Contenu connexe
Similaire à The Science And Art Of Profitable Underserved Consumer Portfolios (20)
The Science And Art Of Profitable Underserved Consumer Portfolios
- 1. The Science and Art of
Profitable Consumer Portfolios
CFSA 2010 Annual Conference
Confidential and Proprietary
Confidential and Proprietary
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
© 2010 CL Verify Credit Solutions™
© 2010 CL Verify Credit Solutions™
- 2. Why am I here?
When someone comes to your store or website it
is the end of one process (acquisition) and the
start of another.
If you’ve already invested the time, energy and
money attracting that consumer shouldn’t you
then maximize your opportunity?
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 3. A Growing Opportunity
Growing opportunity for Alternative Financial Service Centers:
A growing population1:
One
UNDERSERVED
baby every 7
seconds
3 million new
UNDERSERVED
consumers
every year
One
UNDERSERVED
foreign
migrant every
27 seconds
1 Source: Washington Credit Union League and Affiliates
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 4. A Growing Opportunity
Growing opportunity for Alternative Financial Service Centers:
A reduced supply:
Banks are abandoning this audience
• 5% of all bank loans are 3 months past due, the highest since records began1
• 140 banks failed in 2009, 702 are currently at extreme risk1
• Banks registered biggest decline in total loans outstanding since 19421
• Banks are closing large numbers of retail locations in attempts to reduce
overhead2
1 Source: FDIC
2 Source: Wall Street Journal 3-3-10
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 5. Sources of Credit
Thick File, Thick File,
No File Thin File
Low FICO High FICO
< 3 tradelines
Definition No record on bureau
Mainly inquiries
FICO < 680 FICO > 680
Credit Options: 2nd Tier Traditional Top Tier Traditional
SHORT TERM LENDERS Financial Institutions Financial Institutions
Pre-Crisis
Credit Options:
Top Tier Traditional
Post-Crisis and SHORT TERM LENDERS Financial Institutions
Card Act
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 6. A Growing Risk
• Median household income has
reached lowest amount in over a
decade
• Economic trends have pushed
more and more Americans into
economic distress:
– Declining housing market
– Unemployment rate of over 10%
– Job loss
– Mortgage troubles
Source: Census Bureau
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 7. A Growing Risk
Source: Bureau of Labor Statistics Partial Source: American Bankruptcy Institute
• Unemployment rate has consistently increased
• January 2010 saw first decrease in rate since early 2008
• The #1 reason for bankruptcy filings from 2007 – 2009 is job loss
– At the end of 2009, bankruptcy filings were up 34% over 2008
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 8. How can I maximize the opportunity?
• Understand why the consumer is there and what has lead them to you
• Your most important responsibility is to service and fulfill their Primary Request
efficiently and effectively yet profitability
• Two examples of a Primary Request:
• Short term unsecured loan
• Check Cashing
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 9. Industry Drivers
Top 3 reasons underbanked households use payday loans
• 43.2% - easier to get a payday loan than to qualify for a bank loan
• 25.9% - the payday loan place is more convenient
• 16.0% - don’t qualify for a bank loan
Top 3 reasons underbanked households use check cashing services:
• 55.6% - the place is more convenient
• 17.6% - to get money faster
• 10.6% - don’t have a bank account
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 10. The unknowns
• Beyond the Primary Request what else could you do and could you do this
better than their provider?
• Is there an upsell or cross sell opportunity?
• Have they been elsewhere?
• What do they use elsewhere?
• What was their performance elsewhere?
• Do they have an open line of credit elsewhere?
• What is their product behavior elsewhere and so what is your opportunity?
• This question is the same for both new and returning customer
• it is not just “have I seen you before and what happened when I did?”
• it is also “what has happened since I last saw you?”
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 11. Knowing the unknowns
• Unknowns represent risk as well as opportunity
• If you know what is unknown to your competitor you can out perform them
and build broader, deeper and more profitable customer relationships
• To know the unknowns you need to use data
• Your data is one of your biggest assets, perhaps even a fixed asset
• Buildings depreciate in 37½ years
• IT depreciates in 3 years
• Data depreciates in just 24 months1
• In UK if a B2C database has not been fully refreshed in 36 months it is not
considered to have any value for list rental2
• Use your data or lose the value of one of your fixed assets
1 Source: Direct Marketing Association
2 Source: Audit Bureau of Circulation
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 12. Using data
Leveraging your data assets:
• Capture
• Collate
• Protect
• Mine
• Supplement
• Deploy
• There is no uniform pull or solution
• The US consists of multiple diverse markets
• What works in one place is not guaranteed to work in another
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 13. A Diverse Geographical Market
Geographical Loss Rates
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 14. Using data
The realities of leveraging your data assets:
• You will incur expense by using internal or external data
• You may turn down more consumers
• You will be more efficient
• Better decisions
• Consistent decisions
• Faster decisions
• You will reduce storefront and operating expense
• You will deliver a better customer experience leading to higher retention
and repeat rates
• You will make more money
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 15. Theory vs. Practice
• Have an expert analyze your
• Population (store DNA)
• Marketing
• Process
• Results
• All are linked it is not just about credit risk and underwriting rules
• An experienced risk analyst has the ability to do this and create the
opportunity but use one that has seen it , done and deployed it in this
market.
• Your GM / COO / CMO must execute and operationalize the
opportunity
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 16. What to look at
• Use your own IP & data and the best external IP & data
• Deploy it on the best enterprise wide system
• Third parties like CL Verify can help you create, build and deploy it but
you must operationalize and adopt it
• There is a hard and soft investment for you to make
• Does it work?
• CL Verify’s check cashing solution when deployed gave a nationwide
operator a $15:1 ROI and was paid off in two weeks
• CL Verify’s Credit Risk tools gave a nationwide storefront lender a
$14:1 ROI and was paid off within 6 weeks of implementation
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 17. Methodology
• Is a continuous process
Evaluate
Measure ≤6 month cycle Test
Deploy
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 18. Credit Solutions Footprint
• Near-prime credit performance records on over 10 million unique consumers
• More than 60 million inquiry and performance records in aggregate,
representing more than $21B in loan decisions
• Each month the file grows by:
– 1.5 - 2 million discrete inquiries
– 250-300,000 new SSNs
– 500-600,000 new loan records
• $8 Billion in near-prime loans in 2009
• See over 70% of the online and roughly 30% of the retail storefront near-
prime loan applications
• Established new credit trade lines on over 3.5 million consumers
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™
- 19. Colin Reid
CL Verify, LLC
3030 N Rocky Point Dr, Ste 670, Tampa FL 33611
T: 1-813-466-1704
E: creid@clverify.com
Confidential and Proprietary
© 2010 CL Verify Credit Solutions™