Whether it’s refining existing strategies or developing entirely new policies, lenders need to find increasingly sophisticated ways of interpreting risk indicators to compete in a consumer-first and information-driven era.
Samantha Groves, Product Owner: CreditVision at TransUnion, takes a closer look at the role trended information can play in managing consumer risk and how incorporating these insights into lending strategies and marketing activities can help lenders make more informed decisions about their business.
From static view to trended: the dynamics of data are changing
With the rise of the consumer-first era, lenders are now faced with a new type of consumer that is becoming increasingly credit savvy and taking a more active role in their credit health. Faced with a wealth of information (literally) at their fingertips, the balance of power has shifted and consumers are now empowered to not only take control of their credit but also shop around for better rates and more attractive offers.
As lenders navigate this competitive landscape, one of the questions they should ask themselves is: Can I still rely on traditional data alone to inform my risk strategies and help me grow my portfolios? Having a more dynamic view of the consumer that includes account balances over time, actual payments made, and other credit behaviour patterns that emerge through trended information can provide deeper insights on consumers and help lenders make better decisions across the credit lifecycle.
Trended data reveals valuable customer behaviours
Let’s consider an example that looks at three consumers who, at a single point-in-time view, may look the same but who are in fact on very different financial paths:
They may appear to have similar credit histories, utilization and balances. However, if we view just the balance information over time, we can see the difference across each consumer and how their balances have changed over the past 24 months. While Grace is actively paying down debts, Michelle is steadily growing balances, and John is maintaining consistent utilization over this period. Insights such as these, together with the ability to identify transactor and revolver behaviour1 is made possible through trended data and can reveal different risk profiles that a traditional approach would not see.
Lenders armed with this additional insight into consumer behaviour are not only able to make more informed decisions but are further able to assist customers in managing their own credit. By utilizing products powered by trended data, such as a score simulator2, they can provide tools to their customers to help them understand how their behaviour impacts their score and empower them to become better borrowers – a win-win for lenders and consumers alike.
How lenders can incorporate trended data into their lending processes
By evaluating an individual’s credit usage and payment behaviour over time, lenders can gain a more accurate view of a consumer’s risk. Trended information and non-traditional data, such as payment ratios, are powerful tools that can help lenders refine their marketing and risk strategies.
More precise lending decisions are made possible with deeper data insights, and this can be provided by trended information - not only through scores - but also through powerful algorithms which can be integrated into lender’s decisioning environments. Algorithms that identify wallet share, payment-based behaviours, spend patterns and balance trends can be used to drive targeted campaigns, increase customer loyalty and retention and identify more cross sell and upsell opportunities.
It’s important to note that the benefit of moving from point-in-time views to dynamic views of consumers over time doesn’t end with the customer lifecycle. Lenders can help consumers understand and manage their credit better, which in turn may create a more stable credit ecosystem and help to foster stronger relationships between lenders and consumers. Better lenders can ultimately empower better borrowing.
Let TransUnion consult with your organization on how you can leverage trended data to help improve your ROI and build better customer relationships. In the end, trended data helps lenders evolve from being credit providers to being trusted financial partners who work to bring credit and financial inclusion to more consumers in a way that makes sense — and makes a positive difference.