Navigating Consumer Financial Hardship in Uncertain Times
Monday June 29, 2020
How SCORE’s data-driven insights
helps lenders proactively manage customer hardships, pre-delinquency
It’s no secret that many Canadians are facing unprecedented financial
hardships due to the COVID-19 pandemic, including their ability to repay debt
obligations. Yet with more uncertainty ahead, lenders are forecasting economic
headwinds that could result in emerging risks across mortgage, credit cards,
and other personal lending segments.
To-date, many lenders have worked with customers to offer deferment and
accommodation options, to temporarily provide financial relief.
But as businesses’ continue to operate under "a new normal,” how can lenders
better refine their processes to work with customers? How can they become more
efficient in debt collection, managing aspects of financial hardship and
attrition where volumes are predicted to swell?
HOW SCORE ADDS VALUE TO YOUR BUSINESS
SCORE delivers
robust delinquency scoring models based on our unique, in-depth consumer risk
and payment behavior measurements. These credit bureau-based delinquency models
help you better segment, prioritize, and action on portfolio risk.
Put simply, our collection models provide you
with deeper insights to understand who to target and better qualify and
personalize financial hardship options. This intelligent targeting allows you
to optimize your customer relationships and retain your most valuable customers
for future returns.
The result
is significantly improved accounts receivable management performance,
including:
- Reducing credit losses and operating expenses
- Lowering attrition for longer lifetime customer value
- Improved customer satisfaction and Net Promoter Score (NPS)
HARDSHIP IDENTIFICATION: HOW
OUR MODELS HELP
Built solely for
delinquent accounts, our collections scores offer unique features:
- Targeted – over a dozen delinquency scorecards developed on credit bureau data, utilizing homogeneous predictive datasets estimating a customer’s ability and willingness to pay
- Dynamic performance window – uses an "ever”’ cure definition to determine the probability of curing in 90 days or less, which is particularly sensitive to downward collection score migration
- Ease of use– leverages similar statistical methodology as traditional scorecards, proven effective as a supplementary tool to identify meaningful swap set opportunities
The short performance window and
dynamic nature of our collection scores provide a use case as an early warning
indicator of financial stress. By complementing the lender’s existing risk
framework with collection scores, businesses can more strategically fine-tune
their loss mitigation approach to maximize the bottom-line.
OUR APPROACH
For over 20 years, our team has developed the depth and breadth of
experience to objectively analyze, clarify, recommend, and execute strategies
and solutions that deliver unparalleled results.
We work collaboratively with you to find solutions that increase returns with
little disruption to your internal operations. Our process includes:
- Research - Validations to evaluate the efficacy of our models in your current business environment.We analyze how existing processes, strategies, and risk tools interact with SCORE collection scores to demonstrate the added-value opportunity.
- Analysis - Portfolio analysis to identify account segments and strategies for your contact and collection treatment paths. With more intelligent portfolio segmentation, SCORE can recommend tactical approaches providing focus for your customer care and collections resources.
- Recommendation - Refining your current pre-delinquency and early-stage delinquent segmentation strategies. Leveraging our delinquency debt models can yield insights into leading risk indicators. This, in turn, can capture the behavior or risk profile of your customers for more targeted action and improved business results.
SCORE has proven results in a pre-delinquency application where our
scores were used as an additional overlay to better identify cohorts of at-risk
customers in advance of a delinquent event. In fact, a
recent joint study with our credit bureau partner analyzed 2MM current credit
card customers, demonstrating how a blended score approach (generic bureau risk
scores and collections scores) can complement one another in a pre-delinquency
risk mitigation strategy to support improved major derogatory risk
identification, retention, and profitability.
PROVEN
RESULTS
- 4 out of 5 major Canadian banks leverage SCORE collections scoring
- Successful use cases include:
- 12% write-off lift in a pre-delinquency strategy
- 30% lift in the first 60 days and a 10% lift over four years for outsourced accounts
- 10% to 20% lift in recoveries for post-write off accounts with a similar benefit to OPEX
"SCORE has helped us review our
agency outsourcing. The SCORE team developed a strategy on how to maximize
returns, and introduced us to top-performing partners in the market. Through
the modeling process, we were able to get a lot clearer on what we needed to
do, and we were certainly pleased with the 20 percent lift in returns.
I
can't say enough about the SCORE team and their approach. They are a great
group of people who provide clarity and are able to simplify the process for
their clients. SCORE always has great ideas, and they are particularly good at
getting down to the bottom line benefit. I would highly recommend them to
anyone in the accounts receivable management space”.
Director of Collection, Schedule 1
Chartered Canadian Bank
"We have worked on multiple
scoring validation projects with SCORE Statistical over the past several years,
and they have always delivered on time and at a more detailed level than
required. Their flexibility and ability to take on projects on short notice
allows us the flexibility to manage our internal resources and projects more
effectively.”
Thomas Higgins, Director of Credit Risk
& Fraud, PC Financial
"It
was a pleasure to tap into an experienced advisory. We learned how to analyze
our competition, improve underwriting and risk management and drive immediate
business value. SCORE acted as our trusted advisors on every front, providing
macro impact that took us to the next level.”
Natalie
Bell, Co-founder and COO, Magical Credit
If you’d
like to find out more about SCORE’s capabilities in pre-delinquency,
collections and hardship, contact us today on 647.309.1803 for a free
consult. SCORE helps lenders predict which accounts are most likely to
collect through advanced segmentation and over 20 years of trusted
advisory to improve your bottom line.