Redesigning the future of consumer lending with data and analytics

It is well doc­u­ment­ed that the pan­dem­ic has sped up the dig­i­tal trans­for­ma­tion of the econ­o­my — both in the UK and glob­al­ly. Many more eco­nom­ic sec­tors are digi­tis­ing and the amount of data being inte­grat­ed into the build­ing blocks of busi­ness is the high­est it has been. The dig­i­tal cus­tomer expe­ri­ence, enabled by both data and ana­lyt­ics, is there­fore the new bat­tle­ground for many indus­tries.

This has been fuelled by the rise in online activ­i­ty among glob­al con­sumers, with con­sumers report­ing they were online 25% more in 2021 com­pared to a year ago, accord­ing to Exper­ian, and this num­ber hold­ing up in 2022. At the same time there are height­ened expec­ta­tions not just around secu­ri­ty, pri­va­cy and con­ve­nience, but also per­son­alised ser­vices. Dig­i­tal natives are rais­ing the bar in this regard with a zero tol­er­ance for poor ser­vice. Today, rev­enue growth depends on com­pa­nies deliv­er­ing on con­sumer expec­ta­tions.

“The good thing is that tech­nol­o­gy and data now allow busi­ness­es to put the cus­tomer jour­ney at the heart of what they’re doing. With the advanced tech­nolo­gies avail­able today, busi­ness­es can access rel­e­vant data and deliv­er on cus­tomer expec­ta­tions in their moment of need. Whether it’s access to a loan or mort­gage, or to con­sol­i­date debts, a real-time view of the con­sumer is pos­si­ble,” says Steve Wag­n­er, glob­al man­ag­ing direc­tor for deci­sion ana­lyt­ics at infor­ma­tion ser­vices com­pa­ny Exper­ian.

“The mar­ket is dri­ven by con­sumer demand for dig­i­tal ser­vices. Those com­pa­nies that are able to tai­lor the dig­i­tal cus­tomer jour­ney so it reflects the best-in-class con­sumer expe­ri­ence are the ones that will win.”

The appli­ca­tion of advanced ana­lyt­ics, arti­fi­cial intel­li­gence and machine learn­ing is allow­ing busi­ness­es to tai­lor their ser­vices to an audi­ence of one at scale. This is par­tic­u­lar­ly preva­lent in finan­cial ser­vices. Under­writ­ing process­es and accu­rate fraud detec­tion can all be accessed in real time, while the cus­tomer expe­ri­ence and cred­it risk analy­ses coex­ist seam­less­ly.

This is essen­tial since the glob­al pan­dem­ic has elim­i­nat­ed large swathes of phys­i­cal cash trans­ac­tions. Research from Exper­ian found that online retail sales saw four years of growth in just 12 months dur­ing the Covid pan­dem­ic. This has dialled up the need for busi­ness­es to improve how they recog­nise their cus­tomers and pro­vide secure dig­i­tal trans­ac­tions.

“The future involves ask­ing cus­tomers to do less with­out sac­ri­fic­ing the secu­ri­ty, con­ve­nience and pri­va­cy of their online expe­ri­ence. Reliance on phys­i­cal forms of ID to access ser­vices has been replaced by the demand to iden­ti­fy online for a fric­tion­less jour­ney. Whether that’s through bio­met­rics or mul­ti­modal authen­ti­ca­tion, cus­tomers can see the val­ue exchange in shar­ing per­son­al data,” says Wag­n­er.

Behav­iour­al bio­met­rics is the next fron­tier in tack­ling fraud and pro­vid­ing a seam­less cus­tomer jour­ney. Rather than rely­ing on the ini­tial cus­tomer authen­ti­ca­tion, the behav­iour of the user is tracked for sus­pi­cious activ­i­ty. Pas­sive, con­tin­u­ous activ­i­ty mon­i­tor­ing can flag if it isn’t the cus­tomer due to abnor­mal behav­iour.

“The way in which a per­son types a pass­word is unique, so is the way they press on a mobile screen. By mon­i­tor­ing those behav­iours using advanced ana­lyt­ics, busi­ness­es can ver­i­fy cus­tomers with­out dis­rupt­ing the expe­ri­ence and there­fore keep fraud­sters at bay,” says Wag­n­er.

“Tech­nol­o­gy is allow­ing us to analyse far more data sources in real time, pro­vid­ing a com­pre­hen­sive pic­ture of an indi­vid­ual. There­fore, every busi­ness mod­el should be focused on cus­tomer-cen­tric­i­ty, with a bet­ter under­stand­ing of cus­tomer needs and expe­ri­ences.”

Open Bank­ing in the UK, which involves the democ­ra­ti­sa­tion of data, is assist­ing in this process. Cus­tomer data is key, yet its val­ue lies in being able to extract the insight lenders and fin­tech providers need to imple­ment the best cus­tomer jour­ney and make the best deci­sions, often in sec­onds.

Con­sumers are more like­ly to share their per­son­al data if it improves their expe­ri­ence. Open-source data can empow­er busi­ness­es and con­sumers alike. Small­er busi­ness­es with his­tor­i­cal­ly lim­it­ed data can now build a view of poten­tial cus­tomers, expand­ing port­fo­lios and min­imis­ing cred­it risk, bring­ing more peo­ple into main­stream finan­cial ser­vices with prod­ucts that are suit­able for their cir­cum­stances.

“The future is where cus­tomers are more in charge of their own data. This is why we launched Exper­ian Boost glob­al­ly and then Exper­ian Go in the US. This allows con­sumers with lim­it­ed cred­it his­to­ries to build out their cred­it report, using trans­ac­tions not typ­i­cal­ly includ­ed, from rent pay­ments to stream­ing sub­scrip­tions,” says Wag­n­er.

Most busi­ness­es already col­lect data in some way but just stor­ing it is not enough. The data must be clas­si­fied, analysed and processed to pro­duce real insight.

“It’s this insight and increased under­stand­ing of cus­tomers and oppor­tu­ni­ties that will lead to bet­ter deci­sion mak­ing with­in busi­ness­es,” says Jonathan West­ley, chief data offi­cer for the UK and EMEA at Exper­ian.

Busi­ness­es can do this by mak­ing cred­it-risk deci­sions using automa­tion and advanced ana­lyt­ics. This will lead to more oppor­tu­ni­ties for cred­it and thus bet­ter finan­cial inclu­sion, par­tic­u­lar­ly for low-income and mar­gin­alised com­mu­ni­ties. The cost-of-liv­ing cri­sis in the UK is like­ly to high­light the need for more finan­cial inclu­sion. Data and ana­lyt­ics are at the heart of this process.

“Anoth­er fron­tier is a term called ‘insight every­where.’ We live in an omnichan­nel world where cus­tomers inter­act with chat­bots, vir­tu­al assis­tants, call cen­tres or in a phys­i­cal store. Busi­ness­es want access to that knowl­edge about a cus­tomer to pro­vide them with a bet­ter ser­vice,” says Wag­n­er.

“This is where we will con­tin­ue to inno­vate. Exper­ian is in a unique posi­tion because we empow­er com­pa­nies with data, ana­lyt­ics and tech­nol­o­gy, help them cal­cu­late risk and empow­er them to make the right deci­sions for their busi­ness and their cus­tomers. The broad­er mar­ket pays a price if it makes the wrong deci­sions. With the right deci­sions, busi­ness wins, the mar­ket wins and the con­sumer wins. This is what mat­ters.”

For more on unlock­ing the pow­er of data vis­it, experian.com/globalInsights

Pro­mot­ed by Exper­ian