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A Data Driven Solution for a Hardship Challenge

The escalation of credit issues under COVID-19 has introduced a new challenge to the hardship strategy of lenders. With a significant increase in the number of accounts in hardship, the ability to assist customers to better financial health has come under strain. Managing a large volume of customers – each with a different circumstance – lenders must find a way to ensure customers who need the most support are the ones to receive it.

Resource constraints may require lenders to reset their approach to collections, finding new ways to prioritise customers into the right treatment path. Advanced analytics and Equifax bureau data will enable lenders to step up to this challenge, maintaining positive client relations and mitigating against credit loss.

Building a rich data foundation

Rich data is needed for lenders to achieve a clear and accurate picture of a customer’s risk profile. But with the six-month deferral on loan repayments putting a pause to credit activity among hardship customers, lenders must look further than their internal data to make informed risk decisions. 

Linking different data sets together from multiple sources is a valuable way to improve customer insight by providing a complete picture. Using the unified analytics environment of Equifax Ignite®, lenders can connect their data with third-party data to achieve this quickly and easily. They can also access unique Equifax consumer and commercial data on the Australian population, including external account information, credit exposure, repayment history and behavioural scores. This broader view of current and historical data shows customer payment behaviour over time across a range of accounts from different financial institutions.

Adjust strategy with analytic insights

By analysing these integrated data sets, lenders can move to a deeper understanding of customer payment behaviour and their likelihood of risk or recovery. Hardship resources can be prioritised and accounts assigned to the most effective treatment strategy. 

Major lenders, energy retailers and telcos use data-driven strategies to reduce resources spent on managing low-risk accounts. Rather than working all accounts equally, they want to focus on high-priority accounts. By applying appropriate treatment strategies to specific accounts, these organisations can reduce the time their customers spend in collection cycles and prevent them from rolling into serious delinquency. 

These organisations can realise efficiency and debt recovery gains with the following approach:

  • Develop a collections scorecard that is built to segment the portfolio and identify higher-risk customers. Past account behaviour is taken into consideration as a predictor of which accounts would require a higher level of support.  
  • Initiate appropriate treatments based on insights from the scorecard. Higher risk accounts are prioritised for immediate action, and treatments delayed for the accounts likely to self-cure. 
  • Create a cost/debt reduction simulation tool. This tool allows these organisations to step through several scenarios to help them find the most optimal way to manage their collections portfolio. This includes ways to maximise the efficiency of their team and the recovery out of financial assistance for their customers.

The Equifax Ignite® analytics environment allows for the tracking of accounts flowing through different process routes. With a continuous feeding in of data, lenders can see the customer response rate to different communication channels like SMS, email and voice messaging. This enables treatment strategies to be continually assessed and optimised according to the effectiveness of each channel. 

A collections strategy built around rich data and advanced analytics will help many lenders meet the new delinquency challenges that lie ahead.

Request a demo and see for yourself how our powerful data analytics platform, Equifax Ignite®, can make this possible.

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