Alternative data is now essential to successfully engaging and retaining customers across the lifecycle
In the consumer first era, it’s now a necessity to understand and anticipate consumer behavior, preferences and choices — and quickly. If you want to attract and keep consumers happy, you need as much information about them as possible to deliver the kinds of products, services and experiences they desire. Alternative data is ripe with expanded insights into consumer patterns that can help fortify your strategies.
While trended credit data has been accepted and used to gain an enhanced view of consumers, alt data was mostly considered an optional source. Not so anymore. Companies have realized that the more robust picture you have of consumers, the better. So, seeing checking and deposit account information, short-term loans, virtual rent-to-own, shorter installment loans and more gives you a deeper dive. This data, governed by the FCRA, is extremely telling and helpful, especially when coupled with trended credit data. When used together, an additional 60 million consumers can be scored and priced more effectively. This data also enables more customers to access traditional credit products, offering a better financial future for many.
Where to begin
Alt data in partnership with trended credit data has benefits throughout the customer lifecycle. Take marketing for instance — to increase response rates while optimizing spend, it’s important to identify consumers with a high likelihood of responding to specific offers. These may be consumers in the market for a particular product, or those who fall outside of traditional score cut-offs. With trended and alternative credit data, you can evaluate balances, payment behaviors and account activity to target the right consumers and improve response rates. Tailoring an offer to a consumer’s need is an essential but challenging element of marketing. Data outside of the traditional credit report can help uncover customer insights — such as a new auto loan that could qualify for a refi or revolving credit card debt that could shift to a personal loan — and facilitate more relevant offers.
The dynamic duo of trended and alternative credit data is also useful in the underwriting process where risk managers are under pressure to keep approval rates high and losses low. Being able to not only score more consumers, but also score them with greater precision is a huge asset. Take thin-file consumers who are typically denied credit or offered more expensive terms because traditional indicators signal higher risk. By adding alternative data, you get clearer insights into consumers’ risk profiles. This enables you to identify high-risk, as well as high-opportunity consumers, expanding your universe of customers without adjusting underwriting criteria. This also offers a competitive advantage as consumers are always on the lookout for (and more apt to show loyalty to) companies that anticipate their needs and offer products at compelling rates.
Always on alert
Let’s not forget fraud which is as pervasive, prevalent and costly as ever. Determining which customers should pass through identity verification and which should be put into manual review is critical. In a time when consumers demand a smooth experience, a lengthy manual review could cost you potential customers. To conduct thorough yet quick manual reviews, you need accurate and updated information about consumers’ names, phone numbers, dates of birth, aliases, businesses, bankruptcies, professional licenses and more. With the right data, you can reduce the impact and intrusiveness of manual reviews, verify customer identities quickly and decrease case review time.
Next, consider account management — an area in which companies invest millions of dollars. Understanding consumer behavior via alternative credit data can help you know when to proactively adjust credit lines, or contact consumers to help manage their accounts. In a higher delinquency environment, it’s also important to maintain good data hygiene with up-to-date customer information, such as phone numbers, addresses, emails, places of employment or vehicle registration data, to contact a consumer who has missed a payment or gone delinquent on their loan. Contact information can change frequently and is often the difference between recovering a loan versus writing it off as a loss.
Bringing up the arrears
Finally, when delinquencies do occur on accounts, insights into consumers’ willingness and ability to pay helps prioritize the collections process – which is of the utmost importance. Seeing actual payment amounts or whether a consumer is paying more than their minimum due can help you quickly identify accountholders more likely to pay, helping maximize recoveries. By refreshing data and using these strategies, you’ll likely see substantial improvements in the number of payers. After determining who’s likely to pay, you need to reach the right party quickly. Without fresh, actionable contact data from the get-go, you may struggle to maximize skip tracing efforts and increase recoveries. Having the right consumer identity data, along with sophisticated analytics to rank phone numbers or addresses, contacting the right party can be done faster and easier.
Alternative data is there for the taking and many of your peers have already realized and are benefitting from its worth. Knowing more about consumers and their behaviors and preferences is a win-win situation. When you offer the right products at the right time, consumers feel you’re genuinely invested and tuned in to their unique needs. Add to that a secure, seamless experience, and you’re firing on all cylinders. While today’s consumers are indeed demanding, they’re also appreciative of you going that extra mile and more likely to reward you with continued business. So go ahead, dig a little deeper. This is one occasion when being a know-it-all is a good thing.