Behaviour Styles
 
A key aspect of collections relates to training in the correct behaviour style. Broadly speaking, there are three styles into which collectors fall; passive, aggressive and assertive. Last month, we discussed how both the passive and aggressive styles are ineffective and damaging to the collections effectiveness and overall profitability of an organisation.  In this Top Tip we will focus on the third collections style and explain how it improves collections efficiency, effectiveness and customer service perceptions.
 

Assertive Collections
 
Assertive collections can broadly be described as the expression of ones needs openly and honestly, while at the same time maintaining good customer service by not infringing on the rights of the customer. An assertive collector will therefore be direct and communicate the exact set of circumstances of the collections call.  He or she will also balance the needs of the customer with that of the organisation. An example of this would be the showing of empathy towards a customer if the reason for non-payment is associated with a tragic circumstance on the customer’s side. An important aspect of assertiveness in this regard, would be that an assertive collector can respectfully acknowledge the problem the customer has and at the same time not get personally or emotionally involved.
 
A collector who is assertive is confident, assured and always in control of the call, while always listening and building a trust relationship with the customer. The benefits of assertive collections is that the collector achieves both the short-term and long-term goals of the organisation, as trust will result in payment arrangements that are kept and relationships with customers that are maintained. As a result, assertive collectors feel an increased sense of self-confidence, satisfaction and accomplishment.
 
This Top Tip has discussed why an assertive style is the best approach in collections as it can lead to an overall increase in profitability of an organisation by improving collections efficiency and effectiveness as well as customer service perceptions.
 
In next Top Tip, we will explore this style in more detail and discuss the different sub-types of assertiveness that can be used in collections.

Maximising Productivity and Effectiveness of Collectors – Part 1
 

Stephen J. Leonard, Founder & CEO, Credit Risk Connection
Stephen J. Leonard is the Founder and Chief Executive Officer of Credit Risk Connection, a risk management consultancy and reseller of analytics, consulting, CRM, scorecards, software and training. Stephen has over 25 years’ of specialist credit risk management experience in the emerging markets of Europe, Middle East, Africa and South Asia. He has managed assignments with over 150 clients in 30+ countries, covering the entire credit life cycle and the complete range of organisations and products in the consumer credit, SME and credit bureau industries. Stephen holds an AS, BA and MBA and can be contacted at SLeonard@CreditRiskConnection.com

About Credit Risk Connection

Credit Risk Connection is a specialist consultancy and value-added reseller serving clients in the South Asia-Middle East-Africa (SAMEA) region. We provide leading edge analytics, consulting, CRM, scorecards, software and training. Through our partnerships with world-class organisations, CRC delivers, implements and supports a complete range of products and services that are tailored for emerging markets.

For more information on our credit risk and marketing solutions, focused on the specific needs of the SAMEA region, contact Info@CreditRiskConnection.com

Offices and agents in: Bangkok, Cape Town, Dubai, Johannesburg.

Michelle Katics is a risk management specialist and CEO/co-founder of BankersLab (bankerslab.com), which creates “flight simulators” for bankers to help improve their risk management skills. Based in Chiang Mai, Thailand, Michelle regularly travels to far and distant lands for her job and international volunteer initiatives. 

About the Author
 
Stephen J. Leonard, Founder & CEO, Credit Risk Connection

Stephen J. Leonard is the Founder and Chief Executive Officer of Credit Risk Connection, a risk management consultancy and reseller of analytics, consulting, CRM, scorecards, software and training. Stephen has over 25 years’ of specialist credit risk management experience in the emerging markets of Europe, Middle East, Africa and South Asia. He has managed assignments with over 150 clients in 30+ countries, covering the entire credit life cycle and the complete range of organisations and products in the consumer credit, SME and credit bureau industries. Stephen holds an AS, BA and MBA and can be contacted at SLeonard@CreditRiskConnection.com
 
About Credit Risk Connection
 
Credit Risk Connection is a specialist consultancy and value-added reseller serving clients in the South Asia-Middle East-Africa (SAMEA) region. We provide leading edge analytics, consulting, CRM, scorecards, software and training. Through our partnerships with world-class organisations, CRC delivers, implements and supports a complete range of products and services that are tailored for emerging markets.
 
For more information on our credit risk and marketing solutions, focused on the specific needs of the SAMEA region, contact Info@CreditRiskConnection.com.
 

Offices and agents in: Bangkok, Cape Town, Dubai, Johannesburg.

The Greek philosopher Plato once said “You can discover more about a person in an hour of play than in a year of conversation.” He viewed games as a vital learning tool 2,400 years ago, but despite rapid advancements in technology and the sophistication of the almighty Xbox, PlayStation, etc., gaming as an educational tool has only just begun to emerge from its infancy.

A serious game is a game designed for educational purposes, rather than pure entertainment. When designed well, they are ultimately defined by an engagement that cannot be matched by traditional learning. The main advantage of a serious game is that they allow learners to test their expertise in a virtual world, applying theoretical concepts to simulated scenarios. By creating a safe ‘test and learn’ environment, professionals can hone their skills, without the fear of failing on the job.

Although some have embraced it, some industries have yet to invest or even gain a full awareness of the potential that serious games have to offer. Vast possibilities that could revolutionize the way we learn remain untapped
A History of Serious Gaming

Like many new concepts and technology, much of serious gaming’s earliest development and application was driven by the desire to conquer other nations. Military commanders in the Roman Empire used sand tables with abstract icons to represent battle models. They would compete against each other to determine whose strategy would produce the best results. Later, more sophisticated boards evolved from these early strategic competitions. In 1812, the Prussian Army first developed the rules for Kriegspiel (German for “war game”), which would become a popular pursuit among Prussian officers and beyond.

The term “serious game” wasn’t coined until the computer age. Clark Abt was an early adopter, entitling his 1970 book Serious Games, although the book itself was focused on board and card games. During this time, early serious games could teach core lessons, but technology restraints meant that computers then lacked the ability to create a useful reality. The game “Pong” can only teach so much!

Fortunately with the leap in computer technology, these days even a standard first-person shooting game can present countless combinations of buttons and decisions. For serious games, this allows designers to create complex scenarios that can take more and more variables into account, producing closer approximations of real-life situations.
Sharpening Skills and Expertise

Numerous industries have started to take notice. The military remains active in the market. The U.S. Army has used gaming for years, forcing the British to update their models because soldiers played more realistic video games than they trained with. In March 2012, the BBC reported that the FBI and other U.S. agencies also contract video game producers to create games for training. Medical professionals are also often challenged to sharpen their diagnostic and surgical skills in a virtual world, before applying them in the real-world patients, while flight simulators used in the Aviation industry have had a huge impact on the safety and quality of our airline services.

In the corporate world, 20-27 percent of Global Fortune 500 companies have adopted gaming for learning, particularly in the U.S., Britain, and Germany.
A Rapidly Growing Trend

Estimates vary, but for example, IDATE – a French think tank that tracks telecom, internet and media markets – estimated in 2010 that the global serious games market was worth $1.9 billion and was set to reach almost $13 billion by 2015. The rapid growth projections are not unreasonable; as in 2007 estimates of the market sat around $150 million.

Though it is simpler and cheaper to design “fun” than a functional reality, the ability to harness the power of serious gaming in many industries suggests massive potential. Essentially, our expertise in creating serious games can be a game changer, as deploying more engaging and effective training tools produces more experienced, highly skilled workers that beat competitors to the punch.

Maximising Productivity and Effectiveness of Collectors – Part 2
 

About the Author

Stephen J. Leonard, Founder & CEO, Credit Risk Connection
Stephen J. Leonard is the Founder and Chief Executive Officer of Credit Risk Connection, a risk management consultancy and reseller of analytics, consulting, CRM, scorecards, software and training. Stephen has over 25 years’ of specialist credit risk management experience in the emerging markets of Europe, Middle East, Africa and South Asia. He has managed assignments with over 150 clients in 30+ countries, covering the entire credit life cycle and the complete range of organisations and products in the consumer credit, SME and credit bureau industries. Stephen holds an AS, BA and MBA and can be contacted at  HYPERLINK “mailto:SLeonard@CreditRiskConnection.com” SLeonard@CreditRiskConnection.com
About Credit Risk Connection

Credit Risk Connection is a specialist consultancy and value-added reseller serving clients in the South Asia-Middle East-Africa (SAMEA) region. We provide leading edge analytics, consulting, CRM, scorecards, software and training. Through our partnerships with world-class organisations, CRC delivers, implements and supports a complete range of products and services that are tailored for emerging markets.

For more information on our credit risk and marketing solutions, focused on the specific needs of the SAMEA region, contact  HYPERLINK “mailto:Info@CreditRiskConnection.com” Info@CreditRiskConnection.com.

Offices and agents in: Bangkok, Cape Town, Dubai, Johannesburg.

The Internet has greatly increased the options available to credit seekers, as well as changing the way online credit grantors compete; creating a very different playing field to what previously existed just five years ago. This article examines how the Internet can be used to the benefit of both new and existing customers, as well as improving the organisation’s ‘bottom line’.

 
The Internet – A New African Medium

The role of the Internet is well established in Europe and North America and with the advent of lower cost broadband; it has also become increasingly important in Africa. As the Internet changes the interaction dynamic between businesses and consumers, so the more traditional methods of credit granting have evolved. As greater numbers of small business owners and consumers turn to the Internet for communication and commerce purposes, they expect to find easy-to-access, real-time credit as well. A good example of this evolution can be seen with specialty finance, private label or co-branded credit cards that facilitate online purchasing and transactions at the critical point, and can involve parties other than just buyers and sellers.

 
For forward-looking organisations, the challenge lies in exploiting and improving information flow and real-time interactions with the Internet, providing an opportunity to redefine credit relationships. More importantly, the profiles of ‘traditional’ customers have changed due to the influence of the Internet. In the past, credit grantors drove customer interaction and defined what products would be offered, and on what terms. In addition, organisations determined if financial services would be made available to a customer, and this service was typically only offered through branches operating standard office hours.

 
As the Internet has becomes a more common means of communication between consumers, small business and financial services institutions, the power has shifted towards the customer as the party determining how interactions take place. With this shift, the values and expectations of traditional customers have also changed. To remain successful, organisations have had to improve their product offerings, their communication with customer bases, and levels of customer service. Consumers have also become better informed, as the Internet makes information available at the click of a mouse. Modern customers have 24 hours, seven day a week access to the Internet. At any time they can explore competitive offerings, and review what the media and other consumers feel about these offerings. A good example of this type of online interaction is where individuals view bulletin boards or enter chat rooms to learn about the experiences others have had with a specific organisation.

 
A New Breed of Consumer

Access to rich information sources creates more demanding and discriminating consumers. In the past, experiences with financial institutions were often intimidating for consumers and small business owners. Left at the mercy of branch office staff when seeking credit or related financial services, applicants were usually not informed as to the reasons for their credit requests being approved or declined. Often times, the traditional applicant did not understand the factors that contributed to the organisation’s decision to grant credit or not.

 
Nowadays, customers are in a much better position to access the type of information typically used during credit assessment and have this knowledge readily at hand. Customers are educating themselves as to what they should reasonably expect to obtain from organisations in the way of goods and services, based on a better understanding of the value of their custom to each organisation. Informed customers are not only in a position to expect improved customer service; they have become empowered to demand it!

 
In many cases, consumers and small business owners who were previously disregarded as relatively unimportant customers have now come to expect personalised service. Individuals want financial institutions to recognise who they are, and offer products and services tailored to their needs, and at appropriate times. The website Amazon.com is an excellent example of the direction financial institutions have to take if they are to meet customer expectations and retain business. On entry, this online retailer recognises people who have visited previously and presents a customised list of recommendations for books and music, as defined by previous purchases or areas of interest expressed by the visitor before.

 
Customers have also become more sophisticated in the way they use the information available on the Internet to comparison shop. From the luxury of a desk, customers can determine the type of credit product they want, credit terms personally acceptable, and all of this without leaving the comfort of familiar surroundings. Organisations have come to realise that the difference between finding a new customer and losing the sale can be nothing more than a mouse click away, If the organisation does not meet the consumer’s request with relative urgency there is a danger the individual will simply abandon their online shopping efforts and, with a simple mouse click, move on to a competing organisation.

 
Vital in ensuring successful online selling is the issue of customer loyalty. A client sitting in their living room does not necessarily ever need to see a customer service representative face-to-face or pay attention to someone attempting to persuade them to stay with any specific organisation. Instead, the company Internet presence and level of online customer service become critical persuasion factors.

 
Customising the Online Experience

To accommodate this new breed of consumer, financial organisations have to adjust. One of the most important developments is to provide customers with virtual credit. Given the number of competitive options on offer, organisations must have a suitable product range and also provide customers with an almost immediate ‘yes’ to genuine and acceptable requests for credit. This acknowledgement and extension becomes the first step in retaining a customer who might otherwise abandon their shopping attempt and click to go elsewhere.

 
Customers are generally further satisfied and encouraged to stay on a site if the organisation offers services or products specifically tailored to their personal needs. By providing the customer with an appropriate and desirable product range from which to choose, the online experience is enhanced and made more enjoyable. There is a higher likelihood consumers will return to sites or add sites to a ‘favourites’ file when they feel they have control over the online experience and have been personally acknowledged in some way.

 
In this new Internet world that emerging market credit grantors are now entering, marketing becomes an all-important exercise, given that consumers are bombarded with information from many different organisations simultaneously. The importance of differentiating one financial organisation from another becomes paramount and the quantity and quality of marketing campaigns has to be refined and made sophisticated. Organisations must take advantage of the most effective and efficient Internet marketing channels available. For example, there are portals and online search engines attracting millions of users on a daily basis and providing opportunities for advertising and marketing to reach ‘eye balls.’

 
A New Challenge

The Internet presents a whole host of new challenges for organisations deciding to operate online. Not only has the nature of target markets changed, but businesses now face different acquisition and distribution channels as well as different competitors.

 
However, change also creates opportunity, especially in the constantly operating, 24/7 environment of the Internet. Organisations that can create and run automated credit operations that function, irrespective of office hours, stand to gain those consumers and small business owners who prefer to conduct their banking outside of normal office hours. In addition, organisations no longer need to invest capital in building a physical infrastructure of branches or outlets as customers can conduct business wherever they have access to the Internet, be this home or office or on the go.

 
As the method of communicating with customers and prospects has changed, so will the strategies for interaction. As an example, people tend to feel more welcome if there is some form of personalised greeting or acknowledgement every time they log on to a website. Organisations can thus take advantage of the Internet to make interactions with clients even more personalised than was the case when the main client interaction was through a branch office environment.

 
Summary

Not only can organisations use the Internet to make existing customers happier, they can also use the medium to better differentiate themselves from the competition. Emerging market organisations wanting to be successful in the new world of the Internet should be asking themselves specific questions, such as:

• What items should be on the homepage to grab the attention of a prospect and make them stop and take a look?
• How often should the organisation’s name or brand image feature prominently in front of a browser in order to build recognition?
• How many search engines should the organisation be listed with?
• How many different mobile applications should be developed and for what platforms?

Success can only be achieved and accelerated if organisations fully understand the changes the Internet has created. These include changes in customer expectations and demands and how to go about generating online attention and securing new business prospects. Other questions include how to compete against other organisations and how the business itself should manage internal technology requirements and developments? Change, both in the form of challenge and opportunity, will determine which businesses succeed in this new electronic era.

 
To thrive in a customer-driven market, organisations need to utilise the power of the Internet and compete successfully in the virtual world. Using this channel, it becomes possible to build successful and profitable partnerships with individuals and smaller businesses that were previously inaccessible.

The more experience the financial services industry gains about how the Internet is changing the way that business is conducted, the easier it will be to take advantage of the many opportunities on offer. As the saying goes: the medium is the message!

About the Author

Stephen J. Leonard, Founder & CEO, Credit Risk Connection

Stephen J. Leonard is the Founder and Chief Executive Officer of Credit Risk Connection, a risk management consultancy and reseller of analytics, consulting, CRM, scorecards, software and training. Stephen has over 25 years’ of specialist credit risk management experience in the emerging markets of Europe, Middle East, Africa and South Asia. He has managed assignments with over 150 clients in 30+ countries, covering the entire credit life cycle and the complete range of organisations and products in the consumer credit, SME and credit bureau industries. Stephen holds an AS, BA and MBA and can be contacted at SLeonard@CreditRiskConnection.com

About Credit Risk Connection

Credit Risk Connection is a specialist consultancy and value-added reseller serving clients in the South Asia-Middle East-Africa (SAMEA) region. We provide leading edge analytics, consulting, CRM, scorecards, software and training. Through our partnerships with world-class organisations, CRC delivers, implements and supports a complete range of products and services that are tailored for emerging markets.

For more information on our credit risk and marketing solutions, focused on the specific needs of the SAMEA region, contact Info@CreditRiskConnection.com

Offices and agents in: Bangkok, Cape Town, Dubai, Johannesburg.

The effectiveness of any collections strategy is largely dependent on an organisation’s ability to contact its customers. There are many factors that have a major impact on an organisation’s ability to achieve this. Poor data not only prevents an organisation’s collections department from being effective, but it also substantially increases the costs of collections.

Most of the customers’ address and contact information originates from the original application form that the customer completes when applying for credit. It is essential that the application form is designed in such a way that it provides as much customer contact information as possible, such as spouse’s details, next of kin and third party contact details.

Once the customer’s contact information has been obtained it is important that the information is captured accurately. In most cases the customer’s contact information is captured manually from the original application form. The customer’s contact information is also manually confirmed and updated during the collections process. It is crucial that the system on which the data is captured contains comprehensive data validation rules to ensure that the information is updated as accurately as possible. A system that does not allow the data capturer to capture ‘alpha’ characters in the fields provided for telephone numbers, is an example of how validation rules can be used to ensure an accurate data capturing process.

The customer’s contact information should continuously be verified and updated. This should occur with every interaction with the customer. The collections system should prompt a collector to verify a customer’s contact information whenever the collector speaks with the customer and should not allow a collector to exit an account until it is done. The system should then automatically ‘date stamp’ the information once it has been verified, so that the organisation can monitor the ‘recency’ of its data. Collectors should be performance measured and incentivised based on the number and quality of contact information verified and/or updated.

In established credit-granting countries, there are a number of organisations that provide data cleansing services that analyse, report on and fix incorrect customer contact information stored in the organisation’s database. This is by far the quickest and most cost-effective method for an organisation to improve the integrity of its data.

The direct quantifiable costs that are unnecessarily incurred because of incorrect customer contact information include:

• The cost of dialling an incorrect number
• The cost of making calls to directory enquiries
• The costs of using external sources for data validation
• The costs of maintaining staff for tracing customers without valid contact information

In summary, there is no doubt that accurate address and contact information is not only crucial to an organisation’s efforts in combating rising delinquency rates, but also vital for managing spiralling costs. There are many opportunities to ensure that improved data accuracy can be achieved. It is, however, up to the organisation to ensure that these opportunities are optimised from the original application form to the final stage of collections.

About the Author

Stephen J. Leonard, Founder & CEO, Credit Risk Connection
Stephen J. Leonard is the Founder and Chief Executive Officer of Credit Risk Connection, a risk management consultancy and reseller of analytics, consulting, CRM, scorecards, software and training. Stephen has over 25 years’ of specialist credit risk management experience in the emerging markets of Europe, Middle East, Africa and South Asia. He has managed assignments with over 150 clients in 30+ countries, covering the entire credit life cycle and the complete range of organisations and products in the consumer credit, SME and credit bureau industries. Stephen holds an AS, BA and MBA and can be contacted at SLeonard@CreditRiskConnection.com

About Credit Risk Connection

Credit Risk Connection is a specialist consultancy and value-added reseller serving clients in the South Asia-Middle East-Africa (SAMEA) region. We provide leading edge analytics, consulting, CRM, scorecards, software and training. Through our partnerships with world-class organisations, CRC delivers, implements and supports a complete range of products and services that are tailored for emerging markets.

For more information on our credit risk and marketing solutions, focused on the specific needs of the SAMEA region, contact Info@CreditRiskConnection.com.

Offices and agents in: Bangkok, Cape Town, Dubai, Johannesburg.

Many organisations, including banks, offer their customers multiple credit products: current account overdrafts, personal loans, credit cards, car loans, mortgages, to name the most popular ones. If a customer becomes delinquent on a number of these products, there are often numerous collections departments within the one bank, all trying to collect their money from the same customer. Marketing offers for one product are sometimes sent to a customer who might be receiving collections calls for another product.
 

Intuitively, it makes sense to look at a more customer centric collections model, where rather than operating in different collections silos, an organisation collects only once on a person who has defaulted on multiple products. This series of three Top Tips has discussed some of the issues that should be considered when considering moving to the customer centric collections approach.
 

This final tip considers some of the practical implications of making a single collections call on multiple delinquent products.
 

If an organisation decides to combine multi-product collections into one call, then the collector needs to be adequately equipped to be able to deal with the situation. This can be achieved in three ways:

1. Training

A collector that deals with a multi-product collections call will need to be trained to understand the collections approach that will be required for the different products. The scripting support will also need to be flexible and appropriate to ensure that the collector knows how to respond to customer queries and objections.

2. Technology

Information presented on the collector’s screen should be clear and concise. There are numerous information fields that a collector will need in order to perform multi-product collections effectively. This can be an extremely complex ICT issue.

3. Teams

One of the ways of simplifying the problems of screen design and collector skills is to create teams that specialise in dealing with certain product combinations. This has to be based on adequate volumes per product combination so that the teams are able to work productively.
 

This series of Top Tips discussed the collections strategy, collections operations and practical implications that should be considered when an organisation decides to embark on a customer centric collections approach.
 

Customer Centric Collections – Part 1
 

Customer Centric Collections – Part 2

About the Author

Stephen J. Leonard, Founder & CEO, Credit Risk Connection

Stephen J. Leonard is the Founder and Chief Executive Officer of Credit Risk Connection, a risk management consultancy and reseller of analytics, consulting, CRM, scorecards, software and training. Stephen has over 25 years’ of specialist credit risk management experience in the emerging markets of Europe, Middle East, Africa and South Asia. He has managed assignments with over 150 clients in 30+ countries, covering the entire credit life cycle and the complete range of organisations and products in the consumer credit, SME and credit bureau industries. Stephen holds an AS, BA and MBA and can be contacted at SLeonard@CreditRiskConnection.com

About Credit Risk Connection

Credit Risk Connection is a specialist consultancy and value-added reseller serving clients in the South Asia-Middle East-Africa (SAMEA) region. We provide leading edge analytics, consulting, CRM, scorecards, software and training. Through our partnerships with world-class organisations, CRC delivers, implements and supports a complete range of products and services that are tailored for emerging markets.

For more information on our credit risk and marketing solutions, focused on the specific needs of the SAMEA region, contact Info@CreditRiskConnection.com.

Offices and agents in: Bangkok, Cape Town, Dubai, Johannesburg.

This article discusses the benefits to credit grantors who begin sharing data. The article follows on from the previous article, ‘Sharing Credit Data – The Concepts’ which covered the general history and practice of credit data sharing, illustrated with examples specific to South Africa.
 

Credit Data Sharing – An Overview

 
For credit grantors, effective management of customer information is a critical business task. This ranges from the gathering of data found on account application forms, to utilising the ongoing performance information available on existing client portfolios. The correct handling of these data rich environments often determines whether the business remains competitive and successful.
 

In recent years, credit granting organisations have also realised that internal information sources can be supplemented with the value that comes from exchanging data with other businesses. In a South African context, a good example of this was the recognition by several leading retailers some years back that they jointly had at their disposal a pool of untapped consumer information. By grouping this centrally, using credit bureaux to hold the data, a large database of shared information became available. In particular, the data contributors focused on submitting monthly information as to how customers conducted accounts held with each organisation. This data, commonly known as the payment profile history, includes the following:

• Date the account was opened
• Organisation where the account is held
• Type of account, e.g. revolving, instalment
• Account opening balance
• Account current balance
• The total value of all outstanding amounts – the ‘balance versus burden’
• Calendar month the account was last updated at the credit bureaux
• 24 monthly entries from the most recent to the least recent month – a series of alpha and numeric characters indicating the account status for a given month

The benefits of sharing this type of information are quickly identifiable. For example, when reviewing account applications the credit grantor can reference the payment profile history, ask specific questions, and apply policy rules. This is helpful when reviewing or processing ‘marginal’ account applications. Questions might include:

• Has this person disclosed all relevant account information on their application form? Are there other accounts not mentioned? If so, why?

• Are the outstanding amounts on other accounts accurately disclosed? Answering this enables the credit grantor to better determine the applicant’s current debt burden and provide guidelines in the accept/decline decision, as well as the appropriate limit assignment.

• Is the applicant only providing information on those accounts that are conducted well, i.e. the ‘best three’ scenario? Trends ascertained provide insight on all historical account behaviour and performance.

Applicant Verification

There are substantial benefits when looking at a shared ‘bigger picture’ for each applicant. Combined databases assist when it comes to applicant verification and confirmation from an independent, co-managed data source. Verification differs from organisation to organisation, although the more common aspects of confirmation include the applicant’s identity number, address and contact information, personal references, and employment or bank account details.
 

With high-risk applications, verification becomes more intensive and laboured, making processing of these accounts slower – not ideal in the time sensitive credit granting environment. Increased response times impact customer service response levels; any reduction in the confirmation process directly affects the level of service customer representatives can offer.
 

An example of a recent verification initiative in South Africa is the idea of sharing employment details within a closed user group. This can be either information on the company’s own employees, or consumer employment information already verified by that company. Making this data available to other contributors in a controlled and properly audited manner theoretically reduces the time and effort required with subsequent verifications. Details stored could include employee number, a human resource department reference, position held, or date of last verification.
 

Larger contributors, by their very nature, will tend to provide more information than smaller organisations in the user group. By charging a ‘fee per view,’ the data contributor receives some degree of financial return without subsidising smaller users.
 

The general benefits of reducing verification procedures include:

• A faster turnaround time on application review, which is critical in time sensitive credit processing environments.

• Improved utilisation of staff and better business resource allocation. For example, minimising the confirmation steps reduces operating costs and allows staff to prioritise good quality prospects, whilst also managing higher risk applicants.

• Reduce the false-positive rate. This is the phenomenon where underwriters investigate suspected fraudulent applications, only to have these subsequently turn out to be genuine consumers. Naturally, this affects the level of customer service given to the individual, and ties up staff resources unnecessarily.

Fraud – A Common Problem

The danger of fraud is a universal challenge for practically all credit grantors. Sharing credit data is one way of offsetting the potential for fraud, but usually this only takes place effectively once the industry sector jointly acknowledges the problem.
 

Data sharing examples here include monitoring the number of credit applications made by an individual at different credit grantors over a specified time period. Alternatively, velocity analysis of address or personal reference information. An applicant with frequent address changes on application forms warrants closer scrutiny.
 

Through data sharing arrangements, contributors can alert one another to the existence of fraud syndicates, front companies, fake personal references and a host of other fraudulent activities. Deeper analysis of the data may also reveal fraud patterns, helping the database administrator or fraud investigator to uncover hidden meaning in the data and better pinpoint possible warning signs. Other options would be to build up an events sequence or analyse transaction patterns, in so doing creating a proactive monitoring tool or response system.
 

When it comes to the issue of fraud, the benefits of data sharing are not limited to credit grantors only. South Africa has introduced a shared database for the insurance industry. The database, known as the Insurance Data System (IDS), is a repository of information relating to short term insurance claims. The database includes individual claim histories, a log of transactions from service providers and product suppliers to the insurance industry, and compiled reports from damage and loss assessors. The IDS came about after the industry as a whole acknowledged that insurance fraud was spiralling out of control with an estimated 30% of all short term insurance claims being false. The main aim of the database is therefore to prevent collusion between suppliers and claimants, and make it harder for consumers to file bogus claims or switch frequently between insurers.
 

Clearly, this industry sector has accepted that despite their individual competitiveness and business concerns, there is greater benefit to be generated from sharing claims information as opposed to not doing so.
 

Shared Data – Dynamic and Expanding

Where a number of organisations are contributing data, the shared database expands in a dynamic and fluid manner. This constant growth leads to a deepening of the data available for reference and analysis. A ‘bigger picture’ resource is invaluable for a number of reasons:

• Data can be used to develop continually improved modelling, analysis and general risk tools. As the database widens to include other contributors in the industry, or totally new industry sectors, so each consumer profile takes on deeper meaning. In sophisticated economies, contributed data may include information on a wide range of activities from information on personal banking habits and retail account behaviour, to loan obligations, and instalment arrangements.

• Apart from better managing the risk associated with each customer, organisations that have access to wider information are also in a position to refine and tailor product and service offerings most suited to each individual.

• If ‘bigger picture’ information is available, the organisation can proactively manage each account in the portfolio. For example, limiting credit exposure when it becomes evident that an account under review has started going delinquent at other organisations reporting into the shared database. Ultimately, this should encourage more informed and responsible lending practices.

Benchmarking for Better Credit Management
 

Where there is access to a centrally shared database, individual contributors can compare their own data to the industry or region, providing insight for better management. For example, comparing the company match rate against the shared database, where a low match rate indicates poor data quality on the portfolio. Alternatively, companies can agree to use a central database to periodically refresh their own customer information files, perhaps replacing outdated postal addresses.
 

Companies can benchmark their portfolios or credit practices against the industry or other participating businesses. Typically, an independent vendor or third party manages this process, with company identities remaining confidential to safeguard any competitive advantage. Comparison is helpful in assisting management to understand how the business is performing, relative to the rest of the industry. A selection of key assessment measures might include: level of portfolio delinquency versus the industry, customer account utilisation relative to the industry average, comparative percentage of accounts with overlimit balances. In all, these measures create a comparative ‘snapshot’ to guide management in their decisions and actions.
 

Summary
 

This article details a few of the benefits that come about through data sharing. Due to space considerations, the less obvious advantages have not been included in the article. More obvious benefits include tackling the problem of fraud, reducing account processing times and benchmarking companies against their industry sector. Increasingly, data sharing is nowadays undertaken by a number of business sectors, from banking and insurance, to retail and telecommunications.
 

The growth in shared data initiatives is largely due to the logical realisation that, despite competitive and other confidentiality issues, there are many significant advantages to be gained through the responsible and intelligent sharing of data. As such, data sharing practices should be seen as an inevitable and welcome evolution associated with advancing economies.
 

Sharing Credit Data – The Concepts

About the Author

Stephen J. Leonard, Founder & CEO, Credit Risk Connection

Stephen J. Leonard is the Founder and Chief Executive Officer of Credit Risk Connection, a risk management consultancy and reseller of analytics, consulting, CRM, scorecards, software and training. Stephen has over 25 years’ of specialist credit risk management experience in the emerging markets of Europe, Middle East, Africa and South Asia. He has managed assignments with over 150 clients in 30+ countries, covering the entire credit life cycle and the complete range of organisations and products in the consumer credit, SME and credit bureau industries. Stephen holds an AS, BA and MBA and can be contacted at SLeonard@CreditRiskConnection.com

About Credit Risk Connection

Credit Risk Connection is a specialist consultancy and value-added reseller serving clients in the South Asia-Middle East-Africa (SAMEA) region. We provide leading edge analytics, consulting, CRM, scorecards, software and training. Through our partnerships with world-class organisations, CRC delivers, implements and supports a complete range of products and services that are tailored for emerging markets.

For more information on our credit risk and marketing solutions, focused on the specific needs of the SAMEA region, contact Info@CreditRiskConnection.com.

Offices and agents in: Bangkok, Cape Town, Dubai, Johannesburg.