This edition of Experian’s FutureProof expands on
some of the key presentations from this year’s Credit
Risk Summit, where we explored the customer’s
power to choose.
Empowered by access to more information, consumers
now have more control over choosing which product or
service is right for their specific needs, and also when,
where and how they want to be served.
Add to this a host of other factors, from risk and regulation
to the demands of a global economy, and organisations
are obliged to re-think, invest in and overhaul how they
choose to serve customers. In this rapidly evolving
environment, deciding how to proceed is complex.
For many organisations, being truly customer-centric
and understanding what this entails remains top of the
agenda. But given the range of possibilities available and
the speed at which technology is advancing, this can
simply remain an aspiration rather than a reality.
There is no doubt that the increasing power of today’s
consumer intensifies competition and drives innovation,
however one thing is certain – tomorrow’s winning players
will be those who give their customers the power to choose.
I hope you enjoy this edition of FutureProof.
Go To Market Sales Director
Exactly where the economy goes in the next few years
depends on our choices both as citizens and consumers.
We’ve just chosen the Conservatives and they are busy
implementing changes – such as tax credits and other
benefits – to balance the deficit. The Labour Party has
chosen a new leader, and he is proposing alternative
ways of managing and improving the economy too.
Then there are other factors that have to be counted,
such as the effects of interest rate rises, continuing low
inflation and the potential exit of the UK from the EU,
which could impact the economy and financial markets
in a variety of ways. Government policy decisions,
such as funding for Trident, may also lead to a new
referendum on Scottish Independence, which could
potentially have a considerable impact.
Increased prosperity and consumer spending
On average, each of us in the UK is now doing as well
financially as we were before the recession. As the
economic outlook brightens, consumer prosperity and
spending is also on the rise, which is great for the credit
industry. In fact, we predict that individual consumer
spending will be up to pre-crash levels within the next five
or six quarters. Interestingly, the fact that there are more of
us in the UK today than in 2008 means that total consumer
spending is actually above pre-crash levels already.
With increased consumer demand driving the economy
forward, we need to make sure that consumers continue
to have access to appropriate credit. Understanding
consumers and helping them to access the most suitable
financial products and services will help to maximise
spending within the right affordability parameters.
A strong labour market and higher wages
A strong, stable labour market is a major indicator of a
strengthening economy, and that’s what we have at the
moment. Unemployment has continued on its downward
march in recent months, which is improving the financial
outlook for thousands of families and giving the economy a
much needed cash injection.
The latest set of GDP results shows that productivity is
also on the increase, which means that the new jobs being
created are delivering more output than before. If this
productivity growth continues, and the labour market keeps
improving, the economy will grow too.
As well as seeing more people in employment, wages
are also increasing by 3% a year on average1
interest rates remain very low, many consumers are finding
themselves with more disposable income than they’ve had
for a while, which will lead to sustained economic growth
over the coming months and years.
What it all means for the credit market
Overall, the outlook for lenders is overwhelmingly positive.
Unsecured lending is on the up, and that’s set to continue.
What’s more, consumer confidence is high, income growth
is strong and labour market conditions are sound. All this
means that the economy should continue to grow strongly
over the coming months and years, providing excellent
opportunities both for lenders and the customers we serve.
Where there are unknowns in the economy, successful
credit providers will see these as opportunities rather
than threats. While some of your customers might have
been affected by the recent Budget changes, for example,
there may be ways that you can reach out to help them
with new products and services that meet their short-term
Coupled with improving economic conditions, the industry
is developing new technologies and data to minimise credit
risk and support more personalised services for customers.
By ensuring that products and services meet customers’
individual affordability requirements, these kinds of
technologies can help lenders to build long, trust-based
customer relationships, while achieving compliance with
FCA requirements and minimising financial exposure.
Despite these unknowns,
it’s mostly good news for
lenders at the moment,
with many of the economic
indicators looking very
CONSUMER CREDIT TRENDS
Working closely with you, our consultants and analytics
experts, we’ve identified some key trends in the consumer
credit market – particularly regarding mortgages and
THE MIX OF LENDING IS
VERY DIFFERENT FROM 2008
Credit cards and personal
loans are a smaller
proportion of consumer
lending – a trend in the UK
that has echoed the US
There has been
a huge growth
in motor finance
recently, which now
accounts for a larger
market share of new
lending in the UK
increased – there
are fewer mortgages
being issued, but at
The quality of lending is
very high across most
mortgages and motor
loans issued by captive
Unsecured new lending is
now very close to where it
was, pre-crisis, in
Head of Strategy
Head of Credit Services
We are living through a data revolution. More than 2.5
pieces of information are shared on Facebook
every minute, two thirds of the UK’s working population
are happy to share their personal details online2
estimated that 100 billion devices will be online3
All of this data gives us amazing opportunities
to improve the way we work and to deliver better,
more personalised services for customers. We can
also reduce financial exposure and risk, protect our
corporate reputations and help customers to make the
best-informed credit decisions.
Bringing credit reporting into the 21st century
The challenge for the industry is that many of the
mechanisms we currently use to share and report on
data have been around since the 1980s. Back then, the
internet was in its infancy and customers received a
paper statement from their bank once a month.
Now that the pace of life is dramatically faster, we all
expect real-time access to our financial data. There is
a risk, however, that underlying data technologies are
not keeping up with that expectation, leading to issues
of data accuracy and timeliness.
In one example, we found an organisation that had
recurring customer dates of birth, such as 5/5/1955,
in their database. On closer investigation, we found
that the business had filled in gaps in its database
with this ‘default date’ during a technology migration.
While it may have seemed like a good short-term
fix, this inaccurate data could affect credit
decisions as well as other key functions such
as customer marketing.
Data quality issues can also negatively impact the
customer experience. With more people than ever
checking their credit reports, we are now getting
around 300,000 data queries a year. To resolve data
queries faster and give customers the fastest possible
credit decisions, the industry needs to re-evaluate
current data quality measures and checks – including
the existing 28-day SLA for reviewing and addressing
A bright future for data
A new generation of data management and sharing
technologies can improve data quality for both you
and your customers. For example, it is now possible to
look through practically any data set to identify errors
and anomalies, and to provide rich management
information on data being submitted to the bureau –
helping you to address issues at the source.
We can only do all this if we
can connect to the data in a
timely way, identify patterns and
insights, and use those to make
better business decisions.
Industry partnerships could also help to improve data
quality and speed up any required changes. We are
currently in talks with industry stakeholders about the
concept of a data-sharing network. This would allow
consumers and businesses to inform just one data
holder to have their data corrected – improving the
end customer experience and saving everyone time.
Finally, we are challenging the traditional 28-day
SLA to improve the experience for customers with
data queries. We need to think about the speed that
data moves through the network, in a world where
a fraction of a second is now considered timely,
processes that operate over a timeframe of weeks
and months will increasingly be considered archaic.
Improving this is about instilling confidence and trust
in the system.
Winning customers’ trust
As customers take more control over who can see and
use their data, they will increasingly choose to deal
only with organisations they trust. As a result, data
quality is no longer a ‘nice to have’, it’s a major source
of competitive advantage.
So here’s something
to think about: are
you paying enough
attention to your data
quality, or could you
be doing more?
RESPONSIBLE CREDIT CHOICES
Director of Analytics
Director of Banking
Helping consumers make good credit choices is a win-win.
Increasingly, we’re finding that our website and social
media channels are powerful tools for educating
consumers on credit and giving them good financial
knowledge. We currently have 25,000 people following
us on Twitter, 100,000 people liking us on Facebook
and more than 10,000 people reading our blogs
Putting affordability first
While education is the first step, the ability to match
the right products to the right customers is also
critical – and affordability plays a big part in that. In
the past, a quick review of a customer’s finances was
good enough – but not any longer. The FCA requires
more in-depth affordability processes to protect both
lenders and customers.
Fortunately, we now have a range of data and analytics
technologies that make affordability a science,
rather than an informed guess. We can combine a
customer’s bank account information with details
of their rent payment, other monthly payments,
outstanding debts and more, to give a much clearer
view of their ability to pay back. It is also possible to
identify customers who may be exaggerating their
income, helping us protect both you and them from
Click to view the full infographic
Consumers’ needs are met by giving them access to
suitable products and services that help them live the
lives that they want. At the same time, you can comply
with FCA regulations for ensuring good consumer
outcomes, while minimising your credit risk.
While the benefits for consumers and lenders are
clear, helping consumers make the best credit choices
requires a certain amount of thought, not to mention
investment. It starts with education and it ends with
insight, systems and processes that match the right
products and services with the right customers at the
Education, education, education
When it comes to helping people make good credit
decisions, education is key. We have to work together
to debunk common credit myths and empower
customers to make better choices.
One way we are contributing to this is by starting
early, delivering financial education to thousands of
school-aged children across the country, as well as
to their teachers and parents. We are also following
up with educational programmes for adolescents and
students, as well as for adults.
RESPONSIBLE CREDIT CHOICES
Click to view the full infographic
We added consumers’
rent payment data to
their credit scores to
investigate the effect
this added insight
would have on their
62% of consumers who
had a ‘good’ credit score
moved to the ‘excellent’
band when their rental
payments were taken
38% of consumers with a
‘poor’ credit score moved
to the ‘fair’ band with the
addition of this data.
Combined with next-generation analytics
technologies, customer and credit data can help
you put customers on the right credit track like
The pre-qualification advantage
Pre-qualification is another great way to help consumers
make good credit choices, showing them which products
they are likely to be eligible for before they apply. This
kind of solution makes it much easier for customers to
weigh up their financial options and to find products that
suit them, both in terms of available credit limits and
affordability. There’s also less chance of customers being
turned down for products, which usually leaves a negative
mark on their credit scores.
Technology for life
For most customers, their affordability does
not stand still. For this reason, any technology
or data that supports credit decisions must be
continually updated and fully supported throughout
the entire lifecycle of the relationship.
In this way, organisations can help customers make
better long-term credit choices, as well as delivering
appropriate, affordable products at every stage of
the customer journey – from someone’s first loan to
supporting major life events like getting married or
having children. By constantly updating customer data,
it’s also possible to identify and mitigate any shocks
that are impacting a customer’s financial situation; from
the loss of a job, to a downturn in the local economy.
By accessing the right customer data at the right
time, it’s possible to dramatically reduce financial
and regulatory risk. The biggest benefit, though,
is the ability to help customers make better credit
choices: the surest recipe for repeat business
and longer, stronger customer relationships.
The Rental Exchange - additional insight
To find out more about any of our education programmes, follow the links below:
Values, Money and Me primary school resource - http://valuesmoneyandme.com/
Experian Experts Twitter - https://twitter.com/ExperianExperts
Experian Facebook - https://www.facebook.com/ExperianUK/
CreditExpert YouTube channel - https://www.youtube.com/user/CreditExpertUK
Experian Experts blog - http://www.experian.co.uk/blogs/consumer-advice/
A SEAMLESS EXPERIENCE
General Manager of
UKI Identity Fraud
Customers are now using digital and mobile technologies
to engage with organisations around the clock, and to
get immediate responses to their requests. They expect
banking services to work the same way.
Source: BBA - https://www.bba.org.uk/news/press-releases/mobile-phone-apps-become-the-uks-number-one-way-to-bank/#.VlQ5y_ntmH8
Source: Experian client insight from leading banks, 2015
Source: McKinsey - http://www.mckinsey.com/
In response to these consumer demands, organisations
are investing heavily in digital solutions, from SMS
banking services to on-the-move banking apps. In the
near future, we may also have video banking, where
consumers can talk to their financial advisors on
smartphones, PCs or tablets from the comfort of their
While online banking is now almost ubiquitous,
mobile is gaining ground rapidly. Mobile transactions
overtook PC-based transactions for the first time in
. In addition, the number of UK consumers using
mobile banking services increased by a staggering
941% between 2010 and 20151
, according to recent
The numbers from individual organisations back up the
trend. RBS and NatWest have 91% of their customer
base registered for internet banking, while Lloyds has
2.7 million customers registered for mobile banking
services. Meanwhile, Barclays has 1,980 log-ins a
minute to its mobile banking app 2
Good, but good enough?
While it’s clear that organisations are investing heavily
in their online and mobile channels, satisfaction levels
are still not high enough. This is largely due to friction
that still exists in the digital customer journey.
Some existing customers, for example, are not
recognised by their financial services providers when
they apply for a new product or service, requiring them
to provide their information again. Customers also
complain about the complexity of the information-
gathering process, with 150 to 200 pieces of personal
information typically required3
One of the biggest issues for customers are so called
‘breaks’ in the digital process. This happens when
customers begin an application online, and are then asked
to send in physical documents or receive paperwork at
home to sign and return. Friction can mount when online
ID checks aren’t passed, and unexpected manual checks
are required, possibly taking up to 48 hours.
This can all lead to unhappy and frustrated customers
and as many as 85% drop out of digital banking processes
before completing them (compared to just 15% in the
branch), according to McKinsey research4
. Some of these
customers may end up at the contact centre or branch,
but others will go to competitors who offer the seamless
digital experience that they expect.
A SEAMLESS EXPERIENCE
Maximising the digital opportunity
Increasing digital conversion could be much easier,
simpler and less expensive than you think. For example,
instead of sending paper documents, customers might be
given the option to submit their information electronically,
making the process much faster and easier for them and
for you. Over time, you may move to introduce completely
digital journeys, with no manual touch points at all.
One way to align customer expectation with reality is
the introduction of innovative pre-qualification solutions.
Potential customers are able to provide minimal details
and get a strong indication if they are likely to be
approved for a credit card - and what their limit would be.
In this way, customers can reduce the risk of being turned
down after a lengthy application, and they can protect
their credit scores too.
Above all, the journey to an effective, successful digital
environment starts with an in-depth analysis of customer
pain points at every stage of the journey. Once you
understand where your customers are running into
brick walls, you can begin to streamline the process,
maximising online conversion and increasing competitive
advantage. It’s all about listening to your customers, and
making the journey as smooth as possible.
Roy Vella is a digital expert, independent adviser and
consultant to a host of companies in the financial
services, digital and mobile space. Much as many
of the topics he addresses seem futuristic and
unreachable, everything he describes is happening all
around us. The idea of the Internet of Things is already
in full swing, where hyper-connectivity and information
transparency are opening up our global community. He
echoes Darwin’s belief that it’s not the strongest or the
most intelligent, but the most responsive in this ever
changing world who will survive.
Roy highlights five elements that are critical to success:
How can you ensure you’re ready for what’s to come?
Success in a digital age –
Roy Vella, Vella Ventures
Speed – it’s about moving fast and moving now
Transparency – it’s essential and leads to trust
Resilience – key in the changing dynamics of today
Simplicity – keeping it simple is essential, simplicity is the ultimate sophistication
Trust – is the new currency and it commutes across the brand and across networks
Creating a digital bank – Paul Rippon, Mondo Bank
THE PURSUIT FOR GROWTH
Financial Conduct Authority
Growth and diversity are front of mind for the FCA,
which wants to use its powers to prise open banking
and financial services to allow in more entrants,
encourage new ways of doing business and pave the
way for more competition and consumer choice.
Since 2013, changes have been made to reduce the regulatory
barriers to entering the banking market. For start-ups this means:
The climate of
change is meeting
the FCA’s remit
to drive more
Minimum capital reduced from €5mn to €1mn for small
Certainty of early authorisation offers credibility to enable the
recruitment of staff and negotiation with suppliers and agencies
A far more efficient, faster and cost-effective process
Regulatory expectations are made clear from the outset
with pre-application support and named case officers
Timeframes in pre-application and mobilisation are driven
by the applicant, not the regulator
held every year
OTHERS IN ACTIVE
TALKS WITH THE
FCA AND PRA
since April 201312
As a result: