The Analysis News & Opinions
‘Avoid the one-size- fits-all’ approach’
Opinion
‘Social characteristics will be adde to searches’
Non-financial behaviours such as social media use and transactional behaviour may be used in future credit risk assessment with implications for access to consumer finance. ‘Futures of Credit Risk Assessment in the
UK’, written by senior lecturer Joe Deville of Lancaster University and published by us, examines developments in the way credit risk is assessed in the UK and draws on emerging international practices to explore what this might mean for consumers. It reports that established methods such as
Collectors have been warned to avoid a ‘one-size-fits-all’ approach in dealing with their customers, and must focus on the human touch, according to a senior industry professional. Speaking at a round-table debate aimed at
considering the use of technology in the order-to-cash process, organised by CCRMagazine in association with Data Interconnect, Gail Armstrong, head of I2C at Siemens, said: “You cannot have a one- size-fits-all approach. We currently have about 25 different strategies to accommodate our customer requirements. “In my opinion, collections will never
become fully automated because people buy from people and that personal touch is always required at some point. “We have automated a lot of our
correspondences such as pre-due reminders, copy invoices, dunning notifications and so on, as a result, we have automated around 48% of our collections administration activity which is down to Pega CCMT.” Atul Vadher, credit management consultant
and former international credit manager, added: “One of the projects that I had was to understand what the client did and why it did not fit. From reconstructing the account, it was evident that the company was not doing something right and so it was just a mismatch.
March 2020 “So we had a look at the client, had a look
at their processes, what they did and how they did it, and we tried to realign. “Because, really, the closer you are to a
straight line with your clients, the more likely you are to paid. If you are going in totally opposite directions, then it will keep going wrong. “In some industries, you can take some of
the biggest companies, some online and you are their Accounts Payable; you process their invoices on their portal to pay. If you process it wrong, then you do not get paid. If you want them to do it, then they will charge you. “So you basically have to load and match
the goods in and your invoice, with a purchase order, to get paid. “So you need to understand your customers’
processes and how they can best work for you.” Meanwhile, Andrew Dancy, IT director
at Lovetts, added: “We are seeing this with some of our larger clients: they have their own processes, their own portals. They are usually third-party portals that
they have bought from their vendor, or it has come as part of their company system. They are all different from each other and
they are all incompatible, so that an invoice that you tailor for one customer’s portal will not be accepted by another.”
www.CCRMagazine.com
analysing monetary judgment data will still to be central to credit-lending decisions. Credit-risk specialists interviewed for the report, including UK banking and credit reference agency representatives, are so far cautious about the potential use of internet and device data as a method of risk assessment. However, there is evidence of credit risk specialists expanding and diversifying the methods they use to assess credit risk and increased use of ‘big data’ credit scoring. There may be possible benefits to borrowers
from more holistic assessment of their financial status, but the emerging practices raise difficult questions about: the ethical use of some new data types; the criteria to be used to establish whether particular data are appropriate for assessing future financial behaviours and creditworthiness; who should be responsible for establishing these criteria; and issues of fairness. Expectations have been raised that greater
use of ‘big data’ and new forms of assessment could transform how credit risk is assessed. So far, there has been little impact on consumers. But, the use of these emerging methods could become more widespread with potentially negative consequences for consumers. It is critical that regulators, consumer groups, and the industry pre-empt this and develop a robust ethical framework to protect consumers.
Mick McAteer Chairman, Registry Trust
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