Data parity that credit information companies enjoy today is driven by the 2015 directive of the Reserve Bank of India, which has opened various options and opportunities for the institutions and consumers that the industry serves. For the bureaus, this presents a challenge along with opportunity,which now has to offer products and services, which are unique so that they can continue to be viable in a very competitive environment, feels Manish Sinha, India country leader, Equifax.
“The implications of this development have affected the bureaus’ services to its customers, banks and other lenders and to non-banking entities in a very positive way,” he says. With the standardization of backend data, financial institutions and consumers are able to access variety of products and services across all the credit information companies. Financial institutions are selecting credit information companies based on the strength of their products and quality of their service, not just going beyond by the underlying data. From a consumer’s standpoint, consistency in their credit profile across bureaus would potentially reduce confusions and disputes, feels Sinha.
He also mentions that consumers would benefit from all the bureaus having the same format for reporting credit scores. “With lenders having access to complete data through any of the bureaus, the scope of getting away with a default has been reduced. Hence, the loan approval checks have got stricter, especially for defaulters. Consumers have to be more vigilant about their loan repayments, as it will be easier to identify defaults across any of the bureaus” says Sinha.
DATA PARITY/SAME DATA
What data parity means is that all the four bureaus in India have the same data to work on. Therefore, no one can claim to have an advantage on the basis of unique data they would have. It also ensures that all the information available is the same across the bureaus. This means that lenders can use credit reports and credit scores from any of the CICs without the risk of missing data. This has also led to increase in competition, which means better quality of processed information and products, maintains Sinha.
“We are witnessing huge financial institutions implementing comprehensive multi-bureau strategy whereby using one bureau for underwriting a certain product, while using a second bureau for underwriting another product and a third bureau for portfolio management services. Credit information companies’ ability in developing specialized solutions and products that predict risk better, match consumer records more efficiently and offer deeper insights on credit industry across various dimensions will drive their success in the market place. In addition to this, banks can get insights on consumer’s broader profile with this data and it will help them to provide a better overall experience to their customers. What it means for bureaus is that they have to work hard to create a difference in terms of products and services,” says Manish.
So where does Equifax derive its advantage?
DERIVING INSIGHTS FROM DATA
“As a global entity, we have a varied expertise in application of analytics for a variety of business situations. We can leverage this expertise to deliver customized analytical solutions, industry diagnostics and products that are relevant to the Indian business context,” says Sinha.
He says these products include credit risk and fraud management products and solutions developed using statistical techniques and proprietary frameworks. “Also, we are the only bureau in the country at present having Data Analytics and Business Intelligence operations within our business. These operations came from our acquisition of Bangalore based analytics company Net Positive Business Analytics, now also known as Equifax Analytics. The insights are of immense value for banks and lending institutions in taking crucial credit decisions. These enable them to make risk-based pricing for their products and provide them with agility in operations. It helps them to save costs, take timely decisions and avoid detrimental circumstances of defaults to a great extent,” he reveals.
So, the analytics services combined with the bureau data and in-house data, enable the company in creating unique solutions on:
- product and pricing design by understanding the market and creating the right product for right consumer;
- acquisition models, fraud scorecards, product-channel-segment plan;
- portfolio management, governance and monitoring frameworks;
- collection scorecards and segmentation frameworks enabling prioritization of collector resources and collection strategies that align with customer willingness and ability; and
- industry diagnostics that offer insights into macroeconomic trends at a product, lender and geographic level benchmarked for specific institution or set of institutions.
“For instance, we are working with one of the large microfinance institutions on its strategic initiative to leverage data and create unique insights about the key levers that drive their business performance. In this, we are leveraging our capabilities across credit bureau, analytics and business intelligence to provide end-to-end solution building datawarehouse, drawing insights from data, translating insights into analytical models and taking decisions driven by these models,” says Sinha
CUSTOMIZED, DIFFERENTIATED OFFERINGS
As regards to customized products and services, Sinha points out the unique way Equifax approaches a client situation. “We look at business problems holistically and review the pain points to develop solution that draws from multitude of our products and capabilities. For instance, we have enabled one of the large financial institutions execute a key initiative of increasing its customer’s product holding through a customized offering of our portfolio insights product.”
Along the same lines, he also points out to the robust matching and dedupe engine that the company has. With this capability, it helps institutions dedupe their own set of customers and create a single view of their customer across business lines even with challenging quality of data with inconsistent name formats, unstructured addresses and limited identity information. The ability to create single customer view further improves the institutions engagement with their customers and their overall experience.
He also talks about Equifax Risk Score and Verify ID. Equifax Risk Score, he says, is a market-level risk score designed to predict the likelihood that a customer will default in the next 12 months. It is the first score in the market to track not only those consumers on the credit bureau but also no-hits. No-hits are data files that are returned when there is no matching record found on the database for the corresponding enquiry due to the lack of complete data or the enquiring customer being new to borrowing. The Risk Score is calculated based on the enquiry parameters such as demographic attributes. It is especially important to validate the repayment abilities of new entrants to the consumer lending market, particularly for those where credit information / history available is limited. This is one product specifically developed for the Indian market.”
Similarly, Verify ID is a solution that is linked to authentic sources like UIDAI and NSDL for Aadhaar and PAN validation. It is a fully automated process to verify multiple data points – PAN numbers and Aadhaar numbers. The system identifies mismatches and gives alerts for issues like mismatch in name provided on inquiry and the one registered on PAN card. The solution enables a digitized method to do KYC and helps operational streamlining of the process.
