THE MISSING LINK TO COLLECTIONS SUCCESS: CREATING A … · Healthcare, retail, telco – etc. •...
Transcript of THE MISSING LINK TO COLLECTIONS SUCCESS: CREATING A … · Healthcare, retail, telco – etc. •...
THE MISSING LINK TO COLLECTIONS SUCCESS: CREATING A 360 DEGREE VIEW OF YOUR
CUSTOMER’S WALLET
Presented By
Hugh Lloyd-ThomasGroup Vice President, Consumer Credit
November 3, 2011
2Confidential • © 2011 IXI Corporation • All Rights Reserved
Agenda
•
Current collections environment
•
360o View of the Customer
•
Differentiated Data–
Household wealth / assets –
Income–
Discretionary Spending Capacity–
Ability to Pay
•
Enhanced decisioning examples
•
Appendix–IXI Overview and Solutions
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Volatile Collections/Recovery Environment
•
Unemployment
•
No safety net
•
“First time defaulters”
•
“Strategic Defaulters”
•
Bankruptcies
•
Payment priorities
•
Negotiators vs. collectors
Who Can Pay? When Can they Pay? Employment, Income, Asset/Wealth, Ability to Pay
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Identifying a Households “Ability to Pay”
Capacity(Ability to Pay)
Character(Credit Reputation)Collateral
(Illiquid Assets)
Character,
Capacity and Collateral the “Three Cs" of risk
Consideration of a household’s ability to pay is fundamental in predicting payment behavior
Identify additional solutions e.g., Income , Discretionary Spending Capacity, Assets to supplement, complement and enhance existing data and tools
Understanding financial capacity in conjunction with other components of the Three C’s
enables a holistic, multidimensional view of a household’s financial profile
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A Richer Understanding of the Consumers Financial Spectrum
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Ingredients for a 360o view for based on the Full Financial Wallet
Assets and Investment
Style
Income
Spending
Credit
Demographics, Behaviors,
and Attitudes
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Combine Market and Household Insights
Assets Income
Spending
CreditDemo-
graphicsAttitudes & Behaviors
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Additional Market Intelligence and Insights
•
Adjust treatment strategies based on risk profile
•
Adjust strategies based on financial shifts:
•
Leverage 1, 3, and 5 year trends
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Differentiate “Homogenous” Households
What You May Already Know
What You May Already What You May Already KnowKnow
What You Really Need to know
What You Really Need What You Really Need to knowto know
•
Assets @ Firm: $150K•
Income $100K-$125 +K•
Own Home•
Age 35-54•
Has Children
•
Assets @ Firm: $150K•
Income $100K-$125 +K•
Own Home•
Age 35-54•
Has Children
•
Assets @ Firm : $125K•
Income $100K-$125K•
Own Home•
Age 35-54•
Has Children
•
Assets @ Firm : $125K•
Income $100K-$125K•
Own Home•
Age 35-54•
Has Children
•
Total Assets: $950K•
Income $205,398•
High discretionary spending capacity
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Low likelihood of default•
Credit active investor
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Total Assets: $950K•
Income $205,398•
High discretionary spending capacity
•
Low likelihood of default•
Credit active investor
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Total Assets: $125K•
Income $85,391•
Low discretionary spending capacity
•
Credit dependent
•
Total Assets: $125K•
Income $85,391•
Low discretionary spending capacity
•
Credit dependent
10Confidential • © 2010 IXI Corporation • All Rights Reserved11/9/201110
Delinquent Consumer
PrioritizeSegmentation &
Strategy
MonitorMaximize Resources
LocateRight-Party Contact
Additional Differentiated Data & Analytics
Examples
•Wealth, Assets, & Income
•Ability to Pay & discretionary Spending Capacity and behaviors
•Verified Income and Employment data
•Employment Verification Services
•4506T (tax Return) data
•Credit Based scores, models and analytics services
11Confidential • © 2011 IXI Corporation • All Rights Reserved
Balance sheet view of the consumer
•
Credit data –
liabilities–
Performance on past and current obligations–
Derogatory information–
Public record–
Propensity to pay
•
Actual & Modeled income, spending and asset data
–
Early warning on likelihood to cure–
Ability to Pay•
Who’s likely to have means to pay?•
Who is likely to be totally tapped out?
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Where could you use some help? •
Any portfolio . . . –
Mortgage, bankcard, auto deficiency–
Healthcare, retail, telco–
etc.•
Any stage of delinquency
. . .–
Collections–
Charge-off–
Recovery•
All solution components . . . –
Unique data ( ATP, DSI, Income 360)–
Unique custom solutions –
models, strategy engines–
Unique tools (Wallet Insight)
13Confidential • © 2011 IXI Corporation • All Rights Reserved
Predicting delinquency
Mortgage Portfolio, 2010
The “Ability to Pay”
consistently provides meaningful insight into delinquencies
Delinquency rate increases as ATP decreases
This lowest ATP band yields an almost 1 in 2 default rate
Similar predictability observed on this CC
portfolio
Credit Card Portfolio, 2011
14Confidential • © 2011 IXI Corporation • All Rights Reserved
Input Data ClassificationSupplement, complement and enhance - Combined Score Lift Example
19% lift in optimized score’s predictive capability
Accounting for 49% of the total collected amount
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Understand Your Customers’ Ability To Pay
45-50 % increase in
$’s collected
Adding over $5 million to the
bottom line
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Increasing collection success
Healthcare Portfolio, 2010
Differentiate between payers and non-payers. In this case, success was defined by % of payers, but similar analysis can be made of $ collected, payment
within a given time frame, payment amounts, etc
17Confidential • © 2011 IXI Corporation • All Rights Reserved
Owner Occupied (60+DPD) – ATP & FICO
60+DPDATP Decile < 559 560‐579 580‐599 600‐619 620‐639 640‐659 660‐679 680‐699 700‐719 720‐739 740‐759 760‐779 780‐799 800+ Total
<=200 47.4% 31.0% 23.7% 14.9% 11.1% 7.8% 6.3% 5.2% 4.4% 5.4% 3.9% 3.4% 1.8% 2.8%24.3%<=317 48.5% 31.4% 25.9% 18.4% 12.0% 8.3% 6.0% 5.2% 4.4% 5.2% 3.9% 2.6% 2.1% 3.1%23.4%<=416 47.7% 31.7% 28.1% 19.6% 12.7% 8.9% 5.9% 5.2% 3.7% 3.9% 2.0% 2.7% 2.7% 0.8%22.0%<=498 48.0% 32.9% 25.8% 20.3% 14.4% 7.6% 4.7% 4.1% 4.5% 3.3% 3.6% 2.7% 1.9% 0.7%20.9%<=571 47.3% 33.0% 25.4% 19.8% 13.4% 8.3% 5.8% 4.3% 3.9% 2.9% 2.2% 2.3% 1.6% 0.9%19.5%<=641 46.4% 30.4% 22.9% 18.3% 12.8% 8.2% 5.1% 3.7% 3.3% 3.1% 2.2% 2.2% 1.2% 1.5%17.5%<=713 44.6% 29.4% 22.8% 18.4% 13.0% 8.1% 5.4% 3.8% 2.6% 2.8% 1.6% 1.6% 2.0% 0.6%15.6%<=791 43.6% 29.5% 20.0% 14.8% 10.0% 7.5% 4.8% 3.0% 2.3% 1.8% 1.9% 1.4% 0.8% 0.3%12.9%<=883 43.2% 28.1% 22.5% 14.4% 9.7% 6.1% 4.0% 2.5% 2.5% 2.3% 1.4% 1.1% 0.8% 0.9%10.6%>883 39.6% 26.0% 15.4% 11.7% 8.6% 4.6% 3.1% 2.8% 1.9% 1.4% 1.3% 0.8% 0.6% 0.7%6.3%Total 46.5% 30.8% 23.8% 17.4% 11.9% 7.6% 5.1% 3.8% 3.1% 2.9% 2.2% 1.8% 1.3% 0.9% 17.3%
FICO Bands
For any given FICO band, the higher the Ability to Pay score the less likely a loan is to go 60+DPD
IXI enables differentiation among loans with similar
traditional risk profiles
Even though these loans are in different FICO bands their performance is very similar
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Understanding Risk - Some ‘bads’ are better than ‘goods’!
Greatest Ability to PayLeast Ability to Pay
Mortgage Portfolio, 2010Estimated Current CLTV = Total Outstanding Real-estate Secured Debt / Most Recent Home Value
Negative Equity: Borrowers with the lowest ATP are 4x more likely to go 60+ DPD than highest ATP
> 42% Equity: Borrowers with the lowest ATP are 17x more likely to go 60+ DPD than highest ATP
You can differentiate between good accounts with –ve equity and bad accounts with +ve equity
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How to improve decisioning?
Loan amount:•Low ATPs = keep mortgages low•High ATPs = don’t modify
Interest rates:•Whatever the ATP band, keep IR below 5.75!
Monthly payments:•Low ATP = keep payments low•High ATP= no need to modify
Key•20-29% bad•30-39% bad•40%+
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Differentiated Income, Asset, Ability to Pay and Spending Capacity Data is Relevant for All Phases of the Account Lifecycle
AccountAcquisition
AccountOrigination
PortfolioLifecycle
Management
CollectionStrategies
Income Income Income AssetsAssetsAssets Debt Analysis
Debt Debt Analysis Analysis
Financial Capacity Measures (Scores)
Financial Capacity Financial Capacity Measures (Scores)Measures (Scores)ObligationsObligationsObligations
Apply data to multiple credit products including but not limited to Mortgage, HELOC, Credit Card, Consumer Finance, Auto
Financing , Small Business
Apply data to multiple credit products including but not limited to Mortgage, HELOC, Credit Card, Consumer Finance, Auto
Financing , Small Business
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Conclusion
•
Simple to understand•
Unique perspective
•
Stand-alone solutions •
Combine with other models/strategies
•
Can use:•
to predict defaulters, rollers•
identify payers & amount paid•
to improve contact, modification and treatments decisions
•
Simple to implement
22Confidential • © 2011 IXI Corporation • All Rights Reserved
Thank you
If you would like more information regarding IXI products and solutions, please contact:
Hugh Lloyd-ThomasGroup Vice President, Consumer CreditOffice: 703.761.0403 |
Mobile: 917.716.5973Email: [email protected]
23Confidential • © 2011 IXI Corporation • All Rights Reserved
APPENDIX
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About IXI
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The Foundation of IXI’s Economic Insight
Retail BanksIncluding 8 of Top 10
Retail BanksRetail BanksIncluding 8 of Top 10Including 8 of Top 10 Discount BrokersDiscount BrokersDiscount Brokers Full Service
Brokers Full Service Full Service
Brokers Brokers Mutual Fund GroupsOver 25 Fund GroupsMutual Fund GroupsMutual Fund GroupsOver 25 Fund GroupsOver 25 Fund Groups
Insurance FirmsIncluding Top 15 Annuity
Issuers
Insurance FirmsInsurance FirmsIncluding Top 15 Annuity Including Top 15 Annuity
IssuersIssuers
~$10 Trillion FinancialAssets Database
Pooled Anonymous Asset Data Sourced from IXI Member Network
(Available to Members Only)
~$10 Trillion FinancialAssets Database
Pooled Anonymous Asset Data Sourced from IXI Member Network
(Available to Members Only)
Semi-Annual “Anonymized”
Data Feeds
Direct-Measured™
Retail Consumer Assets Database
Economic Insights
Publicly Available Data Sources are Paired With Factors Derived from IXI’s Proprietary Data Foundation
Access Granted Exclusively to
IXI Net™Member-Firms
•
Cost of Living Factors
•
Home Value & Housing
•
Factored Wealth Scores
•
Cost of Living Factors
•
Home Value & Housing
•
Factored Wealth Scores
•
Urbanization and Density
• Census Data
•
Demographic Data
•
Urbanization and Density
•
Census Data
•
Demographic Data
Members-Only Access
26Confidential • © 2011 IXI Corporation • All Rights Reserved
IXI’s Unique data and analytics
“Supplement, complement and enhance existing data, models and scores”ATP, DSI, Income 360
–
CollectionsEarly warning for loss mitigationTargeted strategies, settlement?
–
Charge-offAssignment – internal/externalPrioritization – optimize resources
–
Post charge-offPrioritization (with score, balance)Possible valuation tool for acquisitions
27Confidential • © 2011 IXI Corporation • All Rights Reserved
ATP (Ability to Pay) Overview
Composition
•Financial Behavior characteristics
•Socio-geographic characteristics
•Demographics
•Aggregated Credit attributes
What is it?
•Risk measure of HHs capacity to repay financial obligations
Client applications
•Predict payers and various levels of defaulters
•Identify accounts for treatment, modification or decision
•Combine with other calculations for more accurate risk measures
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Combining with Credit Score
N= 550K First Mortgages, ~12% non-conforming
For any given credit score band, as ATP increases,the rate of delinquency decreases
Borrowers with the lowest Ability to Pay are 3.06x more
likely to go 60+ DPD
Borrowers with the lowest Ability to Pay are 4.37x more
likely to go 60+ DPD
Borrowers with the lowest Ability to Pay are 4.89x more
likely to go 60+ DPD
Differentiate between accounts that can’t pay from those that just haven’t
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Additive when combined with other models
ATP combines unique data sources, yielding additive lift and improved performance and predictability when combined with client internal and/or 3rd
party data
Credit Card Portfolio, 2010
30Confidential • © 2011 IXI Corporation • All Rights Reserved
Income360 (i360)
What?
•A measure of a HH’s income
•Not typical ‘capped income ranges’
•Continuous value up to $2M
Composition
•
Take home pay (salary)
•
Other incomes from assets including capital gains, dividends and interest
Client applications
•Predict loss amounts and improve concessionary offers
•Augment internal risk measures such as DTI
•Often combined with ATP to augment predictability
National Income Distribution
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I360 National Perspective - delinquency
•
Higher distribution of severe delinquency in lower incomes
Severe mortgage delinquency is
spread throughout the
income spectrum….
42% of the US have a combined
HH income of less than $75k,
this same income range accounts
for 51% of severe delinquencies
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I360 combined with ATP = improved results
2010 Mortgage Portfolio, % going severely DLQ in 12m
When ATP is low, higher income actually indicates higher risk!
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Discretionary Spend Index (DSI)
Composition
•Asset Information
•Disposable Income•
Incorporates life-stage, cost of living, age, etc)
•Home Equity
What is it?
•Indexed range of a HH’s
spending capabilities (spendable dollars)
Client applications
•Predict Payers and expected Payment Amounts
•Augment Risk measures
34Confidential • © 2011 IXI Corporation • All Rights Reserved
IXI Core Product SuiteInvestment Behavior
•Direct-Measured™: •Foundation of over 42% of U.S. investable assets: ~$10 Trillion•95+ Financial Services Firms
INVESTMENT STYLE
►Investyles®: Direct-
measured assets for modeling
►Investyles Investment Tendency Measures: Identifies investment style and product propensities
►Investyles.com: Online prospecting tool for FAs
MARKET SIZE AND SHARE
►MarketVision™: Assets and/or sales for peer group, market size, and share; versioned for Securities, and Annuities
Total Wallet•Projected:100% of U.S. investable assets: ~$23 Trillion
TOTAL HOUSEHOLD ASSETS
►WealthComplete®: Household level total assets to determine share of wallet
TOTAL MARKET ASSETS
►MarketMix™: Locates wealth; ZIP or block group market estimates and ground counts for total market
TOTAL MARKET ASSETS
►WalletIXInsights™: Tracks assets and credit for target markets and customer segments
Segmentation•Modeled: Uses proprietary IXI and external data
PROFILING, MESSAGING, MEDIA
►Financial Cohorts®: Asset-based segmentation
Economic Cohorts®: Economic-based segmentation
Cohorts®: Demographic and behavioral-based segmentation
Hispanic Cohorts®: Acculturation, demographic, and behavioral-based segmentation
IXI DIGITAL SOLUTIONSFinancially based online targeting
CLIENT DECISION PLATFORMS► Wallet Insights
Fin/Eco Behaviors•Modeled:Uses proprietary IXI Wealth Information and outside data to create high-powered targeting tools
INCOME, SPENDING, CREDIT, ABILITY TO PAY, PREMIUMS
Income360®: Total income measure (from assets & wages)
DSI® and DS$™: Identifies discretionary spending (rank and dollar amount)
CreditStyles®: Differentiates households based on availability and usage of credit
Ability to Pay Index™: Gauges ability to meet financal
obligations
Economic Spectrum™: Groups customers by income and spending
35Confidential • © 2011 IXI Corporation • All Rights Reserved
Thank you
If you would like more information regarding IXI products and solutions, please contact:
Hugh Lloyd-ThomasGroup Vice President, Consumer CreditOffice: 703.761.0403 |
Mobile: 917.716.5973Email: [email protected]