International speakers and case studies
During the workshop chaired by Davide Meo, Direct International Market Manager for CRIF, one of the most significant issues raised by a representative of the World Bank was the importance of data sources. Oscar Madeddu, Credit Bureau and Risk Management Advisor for the International Finance Corporation (World Bank Group), highlighted how fundamental it is for the future of the credit market to find new, alternative data sources (particularly telcos and utilities).
Madeddu provided a comprehensive picture of international credit bureau development, an area where the IFC operates to develop and increase access to credit, and the value of alternative data. As trends show, in the last five years private credit bureaus have been progressed in Europe and Central Asia, while in Sub–Saharan Africa and the East Asia and Pacific regions they have experienced very slow development.
Using case studies and analysis published in the 2010 edition of the “Doing Business” Report, the IFC advisor showed that the credit bureau is a crucial tool for increasing access to credit, considering the experience of different countries and historical data (e.g. Ecuador).
He also emphasized the emerging role of microcredit, which in many developing areas of the world is growing and impacting on a portion of the population that generally can’t access standard credit tools, and the huge potential of alternative data such as telecommunications information in the understanding of new trends.
Another interesting case study on the role of credit bureaus in complex macro-economic systems during the financial crisis was presented by Zoran Bohacek – Managing Director of the Croatian Banking Association. He presented the success story of Croatia, and how the country faced the negative economic situation, explaining the involvement of the main economic stakeholders such as monetary authorities, government, banks, as well as the impact of the credit bureau. The main role of the credit bureau in this complex business environment is to follow the decisions made by these stakeholders. However, doing this through the introduction of concrete initiatives can also add value to the market, leading to cost reductions, an increase in the number of new data users and providers, and the inclusion of new segments, e.g. SMEs.
The international case studies of Saudi Arabia and Nordic countries gave another perspective to the establishment of credit bureaus, including different data sources, regulations and delivery.
Iyad Hammoud – Lead Project Manager for the Credit Bureau Implementation Project at AL-ELM INFORMATION SECURITY - presented a case study on the proposed creation of a credit bureau in Saudi Arabia, and the necessity to meet specific needs and characteristics of the country.
Annika Steffner – Business Unit Director at UC Decision Solutions – UPPLYSNINGSCENTRALEN (UC) presented the full fledged credit bureau operating in the Swedish market, including the successful cooperation with CRIF. In fact, CRIF provided UC with an Application Processing Solution (CreditFlow) and Decision Engine (StrategyOne) resulting in a highly automated application process, the use of staff for sales instead of administration, a configurable business rule engine, and the possibility of taking quality decisions.
How can a credit bureau score be launched in the middle of a financial crisis?
Petros Kapasouris – Business Development Manager at Tiresias, Bank Information System, Greece - offered a clear example of how value-added services can move the focus from data demand to value demand, while facing this challenge.
Tiresias and CRIF worked together to set up and fine tune the bank’s scoring system, showing how beneficial the cooperation with a third party credit bureau can be. Tiresias had to consider several different aspects: the creation of a scoring system in an increasingly mature credit market, ensuring the stability and sensitivity of the scoring system, successfully making scoring services available to the whole market, changing the relationship between the credit bureau and banks, and using the experience of managing negative data.
The closing speech by Petr Kučera – Regional Manager and Executive Director of CCB, Czech Credit Bureau - reinforced the concept that in spite of different models in different time periods, sound and forward-looking credit management always starts from credit bureau data. Kučera pointed out how the financial crisis boosted the use of monitoring tools. Once a bank or financial institution consolidates its client portfolio, segmenting and managing the trends within it and adapting credit policies is key to monitoring portfolio behavior. Petr Kučera also recommended the maximum use of positive bureau data to focus more and more on exploiting existing clients (rather than just new segments) due to an increase in external risk factors. If we look at the trends, portfolio monitoring using credit bureau data has increased since 2009 in the Czech Republic.
CRIF Credit Bureau approaches, and innovation in credit management services: from bureau data to advanced analytics and software
Using a differentiated approach on a country by country basis has proven to be a crucial factor in meeting market needs, and is an important feature both in setting up a credit bureau, as Vincenzo Resta - Senior business consultant, CRIF Credit Bureau Services - pointed out, and in designing a predictive credit bureau score, as described in the presentation given by Scarlet Shipp - International and Credit Bureau Analytics Manager for CRIF Decision Solutions.
Vincenzo Resta gave an overview of the different models and approaches that CRIF has implemented in developing credit bureaus worldwide. Projects differ by offer type, client sales model and delivery channels, and the key to success is understanding that there is no “standard” approach or model in setting up credit bureaus. CRIF is able to adapt to the “not one size fits all” logic, thanks to its technical capabilities, flexibility and its international project experience. CRIF’s strengths are a deep understanding of local needs, and a business approach adapted to different countries and environments.
Scarlett Shipp presented the CRIF credit bureau score and explained its main characteristics. The CRIF credit bureau score is created using a globally accepted standard with common performance and predictive attributes, while capturing the individuality of each country. In addition, it is crucial to consider economic conditions, cultural financial attitudes, local laws and the maturity of the credit bureau. In the development of a predictive and reliable credit bureau score, it is necessary to adapt to changing environments, considering dynamic aspects and applying a “glocal” approach – global and local at the same time.
Other relevant aspects related to credit management – stress testing and fraud management - and the cutting edge analytical tools and solutions provided by CRIF were at the center of the presentations of Cristina Caprara – Senior Analyst Research & Innovation at CRIF Decision Solutions and Ido Nir – Senior Fraud Consultant at CRIF Decision Solutions, respectively.
Cristina Caprara outlined the alternative and possible uses of credit bureau data by introducing the FSI (financial stress index) and the Credit Limit tool. In a period of financial crisis, measuring the FSI of clients is crucial both in the application and customer management stages.
The integration of the FSI and Credit Limit tool in the portfolio management process ensures: risk reduction in the identification of customers with the highest monitoring priority, speed of intervention in those segments in which the first signs of financial stress are evident even if creditworthiness has not yet deteriorated, portfolio growth by targeting unstressed individuals with low credit risk for marketing campaigns, tailoring products to customer characteristics and managing the customer relationship by fostering a responsible lending approach and helping customers to better understand their “ability to pay”.
Ido Nir explained how CRIF combats fraud by tackling it with a cross-country and “learning on the job” approach. CRIF has developed sophisticated anti-fraud solutions, such as OceanOne, to manage risk effectively and leverage fraud detection by improving data sharing.
Closing the session Davide Meo pointed out how is important for CRIF to play the role of “master of the house” talking about credit bureau and credit management topics in different countries. He also added that thanks to the international development had in the last ten years, CRIF is the perfect place to talk about multi country experiences. Dealing with clients from China and Vietnam, passing through India and Europe, and finally moving to Africa, CRIF is increasingly expanding the international presence, and is also keen to increase the level of similar events.
