What will the EMV shift really mean for consumers and businesses here in the U.S.? Businesses and consumers across the U.S. are still adjusting to their new EMV credit cards. The new credit cards are outfitted with computer chips in addition to the magnetic strips to help prevent point-of-sale (POS) fraud. The new system, called EMV (which stands for Europay, MasterCard and Visa), requires signatures for all transactions. EMV is a global standard for credit cards. In the wake of the rising flood of large-scale data breaches at major retailers – and higher rates of counterfeit credit card fraud – chip-and-signature, as it is also called, is designed to better authenticate credit card transactions. Chip-and-signature itself is not new. It has been protecting consumers and businesses in Europe for several years and now the U.S. is finally catching up. But what will the EMV system really mean for consumers and businesses here in the U.S.? There is the potential for businesses that sell both offline and online, to see an increase in fraud that takes place online called Card Not Present (CNP) fraud. Will credit card fraud ever really be wiped out? Can we all stop worrying that large-scale point-of-sale breaches will happen again? Will the EMV shift affect holiday shopping and should retailers be concerned? Join us as we explore these questions and more on an upcoming Webinar, Chipping Away at EMV Myths. Our panel of experts includes: David Britton, Vice President, Industry Solutions, Experian Julie Conroy, Research Director, Aite Group Mike Klumpp, Director of Fraud Prevention, Citibank Moderated by: Keir Breitenfeld, Vice President, Product Management, Experian

Small Business Fraud When you hear the word “fraud” it’s unlikely that small business fraud comes to mind. However, in terms of potential losses, business identity theft could be considered as big if not a larger threat than consumer identity theft. Just like consumers, businesses face a broad- range of first- and third-party fraud behaviors, varying significantly in frequency, severity and complexity. Small businesses are especially vulnerable, because they typically do not have the layers of security and oversight, an alert accounting or I.T. department, or the sophisticated security technology that larger businesses may have. Over $8 billion is lost or stolen from small businesses each year and 60% of businesses who suffer business identity fraud close their doors within one year. A first-party, or victim-less, fraud profile is characterized by having some form of material misrepresentation (for example, manipulation or falsification of business filings and records) by the business owner without that owner’s intent or immediate capacity to pay the loan item. Historically, during periods of economic downturn or misfortune, this type of fraud is more common. This intuitively makes sense — individuals under extreme financial pressure are more likely to resort to desperate measures, such as misstating financial information on an application to obtain credit. Third-party commercial fraud occurs when a third party steals the identification details of a known business or business owner in order to open credit in the business victim’s name. With creditors becoming more stringent with credit-granting policies on new accounts, we’re seeing seasoned fraudsters shift their focus on taking over existing business or business owner identities. The rising trend of commercial fraud is illustrated by several key reasons including: One of the most common reasons for this is that commercial fraud doesn’t receive the same amount of attention as consumer fraud. Thus, it’s become easier for fraudsters to slip under the radar by perpetrating their crimes through the commercial channel. Keep in mind that businesses are often not seen as victims in the same way that consumers are. For example, victimized businesses aren’t afforded the protections that consumers receive under identity theft laws, such as access to credit information. Another factor is that most businesses are eager to open a new account for a business, after all businesses spend more than consumers. In some cases, opening a new business account can be even easier than opening a new consumer account. Business also have higher credit limits and the invoicing and payment terms allows identity thieves the opportunity to receive products and services without early detection. Finally, it is much easier to get information on a business versus a consumer. Unlike the protections provided to consumers to protect their identity, their credit information much of a business’s information is public record. Armed with the just a business name, address and EIN (employer identification number) fraudulent accounts can be opened and the game of theft begins. These factors, coupled with the fact that business-to-business fraud is approximately three-to-ten times more “profitable” per occurrence than consumer fraud, play a role in leading fraudsters increasingly toward commercial fraud. To learn more about how to protect your business view our interactive Fraud e-book.

Understanding and managing first party fraud Background/Definitions Wherever merchants, lenders, service providers, government agencies or other organizations offer goods, services or anything of value to the public, they incur risk. These risks include: Credit risk — Loosely defined, credit risk arises when an individual receives goods/services in exchange for a promise of future repayment. If the individual’s circumstances change in a way that prevents him or her from paying as agreed, the provider may not receive full payment and will incur a loss. Fraud risk — Fraud risk arises when the recipient uses deception to obtain goods/services. The type of deception can involve a wide range of tactics. Many involve receiving the goods/services while attributing the responsibility for repayment to someone else. The biggest difference between credit risk and fraud risk is intent. Credit risk usually involves customers who received the goods/services with intent to repay but simply lack the resources to meet their obligation. Fraud risk starts with the intent to receive the goods/services without the intent to repay. Between credit risk and fraud risk lies a hybrid type of risk we refer to as first-party fraud risk. We call this a hybrid form of risk because it includes elements of both credit and fraud risk. Specifically, first party fraud involves an individual who makes a promise of future repayment in exchange for goods/services without the intent to repay. Challenges of first party fraud First party fraud is particularly troublesome for both administrative and operational reasons. It is important for organizations to separate these two sets of challenges and address them independently. The most common administrative challenge is to align first-party fraud within the organization. This can be harder than it sounds. Depending on the type of organization, fraud and credit risk may be subject to different accounting rules, limitations that govern the data used to address risk, different rules for rejecting a customer or a transaction, and a host of other differences. A critical first step for any organization confronting first-party fraud is to understand the options that govern fraud management versus credit risk management within the business. Once the administrative options are understood, an organization can turn its attention to the operational challenges of first-party fraud. There are two common choices for the operational handling of first-party fraud, and both can be problematic. First party fraud is included with credit risk. Credit risk management tends to emphasize a binary decision where a recipient is either qualified or not qualified to receive the goods/services. This type of decision overlooks the recipient’s intent. Some recipients of goods/services will be qualified with the intent to pay. Qualified individuals with bad intentions will be attracted to the offers extended by these providers. Losses will accelerate, and to make matters worse it will be difficult to later isolate, analyze and manage the first party fraud cases if the only decision criteria captured pertained to credit risk decisions. The end result is high credit losses compounded by the additional first party fraud that is indistinguishable from credit risk. First party fraud is included with other fraud types. Just as it’s not advisable to include first party fraud with credit risk, it’s also not a good idea to include it with other types of fraud. Other types of fraud typically are analyzed, detected and investigated based on the identification of a fraud victim. Finding a person whose identity or credentials were misused is central to managing these other types of fraud. The types of investigation used to detect other fraud types simply don’t work for first-party fraud. First party fraudsters always will provide complete and accurate information, and, upon contact, they’ll confirm that the transaction/purchase is legitimate. The result for the organization will be a distorted view of their fraud losses and misconceptions about the effectiveness of their investigative process. Evaluating the operational challenges within the context of the administrative challenges will help organizations better plan to handle first party fraud. Recommendations Best practices for data and analytics suggest that more granular data and details are better. The same holds true with respect to managing first party fraud. First party fraud is best handled (operationally) by a dedicated team that can be laser-focused on this particular issue and the development of best practices to address it. This approach allows organizations to develop their own (administrative) framework with clear rules to govern the management of the risk and its prevention. This approach also brings more transparency to reporting and management functions. Most important, it helps insulate good customers from the impact of the fraud review process. First-party fraudsters are most successful when they are able to blend in with good customers and perpetrate long-running scams undetected. Separating this risk from existing credit risk and fraud processes is critical. Organizations have to understand that even when credit risk is low, there’s an element of intent that can mean the difference between good customers and severe losses. Read here for more around managing first party fraud risk.

According to the latest State of the Automotive Finance Market report, a record 55.5% of all used vehicles were financed in Q2 2015, compared to 53.8% the previous year.

Commerce: A conversation between merchants and consumers Last week I joined Sherri Haymond of MasterCard and Bharathi Ramavarjula of Facebook on a panel moderated by Paul Moreton, for a CapitalOne summit on Payments. When asked what was more important for the future of commerce – Sherri spoke of how security and trust is key, and I talked about how messaging has intersected with payments, (and in Wechat’s case) now intersecting with lending – with Bharathi eloquently summing it up as – “Facebook sees Commerce as a conversation”. If Commerce is a conversation between a merchant and a consumer (however loosely defined those terms have now come to be), then it has become contorted and clustered around payments and point of sale. Till not too long ago, there also existed a high barrier for entry to become a merchant, to accept payments, to promote and sell online, and to find cheap capital for growth. All these things are different now – and unsurprisingly, little of this progress can be attributed to banks or other current payment stakeholders. For example: I didn’t know I could be a merchant till Square showed me how easy it is to accept credit cards, and setup a small business. I didn’t know that I could become a driver in my spare time – till Uber showed me how easy it is to become one. I didn’t know that I could become a landlord till AirBnB showed me how easy it is to find people to rent it to. I know I am oversimplifying. These three and others like them chose to use technology and smartphones to exponentially scale the size of existing two-sided markets as well as create new ones. When another billion people on the planet stand to be connected over the next five years – entirely via cheap smartphones – it is hard to view commerce as a zero sum opportunity. Being wired for commerce may come to mean something entirely different for those billion, and messaging apps and social networks will replace point of sale for discovery, acquisition and engagement. This is why I believe changes in payments today are largely incremental and localized to the developed world. The platform driven efforts – such as tokenization – do go beyond any specific modality (card, mobile, connected things) to further the notion and benefit of trust entirely within the network. But that is as far as it goes. Issuers and networks may have little role to play in discovery, consumer loyalty and now more so than ever – identity. Case in point: Through Relay, Stripe enables a retailer to push a button and start selling through new channels while taking comfort in that his pricing and inventory will remain real-time. Through Messenger and Shopping – Facebook will encapsulate product discovery, guide the intent to purchase, host the informed pre-purchase debate and even payment – flattening it and never letting it out of sight. It is no accident that each of the four horsemen of the Internet has heavily invested in voice assistants – (Apple/Siri, Google/Now, Facebook/M, Amazon/Echo, Microsoft/Cortana) – especially as we confront old habits in interaction design that are failing on mobile, to continue to shorten the distance between intent and action through things like 3D Touch, the Amazon Dash button, and intelligent agents. Everything that is interesting in commerce: product discovery, search, interface and interaction design are all being done – with the sole exception of Amazon – by an entity that is neither a retailer nor a bank. Conversational commerce does not end with payments being swallowed up by messaging apps. It is a pre-requisite, but hardly not even a way point in that journey. Originally posted on: Droplabs.co

Driver of success: Mitigate auto lending risk A culture of learning is a key driver of success. Does your risk culture continue to adapt? There are many issues within auto lending that are unique to other financial services ecosystems: the direct versus indirect relationship, insights of the asset influencing the risk insights, new versus used vehicle transactions influencing risk and terms, and more. However, there is one universal standard common to all financial services cultures — change.. Change is constant, and an institution’s marketing and risk organizations need to be constantly learning to stay abreast of dealer, consumer, competitor and regulatory issues. No one has said it better than Jack Welch: “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” This statement was quickly followed by a command: “Change before you have to.” So the challenge for the portfolio manager is to ensure there are the system features, data sources, management reporting structures, data access features, analytic skills, broad management team skill sets, and employee feedback and incentive plans to drive the organization to a constant state of renewal. The challenge for many smaller and midsize lenders is to determine what systems and skills need to be in-house and what tasks are better left for a third party to handle. For consumer-level data, vehicle history and valuation data, and fraud alert flags, it seems reasonable to leverage solutions from established third parties: credit reporting agencies. After that, the solutions to the many other needs may be more specific to the lender legacy skill set and other support relationships: Are there strong in-house data-management and analytic skills? There is a significant difference between management information and data analysis driving policy and portfolio performance forecasts. Does the internal team have both? Is the current operating platform(s) feature-rich and able to be managed and enhanced by internal resources within tight time frames? Is the management team broadly experienced and constantly updating best-practice insights? Is the in-house team frequently engaged with the regulatory community to stay abreast of new mandates and initiatives? There is a solution. Experian® offers the data, software, solutions, management information, analytic solutions and consulting services to tie everything together for a lender-specific best configuration. We look forward to hearing from you to discuss how we can help.

Key drivers to auto financial services are speed and precision. What model year is your decisioning system? In the auto world the twin engineering goals are performance and durability. Some memorable quotes have been offered about the results of all that complex engineering. And some not so complex observations. The world of racing has offered some best examples of the latter. Here’s a memorable one: “There’s no secret. You just press the accelerator to the floor and steer left. – Bill Vukovich When considering an effective auto financial services relationship one quickly comes to the conclusion that the 2 key drivers of an improved booking rate is the speed of the decision to the consumer/dealer and the precision of that decision – both the ‘yes/no’ and the ‘at what rate’. In the ‘good old days’ a lender relied upon his dealer relationship and a crew of experienced underwriters to quickly respond to a sales opportunities. Well, these days dealers will jump to the service provider that delivers the most happy customers. But, for all too many lenders some automated decisioning is leveraged but it is not uncommon to still see a significantly large ‘grey area’ of decisions that falls to the experienced underwriter. And that service model is a failure of speed and precision. You may make the decision to approve but your competition came in with a better price at the same time. His application got booked. Your decision and the cost incurred was left in the dust – bin. High on the list of solutions to this business issue is an improved use of available data and decisioning solutions. Too many lenders still underutilize available analytics and automated decisions to deliver an improved booking rate. Is your system last year’s model? Does your current underwriting system fully leverage available third party data to reduce delays due to fraud flags. Is your ability to pay component reliant upon a complex application or follow-up requests for additional information to the consumer? Does your management information reporting provide details to the incidence and disposition of all exception processes? Are you able to implement newer analytics and/or policy modifications in hours or days versus sitting in the IT queue for weeks or months? Can you modify policies to align with new dealer demographics and risk factors?   The new model is in and Experian® is ready to help you give it a ride.  Purchase auto credit data now.

Key drivers to auto financial services are speed and precision. What model year is your decisioning system? In the auto world the twin engineering goals are performance and durability. Some memorable quotes have been offered about the results of all that complex engineering. And some not so complex observations. The world of racing has offered some best examples of the latter. Here’s a memorable one: “There’s no secret. You just press the accelerator to the floor and steer left. – Bill Vukovich When considering an effective auto financial services relationship one quickly comes to the conclusion that the 2 key drivers of an improved booking rate is the speed of the decision to the consumer/dealer and the precision of that decision – both the ‘yes/no’ and the ‘at what rate’. In the ‘good old days’ a lender relied upon his dealer relationship and a crew of experienced underwriters to quickly respond to a sales opportunities. Well, these days dealers will jump to the service provider that delivers the most happy customers. But, for all too many lenders some automated decisioning is leveraged but it is not uncommon to still see a significantly large ‘grey area’ of decisions that falls to the experienced underwriter. And that service model is a failure of speed and precision. You may make the decision to approve but your competition came in with a better price at the same time. His application got booked. Your decision and the cost incurred was left in the dust – bin. High on the list of solutions to this business issue is an improved use of available data and decisioning solutions. Too many lenders still underutilize available analytics and automated decisions to deliver an improved booking rate. Is your system last year’s model? Does your current underwriting system fully leverage available third party data to reduce delays due to fraud flags. Is your ability to pay component reliant upon a complex application or follow-up requests for additional information to the consumer? Does your management information reporting provide details to the incidence and disposition of all exception processes? Are you able to implement newer analytics and/or policy modifications in hours or days versus sitting in the IT queue for weeks or months? Can you modify policies to align with new dealer demographics and risk factors? The new model is in and Experian® is ready to help you give it a ride.  Purchase auto credit data now.

VantageScore® models are the only credit scoring models to employ the same characteristic information and model design across the three credit bureaus.

With the holidays around the corner, retailers are getting ready to release their holiday campaigns.

While mobile subscriber lists typically are much smaller than email lists, mobile subscribers tend to be loyal and highly engaged customers.

Since Henry Ford invented the assembly line and mass automotive production began, the primary objective of all manufacturers and dealers has been to move new vehicle inventory off the lot year after year. But nowadays finding the right automotive customer can be a challenging task. Where do they live? How old are they? How much do they make? By leveraging data to answer these questions, manufacturers can market to the appropriate audience and manage inventory accordingly. In fact, a recent Experian analysis of the automotive market found that the top 10 states accounted for nearly 60 percent of all new vehicle registrations during the second quarter of 2015, led by California at 12.6 percent. The remainder of the top 10 included Texas (9.9 percent), Florida (7.9 percent), New York 5.7 percent), Pennsylvania (4.4 percent) Ohio (3.9 percent), Illinois (3.8 percent), Michigan (3.7 percent), New Jersey (3.5 percent) and Georgia (2.8 percent). Diving a bit deeper, the analysis also showed that through May 2015, nearly 50 percent of all new vehicle buyers fell within the 40-69 age range. Furthermore, 17.9 percent were between the ages of 50-59. The analysis also found that individuals with incomes from $50,000-$100,000 were the most active new car shoppers during the same time period, equating to nearly 36 percent of the market. Other findings include: Los Angeles and New York were the two DMAs with the highest market share for new vehicle registrations at 6.8 percent and 6.7 percent, respectively Toyota (13.5 percent), Ford (11.6 percent) and Chevrolet (10.8 percent) were the top 3 brands with highest new vehicle market share among retail buyers through Q2 2015 Entry-level CUVs accounted for the highest percentage of new vehicle registrations at 14.6 percent, followed by the small economy car (11.0 percent) and full-sized pickup trucks (10.7 percent) Leveraging data and analytics gives manufacturers and dealers a competitive advantage by enabling them to better understand the entire automotive market, specifically new vehicle trends. With these actionable insights, automotive companies will be positioned to make more confident inventory decisions and target specific consumers. And by better understanding whom they are targeting, manufacturers and dealers will be able to check their primary objective off the list.

A recent Experian study found student loans have increased by 84% since the recession (from 2008 to 2014), surpassing credit card debt, home-equity loans and lines of credit, and automotive debt.

Driver of success: Mitigate auto lending risk A culture of learning is a key driver of success. Does your risk culture continue to adapt? There are many issues within auto lending that are unique to other financial services ecosystems: the direct versus indirect relationship, insights of the asset influencing the risk insights, new versus used vehicle transactions influencing risk and terms, and more. However, there is one universal standard common to all financial services cultures — change.. Change is constant, and an institution’s marketing and risk organizations need to be constantly learning to stay abreast of dealer, consumer, competitor and regulatory issues. No one has said it better than Jack Welch: “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” This statement was quickly followed by a command: “Change before you have to.” So the challenge for the portfolio manager is to ensure there are the system features, data sources, management reporting structures, data access features, analytic skills, broad management team skill sets, and employee feedback and incentive plans to drive the organization to a constant state of renewal. The challenge for many smaller and midsize lenders is to determine what systems and skills need to be in-house and what tasks are better left for a third party to handle. For consumer-level data, vehicle history and valuation data, and fraud alert flags, it seems reasonable to leverage solutions from established third parties: credit reporting agencies. After that, the solutions to the many other needs may be more specific to the lender legacy skill set and other support relationships: Are there strong in-house data-management and analytic skills? There is a significant difference between management information and data analysis driving policy and portfolio performance forecasts. Does the internal team have both? Is the current operating platform(s) feature-rich and able to be managed and enhanced by internal resources within tight time frames? Is the management team broadly experienced and constantly updating best-practice insights? Is the in-house team frequently engaged with the regulatory community to stay abreast of new mandates and initiatives? There is a solution. Experian® offers the data, software, solutions, management information, analytic solutions and consulting services to tie everything together for a lender-specific best configuration. We look forward to hearing from you to discuss how we can help.

According to a recent Experian Marketing Services study, 99% of companies believe achieving a single customer view is important to their business, but only 24% have a single customer view today.