is being left out. Or if financial inclusion is tied to a wider strategy or vision on corporate social responsibility, your goals may include an education component, community outreach, and a re-examination of your hiring practices. No matter what KPIs you're using, here are relevant questions to ask in four key areas – which will help draw out your organizational goals and priorities: Organizational awareness: What action is your organization taking to enhance Diversity, Equity and Inclusion and embrace Corporate Social Responsibility (CSR) around financial inclusion? If you already have financial inclusion programs in place, what are the primary goals? Barriers: What barriers prevent the organization from pursuing equity, diversity and inclusion programs? Education: How do you create awareness and education around financial inclusion? Which community or third-party organizations can help you reach consumers who aren't aware of ways to access financial services? Markers of success: What benchmarks will your organization use to measure and analyze success? Step 2: Do a financial inclusion audit Before developing and implementing a robust financial inclusion program, Lally recommends conducting a financial inclusion audit – which is a "detailed assessment of where you are today, relative to the goals and results you've outlined". In a nutshell, it allows you to assess your current systems and results within your financial institution. According to Lally, a financial inclusion audit should address the following key areas: Roadmap: What are your strategic priorities and how will financial inclusion fit within them? Tracking: Track the actual volume and distribution of different underserved populations (e.g., young adults, low-income communities, immigrants, etc.) within your book of business. Look at the applications and the approval rates by segment. In addition, assess the interest rates these consumers are offered by credit score bands for each group: “Benchmarking is critical. Understanding how they compare to national averages? How do they compare to the rest of your portfolio?" said Lally. Hiring practices: Is diversity, equity and inclusion (DEI) central to your talent management strategy? Is there a link between a lack of DEI in hiring practices and the level of financial inclusion within an organization? Affordability and access: Determine if the products and services you offer are easily accessible, can be understood by a reasonable consumer and are affordable to a broad base. Internal practices: What policies exist that influence the culture and behavior of employees around financial inclusion? Partnerships: Identify outside organizations that can help you develop financial literacy programs to promote financial inclusion. Advertising: Does your advertising promote equal and diverse representation across a wide range of consumer groups? Tools to measure: Are you financially inclusive as a company? How can you improve? The Bayesian Improved Surname Geocoding (BISG) method used by the Consumer Financial Protection Bureau (CFPB) predicts the probability of an individual's race and ethnicity based on demographic information associated with the consumer's surname. Lenders can use this type of information to conduct internal audits or set benchmarks to help ensure accountability in their diversity goals. Step 3: Tap into technology New technology is emerging that gives lenders powerful tools to evaluate a wider pool of prospective borrowers while also mitigating risk. For instance, scoring models that incorporate expanded FCRA-regulated data provide greater insight into 'credit invisible' or 'unscorable' consumers because they look at a wider set of data assets (or 'alternative data'), which allows lenders to assess a larger pool of applicants. It also improves the accuracy of those scores and better assesses the creditworthiness of consumers. Consider these resources, among others: Lift Premium™: Experian estimates that lenders using Lift Premium™ can score 96 percent of U.S. adults, a vast improvement over the 81 percent that are scorable today with conventional scores relying on mainstream data. Such enhanced scores would enable six million consumers who are considered subprime today to qualify for “mainstream" (prime or near-prime) credit. Experian® RentBureau®: RentBureau collects rent payment data from landlords and management companies, which allows consumers to leverage positive rent payment history similarly to how consumers leverage consistent mortgage payments. Clarity Credit Data: Clarity Credit Data allows lenders to see how consumers use alternative financial products and examine payment behaviors that might exist outside of the traditional credit report. Clarity's expanded FCRA -regulated data provides a deeper view of the consumer, allowing lenders to identify those who may not have previously been classified as "at risk" and approve consumers that may have previously been denied using a traditional credit score. Income Verification: Consumers can grant access to their bank accounts so lenders can assess their ability to pay based on verified income and cash flow. In addition, artificial intelligence (AI) and greater automation can reduce operational costs for lenders, while increasing the affordability of financial products and services for customers. AI and machine learning (ML) can also improve risk profiling and credit decisioning by filling in some of the gaps where credit history is not available. These are just a few examples of a wide range of cutting-edge solutions and technologies that enable lenders to promote greater financial inclusion through their decisioning processes. As new solutions are introduced to the market, it is imperative that lenders look into these technologies to help grow their business. Step 4: Monitor and measure Measuring your progress on financial inclusion isn't a one-and-done proposition. After you've set your goals and created a roadmap, it's important to continue monitoring and measuring your progress. That means your performance to gauge the impact of financial inclusion at both the community and business levels. Lally recommends the following examples: Compare your lending pool to the latest population data from the United States census. Is your portfolio representative of the U.S. population or are there segments that should have greater access? How does it compare against other lenders competing in the same space? Keep in mind that it has been widely reported that certain populations were undercounted, so you may want to factor this reality into your assessments. Work to understand how traditionally underserved consumers are performing in terms of their payment behaviors, purchase patterns and delinquencies. Measure the impact of financial inclusion on your company's overall revenue growth, ROI and brand reputation. Conduct an analysis to better understand your company's brand reputation, how it's perceived across different groups and what your customers are saying. Last word Financial inclusion represents a big step towards closing the wealth gap and helping marginalized communities build generational wealth. Given the prevalence of socioeconomic and racial inequality in our country today, it's a complex issue that disproportionately impacts marginalized groups, such as consumers of color, low-income communities and immigrants. Adopting more financially inclusive practices can help improve access to credit for these groups. For financial institutions and lenders, the first step is to identify realistic, quantifiable goals. A successful financial inclusion initiative also hinges on completing a financial inclusion audit, tapping into the right technology and continually monitoring and measuring progress. "It is paramount that financial institutions hold themselves accountable and demonstrate their commitment to make these practices a part of their DNA." - Alpa Lally. Learn more

Rewards are among the most appealing features of any credit card. While upfront benefits, like sign-up bonuses and cashback, are most influential in card acquisition, ancillary benefits, like fraud and identity protection, can amplify a card’s overall value.1 Credit card fraud ranked as the second most common form of identity theft in 2021,2 and is expected to become even more frequent as consumers continue to bank and shop online.3 42% of consumers are concerned for the safety of their banking and shopping transactions. With digital identity theft and fraud on the rise, it’s no surprise that safety measures are “very” or “extremely” important to consumers when deciding between different credit cards.4 In response, many card issuers have started to market their security and protection-related benefits more frequently to better capitalize on their cards’ value to consumers. The ways they’ve highlighted these benefits include: A fraud protection campaign From spotlighting their fraud protection benefits in card welcome kits to providing privacy tips on social media, credit card issuers have crafted compelling campaigns to demonstrate their commitment to protecting their customers from fraud and identity theft. In turn, issuers can differentiate their cards from the competition and improve response rates. Reminders about their fraud prevention efforts Issuers have also sent out ongoing reminders outlining the protections their credit cards offer, such as credit monitoring services 5 that notify cardholders of suspicious activity on their credit report. By consistently promoting their efforts to keep their customers’ accounts and data safe, issuers can earn their cardholders’ trust, build loyalty and drive card usage. While benefits like cashback and travel points can help with card acquisition, fraud and identity protection benefits can help drive long-term customer relationships, especially now that card fraud is becoming a growing concern.6 To learn more about how businesses have worked to meet the consumer demand for secure interactions, check out our 2021 Global Identity and Fraud Report. Learn more 1Jonathan O'Connor. "Most Consumers Aren't Aware of Their Credit Cards' Ancillary Benefits. How Does This Impact Card Acquisition and Usage?" TSYS, January 2019 2FTC. "Consumer Sentinel Network" Data Book, 2021 3April Berthene. "Coronavirus pandemic adds $219 billion to US ecommerce sales in 2020-2021" Digital Commerce 360, March 2022 4"Consumers Consider as Many as Six Factors When Choosing Credit Card" PYMTS.com, December 2021 5David McMillin. "Identity theft is a major problem, but these 5 credit card protection programs can help keep you safe" Business Insider, June 2021 6"New FICO Survey Finds Overconfidence Could Put US Consumers at Risk From Scams" Business Wire, February 2022

For decades, the credit scoring system has relied on traditional data that only examines existing credit captured on a credit report – such as credit utilization ratio or payment history – to calculate credit scores. But there's a problem with that approach: it leaves out a lot of consumer activity. Indeed, research shows that an estimated 28 million U.S. adults are “credit invisible," while another 21 million are “unscorable."1 But times are changing. While conventional credit scoring systems cannot generate a score for 19 percent of American adults,1 many lenders are proactively turning to expanded FCRA-regulated data – or "alternative data" – for solutions. Types of expanded FCRA-regulated data By tapping into technology, lenders can access expanded FCRA-regulated data, which offers a powerful and complete view of consumers' financial situations. Expanded public record data This can include professional and occupational licenses, property deeds and address history – a step beyond the limited public records information found in standard credit reports. Such expanded public record data is available through consumer reporting agencies and does not require the customer's permission to use it since it's a public record.1 “Experian has partnerships with these agencies and can access public records that provide insight into factors like income and housing stability, which have a direct correlation with how they'll perform," said Greg Wright, Chief Product Officer for Experian Consumer Information Services. “For example, lenders can see if a consumer's professional license is in good standing, which is a strong correlation to income stability and the ability to pay back a loan." Rental payment data Experian RentBureau draws updated rental payment history data every 24 hours from property managers, electronic rent payment services and collection companies. It can also track the frequency of address changes. “Such information can be a good indicator of risk," said Wright. “It allows lenders to make informed judgments about the financial health and positive payment history of consumers." Consumer-permissioned data With permission from consumers, lenders can look at different types of financial transactions to assess creditworthiness. Experian Boost™, for example, enables consumers to factor positive payment history, such as utilities, cell phone or even streaming services, into an Experian credit file. “Using the Experian Boost is free, and for most users, it instantly improves their credit scores," said Wright. “Overall, those 'boosted' credit scores allow for fairer decisioning and better terms from lenders – which gives customers a second chance or opportunity to receive better terms." Financial Management Insights Financial Management Insights considers data that is not captured by the traditional credit report such as cash flow and account transactions. For instance, this could include demand deposit account (DDA) data, like recurring payroll deposits, or prepaid account transactions. “Examining bank account transaction data, prepaid accounts, and cash flow data can be a good indicator of ability to pay as it helps verify income, which gives lenders insights into consumers' cash flow and ability to pay," Wright added. Clarity Credit Data With Experian's Clarity Credit Data, lenders can see how consumers use expanded FCRA-regulated data along with their related payment behavior. It provides visibility into critical non-traditional loan information, including more insights into thin-file and no-file segments allowing for a more comprehensive view of a consumer's credit history. Lift Premium™ By using multiple sources of expanded FCRA-regulated data to feed composite scores, along with artificial intelligence and machine learning, Lift Premium™ can vastly increase the number of consumers who can be scored. For example, research shows that Lift Premium™ can score 96 percent of American adults ­– a significant increase from the 81 percent that are scorable with conventional scores relying on only traditional credit data. Additionally, such enhanced composite scores could enable 6 million of today's subprime population to qualify for “mainstream" (prime or near-prime) credit.1 How is expanded FCRA-regulated data changing the credit scoring system? The current credit scoring system is rapidly evolving, and modern technology is making it easier for lenders to access expanded FCRA-regulated data. Indeed, this data disruption is changing lender business in a positive way. “When lenders use expanded credit data assets, they see that many unscorable and credit invisible consumers are in fact creditworthy," said Wright. “Layering in expanded FCRA-regulated data gives a clearer picture of consumers' financial situation." By expanding data assets, tapping into artificial intelligence and machine learning, lenders can now score many more consumers quickly and accurately. Moreover, forward-thinking lenders see these expanded data assets as offering a competitive edge: it's estimated that modern credit scoring methods could allow lenders to grow their pool of new customers by almost 20 percent.1 Case study: Consumer-permissioned data To date, over 9 million people have used Experian Boost. The technology uses positive payment history as a way to recognize customers who exhibit strong credit behaviors outside of traditional credit products. “Boosted" consumers were able to add on average 14 points to their FICO scores in 2022 so far, making many eligible for additional financial products with better terms or better product offerings. Active Boost consumers, post new origination performed on par or better than the average U.S. originator, consistently over time. “In other words, having this additional lens into a consumer's financial health means lenders can expand their customer base without taking on additional credit risk," explains Wright. The bottom line The world of credit data is undergoing a revolution, and forward-thinking lenders can build a sound business strategy by extending credit to consumers previously excluded from it. This not only creates a more equitable system, but also expands the customer base for proactive lenders who see its potential in growing business. Learn more 1Oliver Wyman white paper, “Financial Inclusion and Access to Credit,” January 12, 2022.

At Experian, we know that financial institutions, fintechs and lenders across the entire spectrum – small, medium and large, are further exploring and adopting AI-powered solutions to unlock growth and improve operational efficiencies. With increasing competition and a dynamic economy, AI-driven strategies across the entire customer lifecycle are no longer a nice to have, they are a must. Our dedication to delivering on this need for our clients is why we are thrilled to be recognized as a Fintech Breakthrough Award winner for the fifth consecutive year. Experian’s Ascend Intelligence ServicesTM (AIS) platform hosts a suite of analytics solutions and has been named “Best Consumer Lending Product” in the sixth annual FinTech Breakthrough Awards. This awards program is conducted by FinTech Breakthrough, an independent market intelligence organization that recognizes the top companies, technologies and products in the global fintech market today. This is the second consecutive year that AIS has been recognized with a FinTech Breakthrough Award, previously being selected for the “Consumer Lending Innovation Award” in 2021. “Winning another award from FinTech Breakthrough is a fantastic validation of the success and momentum of our Ascend Intelligence Services suite. Now more than ever, the world is in a state of constant change and companies are being reactive, with data scientists spending too much time on manual, repetitive data-wrangling tasks, at a time when they cannot afford to do so,” said Shri Santhanam, Experian’s executive vice president and general manager of Global Analytics and AI. “Companies need to be able to rapidly develop and deploy ML-powered models in an agile way at low cost. We are now able to offer this to more lenders no matter their size.” With AIS, Experian can empower financial services firms to make the best decisions across the customer life cycle with rapid model and strategy build, seamless deployment, optimization and continuous monitoring. The AIS suite is comprised of two key solution models: Ascend Intelligence Services Acquire is a managed services offering that enables financial institutions to increase approval rates and control bad debt by acquiring the right customers and providing the best offers. This is accomplished through a rapid AI/ML model build that will help better quantify the risk of an individual applicant. Next, a mathematically optimized decision strategy is designed to provide a more granular view of the applicant and help make the best decision possible based on the institution’s specific business goals and constraints. The combination of the AI/ML model and optimized decision strategy provides increased predictive power that mitigates risk and allows more automated decisions to be made. The model and strategy are seamlessly deployed to help deliver business value quickly. Ascend Intelligence Services™ Limit enables financial institutions to make the right credit limit decisions at account origination and during account management. Limit uses Experian’s data, predictive risk and balance models and our powerful optimization engine to design the right credit limit strategy that maximizes product usage, while keeping losses low. To learn more about how Ascend Intelligence Services can support your business, please explore our solutions page. Learn more For a list of all award winners selected for the 2022 FinTech Breakthrough Awards, click here.

As credit volumes recover from lows observed in 2021, lenders face new challenges – from increasing demand in customer expectations, to heightened competition, market volatility and a fierce war on talent. Many lenders have incorporated the foundational elements of credit analytics and seen significant initial returns. Now, it’s time for lenders to unlock even greater growth opportunities and operational efficiencies by exploring AI-powered solutions. Experian presented on a recent webinar hosted by Lendit Fintech, where Srikanth Geedipali, Senior Vice President of Global Analytics and AI for Experian, joined a panel of industry experts with representation from OPY and Citibank, to speak on how lenders can differentiate themselves by unlocking the power of advanced technologies such as AI and ML to address these emerging challenges. Watch the full webinar, NextGen Applications of AI in the Credit Lifecycle, and learn more about: Emerging trends in the AI/ML space that will drive innovation and differentiated solutions Use-cases for AI/ML across the lending lifecycle and how to leverage MLOps to industrialize analytics and improve speed and agility of decision-making How advanced technologies have driven impact for lenders of all sizes     This webinar is a part of Lendit Fintech’s webinar series. To learn more about how leveraging AI/ML can help optimize your lending strategies, contact us today. Learn more about Ascend Intelligence Services

Lenders are under pressure to improve access to financial services, but can it also be a vehicle for driving growth? With the global pandemic and social justice movements exposing societal issues of equity, financial institutions are being called upon to do their part to address these problems, too. Lenders are increasingly under pressure to improve access to the financial system and help close the wealth gap in America.  Specifically, there are calls to improve financial inclusion – the process of ensuring financial products and services are accessible and affordable to everyone. Financial inclusion seeks to remove barriers to accessing credit, which can ultimately help individuals and businesses create wealth and elevate communities. Activists and regulators have singled out the current credit scoring system as a significant obstacle for a large portion of U.S. consumers.  From an equity standpoint, tackling financial inclusion is a no-brainer: better access to credit allows more consumers to secure safer housing and better schools, which could lead to higher-paying jobs, as well as the ability to start businesses and get insurance. Being able to access credit in a regulated and transparent way underpins financial stability and prosperity for communities and is key to creating a stronger economic system. Beyond “doing the right thing," research shows that financial inclusion can also fuel business growth for lenders.  Get ahead of the game  There is mounting regulatory pressure to embrace financial inclusion, and financial institutions may soon need to comply with new mandates. Current lending practices overlook many marginalized communities and low-income consumers, and government agencies are seeking to change that.  Government agencies and organizations, such as the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC), are requiring greater scrutiny and accountability of financial institutions, working to overhaul the credit reporting system to ensure fairness and equality.  As a lender, it makes good business sense to tackle this problem now. For starters, as more institutions embrace Corporate Social Responsibility (CSR) mandates—something that's increasingly demanded by shareholders and customers alike—financial inclusion is a natural place to start. It demonstrates a commitment to CSR principles and creates a positive brand built on equity.  Further, financial institutions that embrace these changes gain an early adopter advantage and can build a loyal customer base. As these consumers begin to build wealth and expand their use of financial products, lenders will be able to forge lifelong relationships with these customers.  Why not get a head start on making positive organizational change before the law compels it?  Grow your business (and profits)  To be sure, financial inclusion is a pressing moral imperative that financial institutions must address. But financial inclusion doesn't come at the expense of profit. It represents an enormous opportunity to do business with a large, untapped market without taking on additional risk. In many instances, unscorable and credit invisible consumers exhibit promising credit characteristics, which the conventional credit scoring system does not yet recognize.  Consider consumers coming to the U.S. from other countries. They may have good credit histories in their home countries but have not yet established a credit history here. Likewise, many young, emerging consumers haven't generated enough history to be categorized as creditworthy. And some consumers may simply not utilize traditional credit instruments, like credit cards or loans. Instead, they may be using non-bank credit instruments (like payday loans or buy-now-pay-later arrangements) but regularly make payments.  Ultimately, because of the way the credit system works, research shows that lenders are ignoring almost 20 percent of the U.S. population that don't have conventional credit scores as potential customers. These consumers may not be inherently riskier than scored consumers, but they often get labelled as such by the current credit scoring system. That's a major, missed opportunity!  Modern credit scoring tools can help fill the information gap and rectify this. They draw on wider data sources that include consumer activities (like rent, utility and non-bank loan payments) and provide holistic information to assist with more accurate decisioning. For example, Lift Premium™ can score 96 percent of Americans with this additional information—a vast improvement over the 81 percent who are currently scored with conventional credit data.1 By tapping into these tools, financial institutions can extend credit to underserved populations, foster consumer loyalty and grow their portfolio of profitable customers.  Do good for the economy  Research suggests that financial inclusion can provide better outcomes for both individuals and economies. Specifically, it can lead to greater investment in education and businesses, better health, lower inequality, and greater entrepreneurship.  For example, an entrepreneur who can access a small business loan due to an expanded credit scoring model is subsequently able to create jobs and generate taxable revenue. Small business owners spend money in their communities and add to the tax base – money that can be used to improve services and attract even more investment.  Of course, not every start-up is a success. But if even a portion of new businesses thrive, a system that allows more consumers to access opportunities to launch businesses will increase that possibility.  The last word  Financial inclusion promotes a stronger economy and thriving communities by opening the world of financial services to more people, which benefits everyone. It enables underserved populations to leverage credit to become homeowners, start businesses and use credit responsibly—all markers of financial health. That in turn creates generational wealth that goes a long way toward closing the wealth gap.  And widening the credit net also enables lenders to uncover new revenue sources by tapping new creditworthy consumers. Expanded data and advanced analytics allow lenders to get a fuller picture of credit invisible and unscorable consumers. Opening the door of credit will go a long way to establishing customer loyalty and creating opportunities for both consumers and lenders.  Learn more

Student loan forbearance, part of the Coronavirus Aid, Relief, and Economic Security (CARES Act) economic stimulus bill that paused student loan repayment, interest accrual, and collections, is set to expire on May 1, 2022.  Borrowers who carry  federal student loans in the United States need to anticipate the resumption of repayment and interest accrual. In this article, we’ll answer questions your borrowers will be asking about the end of the student loan pause and how they can better prepare.   Lenders and servicers should anticipate an influx of requests for modification and for private student loan lenders, a potential significant push for refinancing.   When do student loans resume and when does student loan interest start again?  Student loan repayments and resumption of interest accruals are set to resume on May 1, 2022. This means that student loans will start accruing interest again, and payments will need to resume on the existing payment date. In other words, if the due date prior to the pause was the fifth of every month, the first repayment date will be May 5, 2022.  In the weeks preceding this, borrowers can expect a billing statement from their student loan servicer outlining their debt and terms or they can reach out to their servicers directly to get more information.  Will student loan forbearance be extended again? Will the CARES Act be extended?  There is no indication that the federal government will extend student loan forbearance beyond May 1, 2022, which was already extended beyond the original deadline in February 2022. Your borrower’s best strategy is to prepare now for the resumption of repayments, interest accrual and collections. Will Biden forgive student loans?  Free community college tuition and federal student loan forgiveness up to $10,000 were a centerpiece of the Biden platform during his candidacy for president and were included in early iterations of the government's Build Back Better agenda. In February 2022, during bargaining, the administration removed the free tuition provision from the bill. The Build Back Better bill has yet to pass.  Although there remains a student loan relief provision in the draft Build Back Better agenda, there is no guarantee that it will make it into the final iteration.  What should borrowers do if they paid student loans using auto-debit?  Most borrowers will need to restart auto-debit after the student loan pause. If auto-debit or ACH was used prior to the student loan pause went into effect on March 13, 2020, borrowers can expect to receive a communication from their servicer confirming they wish to continue with auto-debit. If the borrower doesn’t respond to this notice, the servicer may cancel auto-debit. If the borrower signed up for auto-debit after the beginning of forbearance, payments should automatically begin.  How much interest will borrowers have to pay?  Unless terms have changed, such as consolidating loans, the interest rate will be the same as it was before the student loan pause went into effect.  Will balances be the same as they were before the student loan pause? Will it take the same amount of time to pay off the student loan?  For those on a traditional repayment plan, a student loan servicer might recalculate the amount based on the principal and interest and the amount of time left in the repayment period. Borrowers will still make payments for the same number of months in total, but the end date for repayment will be pushed forward to accommodate the payment pause.   In other words, if the loan terms originally stated that it would be repaid in full on January 1, 2030, the new terms will accommodate the pause and show full repayment on January 1, 2032.  For those on an Income-Driven Repayment Plan (IDRP) – such as Revised Pay as You Earn Repayment (REPAYE), Pay As You Earn Repayment (PAYE), Income-Based Repayment (IBR), or Income-Contingent Repayment (ICR) – the payment amount will resume at the same rate as before the payment pause. Student loan forbearance will not delay progress towards repayment.  What are borrower options if the student loan payment is too high?  Enroll in an IDRP program: Available plans include REPAYE, PAYE, IBR or ICR.  Student loan refinancing: When a borrower refinances, he or she can group federal and private loans and possibly negotiate a lower repayment amount. However, they will not be eligible to access federal loans protections or programs.  Loan consolidation: This process allows borrowers to combine multiple federal loans into a single loan with a single payment, which can reduce monthly payments by extending the repayment period. Note this will result in more interest being charged, as the time to repay will be extended. Will this change affect those with private student loans?  Private lenders are not covered by the CARES Act, so student loan forbearance did not apply to them. Most private lenders have continued collecting repayments throughout the COVID-19 pandemic.   Borrowers having trouble making payments to a private lender, can discuss options such as deferment, forbearance, consolidation and modified repayment terms.  What happens if a student loan payment is missed or the borrower can’t pay at all?   If a payment is missed, the account will be considered delinquent. The account becomes delinquent the first day after a missed payment and remains that way until the past-due amount is paid or other arrangements are made.   If the account remains delinquent, the loan may go into default. The amount of time between delinquency and default depends on the student loan servicer. If the loan goes into default, borrowers could face consequences including:  Immediate collections on the entire loan and interest owed Ineligibility for benefits such as deferment and forbearance,   Inability to choose a different payment plan or obtain additional federal student aid  Damage to credit score  Inability to buy or sell assets  Withholding of tax refunds or other federal benefits Wage garnishment A lawsuit Do student loans affect credit scores?  Yes, for delinquent student loans, the servicer will report the delinquency to the three major credit bureaus and the borrower’s credit score will drop.2 A poor credit score can affect a consumer’s ability to obtain credit cards or loans and may make it difficult to sign up with utilities providers, cell phone providers and insurance agencies. It can also be challenging to rent an apartment.  What are the options for those who can’t pay? Can student loans be deferred?  For those with federal student loans, now is the time to prepare for the end of student loan forbearance. Revisit budgets, make sure records are up to date and communicate with student loan servicers to make sure payments can be made in full and on time.  For those unable to pay back loans, they can consider requesting a deferment. A deferment is a temporary pause on student loan payments. Depending on the type of loan, interest may or may not continue to accrue during the deferment.  If they wish to apply for a deferment, they must meet eligibility requirements. Some common grounds for deferment are:  Economic hardship  Schooling  Military service  Cancer treatment  Loan servicers and private lenders should arm themselves for the large volume of questions  from borrowers who are not prepared to begin resuming payment. Now may the time to increase customer service or consider adding student loan consolidation products to serve the increase in demand.  For information on mitigating risk and effectively managing your portfolio, click here.  

Credit scores hold the key to many aspects of our financial lives. Whether qualifying for a mortgage, insurance, or a smartphone plan, financial institutions rely on credit reports — a document detailing how responsibly a person has used credit accounts in the past — to decide if they should approve your financing application. However, here's the problem: because today's scoring system leans heavily on a person’s credit history to generate a credit score, it leaves out large segments of the United States population from accessing credit. According to a recent Oliver Wyman report, an estimated 28 million U.S. consumers are considered ”credit invisible," while another 21 million are deemed "unscorable," meaning they don’t have the types of accounts that have been traditionally used to generate a credit score. Using the traditional credit-scoring formula, certain populations, such as communities of color and low-income consumers, are left behind. Now, times are changing. A modern approach to credit scoring can significantly improve the financial inclusion of millions of U.S. consumers and correct past and present inequities. ­Tapping into advanced technologies that leverage expanded data assets can produce powerful results. A cycle of exclusion: The limitations of conventional credit scoring A big part of the problem lies with how credit scores are calculated. Between payment history and length of accounts held, a consumer’s credit history accounts for 50 percent of a FICO credit score — the credit score used by 90 percent of top lenders for credit decisions. In other words, the credit system rewards people who already have (or can get) credit and penalizes those that cannot or don't yet have credit. For those who do not have credit, their financial behaviors ­— such as timely rental and utility payments, bank account data and payday loan installment payments — may not get reported to credit bureaus. As a result, consumers without a credit history may appear as credit invisible or unscorable because they don't have enough tradelines to generate a score. But they also can’t get credit to improve their score. It creates a cycle of exclusion that’s hard to break. Who gets left behind? According to the latest research, the limitations on the traditional credit scoring system disproportionately impact certain communities: Low-income: 30 percent of those in low-income neighborhoods are credit invisible, and 16 percent are considered unscorable, compared with just 4 percent and 5 percent, respectively, in upper-income neighborhoods.1 Communities of color: 27 percent of Black and 26 percent of Hispanic consumers are either credit invisible or unscorable, while only 16 percent of white consumers are.1 Immigrants: People who have recently arrived in the United States can lack a credit history here, even if they may have had one in their home country. Meanwhile, undocumented immigrants, who don’t have a Social Security number, can find it difficult to get a credit card or use other financial services. Young adults: 40 percent of credit invisibles in the U.S. are under the age of 25,1 with 65 percent of 18- to 19-year-olds lacking a credit score. Being labeled unscorable or credit invisible can hinder participation in the financial system and prevent populations from accessing the socioeconomic opportunities that go with it. Why are certain individuals and communities excluded? There are often complex — and valid — reasons for why many consumers are deemed unscorable or credit invisible. For example, newcomers may appear to be credit invisible because haven’t yet generated a credit history in the U.S., although they may have a solid score in their home country. Young consumers are also a common category of unscorable or credit invisible people, largely because they haven't acquired credit yet. Only 35 percent of 18- to 19-year-olds have a credit score, while 91 percent of 25- to 29-year-olds do. However, those who can quickly get a credit history typically come from wealthier households, where they can rely on a creditworthy guarantor to help them establish credit. Finally, some consumers have had negative experiences with the financial system. For instance, a prior default can make it difficult to access credit in the future, which can result in an extended period without credit, eventually leading to being labelled unscorable. Others may distrust the mainstream financial system and choose not to participate. Underpinning all this are racial disparities, with Black and Hispanic consumers being classified as unscorable and credit invisible at significantly higher rates than white and Asian consumers. According to the Consumer Financial Protection Bureau (CFPB), Black and Hispanic people, as well as low-income consumers, are more likely to have “scant or non-existent” credit histories. Financial inclusion is an equity issue Traditional credit scoring places big barriers on certain communities. Without access to credit, marginalized communities will continue to face challenges. They will lack the ability to purchase property, secure business and/or personal loans and deal with financial emergencies, further widening the wealth gap. Since credit scores are used to decide loan eligibility and what interest rate to offer, those with low or no credit rating tend to pay higher interest rates or are denied desired loans, which compounds financial difficulty. The impact is profound: a significant percentage of the population struggles to access basic financial services as well as life opportunities, such as financing an education or buying a home. Without the ability to generate a credit score, unscorable or credit invisible consumers often turn to less-regulated financial products (such as payday loans or buy now pay later agreements) and pay more for these, often locking them in a vicious cycle. Consumers who are credit invisible or unscorable often end up paying more for everyday transactions. They may be required to put up hefty deposits for housings and utilities. Auto and homeowners insurance, which use credit score as a factor in setting rates, may be more expensive too. Consider how much this could impede someone’s ability to save and build generational wealth. Financial inclusion seeks to bring more consumers into the financial system and enable access to safe, affordable financial services and products. With the right technology on your side, there are solutions that make it easier to do so. Tap into technology Banks, credit unions and other lending institutions are well positioned to move the needle on financial inclusion by embracing expanded definitions of creditworthiness. By seeking out expanded FCRA-regulated data with wider sources of financial information, financial institutions can find a vast untapped pool of creditworthy consumers to bring into the fold. Technology makes achieving this goal easier than ever. New credit scoring tools, like Lift Premium™, can give lenders a more complete view of the consumer to use for credit decisioning. It combines traditional credit data with expanded FCRA-regulated data sources, helping lenders uncover more creditworthy consumers. Lift Premium can score 96 percent of U.S. consumers, compared to just 81 percent that conventional scoring systems do now. By applying machine learning to expanded data sets, Lift Premium can build a fuller and more accurate view of consumer behaviors. Moreover, the 6 million consumers whose scores are now considered subprime could be upgraded to prime or near-prime by analyzing the expanded data that Lift Premium uses. The opportunity presented by financial inclusion is significant. Imagine being able to expand your portfolio of creditworthy borrowers by almost 20 percent. The last word With a renewed focus on social justice, it’s no surprise that regulators and activists alike are turning their attention to financial inclusion. A credit-scoring system that allows lenders to better evaluate more consumers can give more people access to transparent, cheaper and safer financial products and the socioeconomic benefits that go along with them. New models and data assets offer additional data points into the credit scoring system and make it possible for lenders to expand credit to a greater number of consumers, in the process creating a fairer system than exists today. Early adopter lenders who embrace financial inclusion now can gain a first-mover advantage and build a loyal customer base in a competitive market. Learn more Download white paper 1Oliver Wyman white paper, “Financial Inclusion and Access to Credit,” January 12, 2022. 

With consumers having more banking options than ever before, loyalty has become the most valuable currency for financial institutions (FI). As fintechs and big tech companies continue to roll out innovative banking and payment options, traditional FIs must rethink their strategies to drive new business, retain existing customers and remain competitive. According to a recent Mintel report, rewards, transparency and customer service are the top three constants when it comes to building loyalty. Here’s how financial institutions can deliver on these fronts to create and maintain lasting customer relationships: Rewards programs and incentives Rewards have long been a key customer retention strategy, with 39% of consumers stating they would remain loyal to their financial service providers if they offered incentives and rewards. While traditional rewards programs that offer points or cash back on everyday purchases remain popular, many companies are expanding beyond the conventional rewards structure to attract new customers and stand out from the competition. For example, one California-based startup enables its cardholders to earn points at every winery, wine club or wine shop, while a health and wellness company rewards its cardholders with extra cash back when they meet their weekly fitness goals. To build and maintain customer loyalty, FIs can follow suit by incentivizing positive financial behavior, such as offering points to customers when their credit score increases or when they reach their monthly savings goal. Being rewarded for improving their financial health can encourage customers to continue making positive and responsible financial decisions. When customers see how much their financial institution invests in their financial well-being, they are more likely to remain loyal to the brand. Nurturing existing customers through rewards programs is also more cost-effective than acquiring new ones. Rewards program members spend 5-20% more than non-members on average, which not only covers operating costs but leads to increased sales and revenue. Transparency over fees Beyond rewards programs and incentives, many FIs have created innovative tools to help customers avoid overdraft fees, such as real-time alerts for low balances. To take it a step further, some have eliminated these fees altogether. While overdraft fees can be an easy source of revenue for financial institutions, they are a pain point for customers, especially for those who are financially vulnerable. Rather than continuing to be saddled with hefty penalties, customers are likely to switch to providers that are more upfront about their fees or have eliminated them outright. To avoid losing current and prospective customers to new competition, FIs need to be more transparent and work toward establishing fairer practices. Quick, friendly, and accessible customer service With today’s consumers having increased expectations for easy, convenient and accessible customer service, many FIs have refined their strategies by becoming digital-first. When customers have a question or concern, they can engage with financial institutions at any time through digital channels, including chat, email or social media. Being accessible at any hour of the day to assist their customers provides FIs with a great opportunity to build trust, loyalty and a positive reputation. By providing exceptional customer service, compelling rewards and being transparent, financial institutions have the power to create long-lasting customer relationships. Learn more about what you can do to retain your best customers or check out how to build lifetime loyalty with Gen Z. Learn more Build loyalty with Gen Z