Collections & Recovery Your Collections Message — If It’s Long, It’s Wrong

Man reading long email
Jan302015

Let’s say you’ve sent a customer who is behind on their payments one or two reminders and have gotten no response. It seems the customer just isn’t getting the message. If the debt’s been charged off, this situation becomes more prolonged, expensive and serious. Whether it’s a collection or recovery effort, the fact remains: You’re being ignored.

So what do you do? Talk louder? Communicate more frequently? Use more channels?

Any seasoned collector will tell you this doesn’t always work. In addition, regulators such as the Consumer Financial Protection Bureau (CFPB) are looking to identify any collection efforts that don’t fall within regulatory guidelines.

Despite the fact that people are more likely to read and respond to short messages, regulations and the need to clearly state the case to overdue borrowers means that messages are getting longer — often much longer.

One organization taking a different approach is Lloyds Bank.... [Read More]

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Fraud & Security 2015: The Internet of Threats and Other Things

Binary code
Jan282015

So far, 2015 has been a mixed bag. Two traditional January events – the Consumer Electronics Show (CES) in Las Vegas and the World Economic Forum in Davos, Switzerland - that are usually bubbly, if not downright effervescent, were a bit flatter this year.

Why? Having been pummeled by high-profile security breaches in 2014, business and government leaders are all too aware that front-page breaches like Target and JPMorganChase are only a taste of things to come.

The Internet of Threats

At CES, the Internet of Things (IoT) was again a hot topic, as connected solutions really hit their stride. On the show floor, crowds thronged around everything from an Internet-enabled craft-brewing machine to an entire smart house. An estimated 25 billion connected objects will be online in 2015.

But IoT is not all craft beer and domestic utopia. In a speech at CES, US Federal Trade Commission chairwoman Edith Ramirez... [Read More]

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Customer Engagement Mind the (Generation) Gap: Millennials and Venmo

Millennials
Jan272015

Venmo, Venmo, Venmo?  Sounds like a Latin proverb doesn’t it, but if your ears didn’t perk up right away at the name of this break-away payment startup, then pay attention.

Venmo is a hybrid that combines a smartphone payment app with a social network and has become one of the Millennial generations go-to apps. According to Business Week, Venmo’s on fire: in the third quarter of 2014, Venmo said it processed $700 million in payments, up from $141 million year-over-year. That is still just a fraction of the ~$5T US payments card market in 2013 (Nilson Report), but the growth is staggering.

Payments, social networks and emoji

Venmo allows users to send payments to each other with their smartphones, a capability that is extremely popular with rent sharing, tab-splitting twenty-somethings. Reimbursing a friend no longer involves cash –– since 25% of millennials have less than $5 cash on them seven days a... [Read More]

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Risk & Compliance Analytics Must Work Harder in Strategic Planning

Strategic planning 2 profit path
Jan262015

Until someone devises a crystal ball for a lending portfolio’s profitability, strategic planners will increasingly turn to analytics. Many banks have already gone well beyond the traditional use of business intelligence (BI) to analyze their past and current financial performance. They’re using forecasting models to predict how their profit and loss (P&L) statement will look 12 or 24 months out.

While useful, these forecasts are limited. They often lack sufficient granularity to identify the most powerful drivers behind P&L components and to accurately quantify the impacts of making changes to them.

Moreover, analytics rarely look across departments to reveal how these drivers interact. It can be hard to say definitively which actions to take in which combination and sequence to improve profitability forecasts.

In our experience, analytics can work harder for strategic planners, providing the clarity needed to avoid missteps or delays in approvals and execution. What we see as... [Read More]

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Risk & Compliance Model Management That Fits Diverse Needs

Model Management One Size Does Not Fit All
Jan222015

As those of you who follow this blog know, I’ve been discussing the importance of centralized model management. But centralization should not translate into one-size-fits-all.

Indeed, banks vary greatly in how they use analytics across their enterprise and the scope of their efforts to standardize lifecycle model management processes. Among our clients, we see such diversity:

A top-five US bank is centralizing management of every model across its vast enterprise. A leading Asian bank is initially focusing on ensuring their models in development achieve Advanced Internal Rating Based status under the Basel III global standard. A top-five Australian bank seeks to bridge current process inconsistencies around model tracking and validation of Basel rating models and decision models across different countries.

Because of these varied needs and goals, configurable workflow tools are a core component of any model management infrastructure. It’s essential to have the flexibility to align workflows with the... [Read More]

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Fraud & Security US Chip and Sig Strategy: Days of Future Past?

X Men - Days of Future Past poster
Jan212015

Do you remember those early days at school where the teacher implored you to make sure that your handwriting was neat and tidy?

Most of us get sloppier as we get older, and we adopt a slightly different style — different pressure, different emphasis, a flourish with the pen here, a glide across the characters there. I have recently been selling a property that I acquired over a decade ago and it has meant accessing papers long since stored away. Had I not known that the writing was my own on some of the aged documents, I would have sworn that it was penned by someone else’s hand.

So if we accept that there our signatures change for many reasons — not forgetting the media used, the pen wielded and the occasion involved — then how can a stranger be expected to authenticate our identity by comparing today’s signature to... [Read More]

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Risk & Compliance Three Things We Learned from Our Latest Banker Survey

Risk Survey Report Cover
Jan212015

Happy New Year!

We’re kicking off 2015 with the release of our latest credit risk survey results. The bank risk officers we polled in December offered interesting insights into the potential financial and economic pitfalls we may face this year. Here are three results that grabbed my attention.

Credit card debt is expected to rise. In the banker survey, 57 percent of respondents said they expected credit card debt to rise. In addition, 42 percent expected consumer loan delinquencies to rise, while 11 percent expected delinquencies to decline. However, respondents did not see consumer demand for credit slowing – 58 percent expected the amount of new credit requested to increase, and just 6 percent expected a decrease. The wealth gap is perceived to be a big deal.Nearly 74 percent of those surveyed said “the wealth gap poses a risk to the financial system in North America.” That is an increase... [Read More]

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Collections & Recovery The CFPB Will Shine a Brighter Light on Collections Reporting in 2015

Collections in Spotlight
Jan152015

Since its inception, the CFPB has made debt collection a top priority. I have highlighted some of the Bureau’s activities in previous posts (in April and January of last year). Last month, the CFPB again demonstrated laser-focused interest in this subject by holding a field hearing in Oklahoma City on medical debt collections. Not surprisingly, there were several noteworthy developments.

The event featured a major speech by Director Richard Cordray, the announcement of several new Bureau initiatives, as well as a panel discussion on medical collections involving a group of experts. Jim Wehmann, the leader of FICO’s Scores division, was invited to join the panel of industry and consumer advocates.

Jim highlighted FICO’s research efforts in developing the latest and most predictive credit score version, FICO® Score 9. He discussed the positive impacts derived from the score’s innovative treatment in differentiating between unpaid medical and non-medical collections, as well as... [Read More]

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Collections & Recovery Collectors Take Note: Consumers Are Paying Debt Differently

Webinar details
Jan142015

Banks have a new competitive battleground: Debt collection.

The same high level of attention is being given to debt collection as has long been given to the front end of the credit process: offering mortgages, HELOCs, personal and auto loans and payment cards.

Why is debt collection being added to the list? Because there’s less money to go around and consumers are managing their budgets differently.

In years gone by, consumers could take out a home equity loan, line of credit or tap into a retirement account to stay current. Today, home values are only slowly climbing back to pre-recession prices and many homeowners remain under water. Credit is tighter, and harder to qualify for. Retirement accounts aren’t being funded the way they were pre-recession, and consumers have fewer resources for debt payment.

Debts are also being paid slower and as a result, first and third parties are... [Read More]

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Fraud & Security Fighting Financial Crime — Why FICO Acquired TONBELLER

Tackling Fraud-thumb
Jan132015

FICO announced today that we have acquired TONBELLER an innovative provider of financial crime prevention and compliance solutions based in Bensheim, Germany. With this announcement, FICO has moved firmly into the rapidly growing market for financial crimes and compliance solutions. We intend to bring the benefits of advanced analytics and a risk-based approach to a field dominated by older, relatively inflexible, rule-based systems.

The need for these solutions is absolutely critical. CROs are under mounting pressure to manage increasingly sophisticated fraud / financial crimes as well as an increasingly dynamic regulatory environment – and to do so amid growing time and resource constraints. This is exacerbated by the fact that incumbent, rule-based systems are proving to be inflexible and costly to maintain in the face of evolving regulations – and the penalties for this inadequacy can easily reach into the billions of dollars in fines, increasing the institution’s risk and endangering... [Read More]

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