Fraud & Security PSD2 Is Coming and Nobody Knows It

Bar with sign about card surcharge
Jun072017

Many of you reading the headline will be thinking – yes we do! We are even getting bored of talking about PSD2. But I’m not talking about us in our payments bubble. I’m talking about the general public. Small business owners and people in love with their Amazon 1-Click don’t know that PSD2 is about to rock their world, or at least change how they take and make payments. Last night I went to a local pub and while sipping my Merlot noticed a sign behind the bar “50p surcharge on card payments below £10”. It’s not unusual to see variations of this sign in small businesses, and no one has told them that from January they won’t be able to surcharge. I spoke to the barman, who turned out to be quite savvy about card payments, but he hadn’t heard of PSD2 and didn’t know that this would happen.... [Read More]

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Risk & Compliance Early Warning Signs on New UK Card Accounts

Pile of credit cards
Jun072017

As noted in my previous post, over the last five years there has been significant growth in exposure, card balances, sales and, to a lesser extent, cash usage on UK cards. This is despite a decrease in the number of total accounts, as acquisitions have not outpaced attrition. Looking at our March 17 report, less than 1% of total card accounts were booked that month, and just under 8% of accounts had been on the books 12 months or less, showing slow growth rates. Fortunately, payments growth has exceeded these metrics and total 1 to 3 cycle accounts and balances decreased over this period. That reduction in delinquent balances isn’t true across the board, though. If you look at the vintage level, you see a different story. Veteran accounts (5+ years) are responsible for the positive news above, and to a lesser extent Established (on the books 1 to 5... [Read More]

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Analytics & Optimization The Future of Analytics: The Revolution Will Be Unstructured

Picture of Osvaldo Driollet
Jun052017

Although there has been much speculation over this statistic’s origin, most industry experts agree that 80% to 90% of the world’s data is unstructured data, and about 90% of it has been produced over the last two years alone. Of these unthinkably vast stores, only 0.5% is effectively analyzed and used today. In the business world, most unstructured data lies in customer-related text, which is abundant and available. However, most organizations don’t know how to efficiently extract predictive elements from unstructured customer data. They’re not sure how to reap the value of these insights by using them to boost the performance of predictive analytics, and make better operational customer decisions. But, done right, extracting valuable predictive insights from huge quantities of text takes just seconds. The Future Is Unstructured The tech industry is full of predictions, but in this one, I have high confidence: The future is unstructured –– because... [Read More]

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Risk & Compliance How Do FICO Scores Bounce Back After Negative Credit Info is Purged?

FICO Score logo
Jun052017

In the depths of the Great Recession, tens of millions of consumers had lapses in meeting their credit obligations. Some seven years down the line, those missed payments are being purged from credit reports in accordance with the Fair Credit Reporting Act, and these consumers may now be looking at a clean (or at least cleaner) slate. To find out how the FICO® Scores of these consumers might be impacted by this negative information being purged, FICO conducted research on a random representative sample of the 28 million US consumers who had a serious delinquency (defined as 90 or more days past due) between 2009 and 2010. This sample was divided into two groups: Those who had a delinquency removed from their credit report between May 2016 and July 2016. We’ll refer to this group, which numbers about 6 million nationally, as the “delinquency purge” population. Those who did not... [Read More]

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Collections & Recovery Collectors — Get Ready for the IFRS 9 Bucket Challenge

Ice bucket challenge photo
Jun012017

Remember the ice bucket challenge craze? Get ready for the IFRS 9 bucket challenge — it’s even more startling, and nobody’s standing by to give you a warm towel. Like GDPR, IFRS 9 poses major challenges for collectors, just as it does for accountants, IT, risk managers and anyone else in the credit business. So now let’s talk about what you can do. Note: While I’m just talking about IFRS 9 here, you do have to approach it and GDPR in concert, because in some areas they seem to be in conflict. You don’t want to gear up for IFRS 9 and then realize you have to undo some of your strategies or processes to avoid GDPR fines. Build your 30-day plan IFRS 9 says if a customer’s risk deteriorates — including becoming 31 days overdue — they go into Stage 2, and you have to start holding lifetime impairment.... [Read More]

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Risk & Compliance Attention Small Business Lenders!  The CFPB is Calling on You.

May312017

Update: On June 8, the CFPB announced a sixty day extension of the public comment deadline. Comments are now due by September 12. On May 10, the Consumer Financial Protection Bureau (CFPB) issued a Request for Information (RFI) seeking to learn more about the small business lending market.  If you are scratching your head as to why the CFPB is delving into small business lending, you are not alone. The CFPB was created to regulate those engaged in offering or providing consumer financial products or services.  Yet tucked into the massive Dodd-Frank Act is a small provision, section 1071, which requires the CFPB to issue rules regarding the collection of data to help identify needs and opportunities in the small business lending market and to facilitate enforcement of fair lending laws. For many years, this provision has been a lower priority for the CFPB. However, with the issuance of many... [Read More]

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Analytics & Optimization Explainable AI Breaks Out of the Black Box

Box stamped AI
May312017

Over the last 12 months or so there’s been incredible excitement about artificial intelligence and all of the amazing things it can do for us—everything from driving cars to making pizza (super-cool video!). But — and this is a big “but” — artificial intelligence comes with many challenges, including trying to decipher what these models have learned, and thus their decision criteria. In my last post, I discussed how regulations such as Europe’s General Data Protection Regulation will demand Explainable AI. This is a field of science that attempts to remove the black box and deliver AI performance while also providing an explanation as to the “how” and “why” a model derives its decisions. DARPA says Explainable AI or XAI: Produces more explainable models, while maintaining a high level of learning performance (prediction accuracy); and Enables human users to understand, appropriately trust, and effectively manage the emerging generation of artificially intelligent partners. Three Ways... [Read More]

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Fraud & Security Are the C Suite Complacent About Cybersecurity?

Notification of Tweet Chat
May302017

Given the significant consequences that face board members in breached organizations, you might expect that they are giving cybersecurity their full attention – but are they? Our recent survey with research and consulting firm Ovum sheds a revealing light on this.  Do they think the problem will go away? No one is expecting cyber-attacks and breach attempts to stop, and only 1% of respondents think that levels of attack will go down in the coming year, while 62% expect the rates of attack to increase. This reflects recent experience in their own organizations, 60% have experienced an increase in attempted data breaches in the past year, 24% of those polled have seen attempts increase in volume by more than 25%. Verdict: Not complacent – they recognize that cyber threat is on the increase. Are they investing enough to fight cybercrime? Although 62% of organizations expect cybercrime attack rates to go... [Read More]

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Risk & Compliance Unused Credit Card Lines Are a £90 Billion Problem in UK

Pile of credit cards
May302017

As the UK’s Financial Conduct Authority proposes that issuers reduce or waive interest rate charges for persistent credit card debt, it raises the question: Just how much credit card debt do Britons carry? The answer is: a lot more than they used to. FICO has just done research based on our FICO® Benchmark Reporting Service data, which includes the vast majority of cards issued in the UK. Our analysis shows that: Average credit lines on “Classic” cards (which excludes Premium cards, Student cards and Irish-issued cards) have grown 50% since 2002 to £5,062. The largest growth has been accounts which are 1 to 5 years on book (Established) and this vintage have the highest percentage of inactive accounts, 35%. Veteran (5+ years on book) has the highest % of unused credit on accounts which are spending. In January 2017 the average balance on accounts with limits £5,001 to £10,000, which... [Read More]

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Risk & Compliance Don’t Let “Averages” Mess Up Your IFRS 9 Impact Forecasts

IFRS 9 as digital clock display
May292017

The clock is ticking on IFRS 9 compliance. Preparing for Day 1 IFRS 9 impacts before models are fully built, tested and validated is a bit like preparing for a scheduled car crash: You know the event is going to happen and you know it will be expensive and painful, but you don’t yet know the exact amount of damage. It is tempting to seek comfort in averages from industry benchmarks or surveys. But just as you would never apply the brakes of your car during heavy rain based on the average stopping distance of an average car in average weather conditions, neither should you plan for your business’s IFRS 9 impacts based on average industry impacts alone. Don’t Go by Published Numbers A few widely published, well-intended surveys have attempted to prepare affected organisations for this event by providing estimated ranges and averages in respect of key impact measures.... [Read More]

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