Saying ‘Yes’ to No-Hits: TransUnion’s Andrew Sigfrid Proposes a Risk-based Strategic Approach

As Canadian credit providers look to gain a competitive edge in a highly saturated market, many are missing an untapped consumer pool: the no-hit population. The reason: It’s too risky. No-hits have a fraud rate eight times higher than hits, so it makes sense most organizations are declining the population without further investigation.

So, how can you confidently increase approvals of this largely underserved market? We sat down with Andrew Sigfrid, Advisor, Fraud Analytics Consulting at TransUnion, to learn more.

Q: What is a no-hit? 

Andrew: Essentially, it means TransUnion can’t match the full identity of an inquiry sufficiently to a single credit file. Since financial institutions and creditors rely on us to help them make decisions around creditworthiness and identity legitimacy, if we don’t have data on a consumer, they’re classified as a no-hit and legitimate identities could potentially be tossed into a bucket with synthetic identities.

Q: How have organizations been handling the challenge so far?

Andrew: Many banks and telecom providers simply reject all no-hits. Other organizations require customers to jump through hoops; for example, the customer will be required to go to a branch in person and provide additional information, such as ID or income verification.

The approval process creates friction for consumers and extra work for employees, so many organizations just decline them all — even the no-hits who are legitimate consumers.

Q: Where does that leave the legitimate consumers?

Andrew: Ironically enough, it often leads them to your competitors. If you consider the lifecycle of a no-hit, which is defined as a credit file TransUnion hasn’t seen before, immediately after they’re deemed a no-hit, they officially become a hit because we’ve now seen them. As soon as legitimate consumers are declined, they frequently go to a competitor.

Now, the consumers are a hit, and the competitor is going to treat them differently. The likelihood of turning them into an approval is much higher. So in a sense, by not properly assessing this population, you’re inadvertently propping up your competitors and giving business to them.

Q: Why is now the right time to rethink how organizations approach no-hits?

Andrew: For starters, it’s a market most organizations haven’t sufficiently considered before. Additionally, in Canada, under the Immigration Levels Plan, we’re seeing and will continue to see historic levels of immigrants entering the country. This is likely to increase the number of no-hits — many of whom will be legitimate consumers.

By focusing on the no-hit population, organizations can boost their business — while doing the important work of helping new immigrants establish credit and begin to build a financial foundation in their new country.

Q: How is TransUnion helping organizations increase approvals for no-hits?

Based on a TransUnion analysis, no-hits comprise 7%–10% of credit applications on average; yet actual approvals are significantly lower at 2%–4%. Increasing that approval rating a percentage or two could be great for business. Whereas other providers leave organizations to their own devices to deal with no-hits, at TransUnion, we’re here to help.

With TransUnion TruValidate™ Identity Exchange, which provides industry-leading fraud capture rates, what we’re doing is verifying identities and assessing identity risk against a broad set of data. Identity Exchange scores no-hits by looking at how elements of that identity are being utilized across the entire bureau ecosystem. So, even if TransUnion hasn’t seen the full identity of an applicant before, it may have seen individual elements, such as name, address, phone or SIN, across more than one credit file.

With Identity Exchange, the worst-scoring 25% of no-hits contains 80% of all no-hit fraud. The best-scoring 50% contains only 8% of all no-hit fraud. Essentially, with this solution you remove a good chunk of the fraud, enabling you to approach this group with confidence. Because we provide a prediction about the risk of an identity, even though we can't match it to a credit file, you have insight to decide whether or not to take a chance. You set your risk threshold and score range, and then decide the level of authentication required to move forward — basing the level of friction on the level of risk.

Ultimately, you can hit a higher approval rate than you would have traditionally, land more business, improve the customer experience and mitigate extra work for your staff.

Check out our new video or contact us today to learn more about how TransUnion TruValidate Identity Exchange can help grow your business by targeting underserved no-hits.