Risk & Compliance Financial Health: The Key to the Future of Customer Acquisition

Feb092017

For all the differences between traditional banks and new online lenders, there is one business challenge that unites both groups: acquiring new customers. Despite the advancements made by online lenders in many traditional financial services processes (such as account opening), the methods most online lenders use to advertise to and acquire new customers come straight out of the bank marketing playbook – third-party brokers, television ads, and even direct mail solicitations. While online lenders experiment with offline marketing tactics, banks are aggressively ramping up their online marketing efforts, with total digital ad spend by U.S. financial institutions predicted to top $10 billion in 2019 (up from $5.3 billion in 2013). This shift is being motivated by continuing declines in branch activity and the increasingly-evident risks of branch-based sales strategies. The result is that both groups are converging on a set of established acquisition techniques that are compatible with a post-branch... [Read More]

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Fraud & Security How Norvik Banka Fights Money Laundering in Latvia

Norvik Banka exterior photo
Feb092017

Bank regulators in Latvia have increased scrutiny on banks suspected of allowing money laundering, resulting in record fines and more bank audits. One of FICO’s customers, Norvik Banka, is taking an early lead in this fight, using the FICO® TONBELLER® Compliance Solutions to fight money laundering and financial crime. “We had been using an in-house system to comply with Latvian regulations around money laundering, and based on the latest AML audit we ran a tender with global AML IT providers, of which FICO TONBELLER provided the best fit for our organization,” says Oliver Bramwell, Chairman of the Board at Norvik Banka, which has the country’s widest network of branches and finance and accounting groups. “The FICO TONBELLER system will allow us to improve transaction control significantly, enhance transaction transparency and decrease the bank’s operational risks.” Mr Bramwell was interviewed for an article that appeared last week in Retail Banker International.... [Read More]

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Risk & Compliance FICO Research: Are Millennials Really Abandoning Credit?

Feb082017

Nothing fascinates us more in the world of demographics than what the Millennial generation think, do and how they act.  One thing for sure is that, as they vie with the Baby Boomers to be the largest demographic group here in the USA, what they do is important. And we don’t need to be statisticians to know that the Baby Boomer generation isn’t going to be getting any bigger. The question for many in financial service boils down to this: Are Millennials really abandoning us? The topic came to mind for me recently as I was asked to be part of a panel discussion on credit and the economy at an ABS East conference. Since much of what gets said about Millennials seems to be more opinion than fact, I decided to look at a few stats and see if we could cast any light on what might be happening.... [Read More]

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Collections & Recovery What We Heard When UK Collectors Sat Down

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Feb082017

Last week I sat down with around 20 executives who manage collections for both lenders and debt collection agencies in the UK, to discuss what’s happening in the industry and how analytics — FICO’s specialty — can help. I will discuss my takeaways from this meeting in a separate post, but first I want to share some of the statements made during this meeting. If you ask me, the diversity of opinions in this group, and the participants’ clear desire to improve collections and customer relationships, show how much the industry is changing. This was not your father’s back-room chat on how to squeeze people for cash. This was a group of highly engaged professionals who understand regulations, customer needs and technology as well as anyone in the lending industry. Here are some quotes that should get anyone in the collections industry thinking. Regulation “The FCA is asking, ‘Are we... [Read More]

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Fraud & Security Two Ways to Gain from Measuring Your Cybersecurity Posture

Cybersecurity posture score dial
Feb072017

Fighting cybercrime is often associated with preventing loss rather than generating a tangible benefit for your organization. However, understanding cybersecurity isn’t only about tackling the negative. If you understand your organization’s cybersecurity posture, you can not only prevent loss but also benefit in at least two ways: 1. Working with customers, partners and prospects. Customers worry about the cybersecurity risk you as a vendor could introduce to them. Tackling this issue can lead to lengthy questionnaires as part of their procurement process. However, with a good understanding of your cybersecurity posture, you have much of what is needed to provide the answers quickly and easily and in a way that is easy to understand. When you can demonstrate good practice and benchmark your cybersecurity posture with your competitors, you gain a competitive advantage. 2. Getting cyber insurance. Cyber-readiness is increasingly a necessity for organizations, but for insurance underwriters, evaluating an organization’s cybersecurity... [Read More]

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Collections & Recovery How Thames Water Cut Bad Debt by 11% in a Year

Thames Water logo
Feb072017

Think of collections and most people think of angry phone calls and repossessed cars and homes. But what happens when you provide an essential service you can’t switch off? That’s the case for Thames Water, the UK’s largest provider of water and wastewater services, which uses technology to increase results. Thames Water has reduced bad debt by 11% in the last 12 months by innovating its collections process using FICO® Debt Manager™ solution. For its achievement, Thames Water has been awarded the FICO Decisions Award for Debt Management. “The introduction of Debt Manager 9 has allowed us to design our treatment strategies from the bottom-up — rather than building strategies to the system limitations, we built them to the business and customer needs,” said Ross Betts, Thames Water’s collections system, strategy & segmentation manager. “This program has been hugely successful, not least because it managed to implement several ambitious goals... [Read More]

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Risk & Compliance Truth Squad: Is FICO Score 700 the Same as VantageScore 700?

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Feb062017

Securitization plays a key role in driving increased liquidity in the mortgage market, ensuring that banks can fund more loans, at lower cost. This in turn gives consumers greater access to affordable mortgages. FICO Scores, of course, play an important role in the risk management and transparency that powers the secondary market. Now VantageScore is claiming that its score can be used instead in GSE underwriting (and by extension, securitization), as a one-to-one replacement for the FICO Score. Could a clean swap-out work? It’s time to set the record straight. Claim: A seamless mapping exists between FICO Score and VantageScore, one that will hold up over time. Truth: The FICO Score and VantageScore, while sharing the same score range, do not share the same odds-to-score relationship, meaning the risk at a given score is different. The relationship between the two scores is not constant and any analysis that attempted to... [Read More]

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Fraud & Security What Does Your Wearable Tech Tell a Cybercriminal?

Runners with wearable tech
Feb022017

The short answer: potentially a lot more than you intend. Let’s say you take a walk or run early every morning, on the same route in your favorite park, before the sun comes up. Your fitness wearable times your run, tracks your progress, and calculates your distance based on location, which is great—until that information, stolen during a data breach, ends up in the hands of a cyber stalker. Now, all of a sudden, you’ve unwittingly been put in a very vulnerable place. It’s true, this type of theorizing can be a little macabre. So are the ethics of self-driving cars, and many other aspects of the new world of artificial intelligence we now inhabit. The reality is, every category of technology carries inherent risks, and as people become more connected with technology in every aspect of their lives, we must be cognizant of those risks. New technology creates new... [Read More]

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Risk & Compliance FICO @ AFSA: Auto Lenders Losing $2-3B to Fraud

Jan312017

One of my favorite movie scenes is from Blade Runner. A policeman is interrogating his detainee, asking a series of questions to determine whether the person is a real human-being or a synthetic. Funnily enough, this scene parallels the problems discussed at a FICO roundtable on ‘How to Fight Auto Loan Fraud’ held this week at the AFSA Vehicle Finance Conference & Expo. While none of the 25 attendees resembled Harrison Ford, they agreed they were getting busier looking for synthetics, just a different kind of synthetic. In this case, we were talking about synthetic identities, a type of fraud in which a criminal combines real and fake information to create a new fake identity that is used to open fraudulent accounts and make fraudulent purchases. The use of synthetic IDs in the auto loan industry has been a growing problem in the last 18 months. Attendees at the roundtable... [Read More]

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