There was a time when what used to be called ‘Credit Vetting’ was completed once, when the credit account was opened and the information supplier charged per report. These reports would take a few days to come through and give a very broad non-specific response.
If you were a real ‘belt and braces’ sort of a credit manager may have also requested a bank reference, the response to these would be in a vague code ‘Good for your figure’ or ‘Unable to speak for your figure’ and you may have also requested the 2 trade references, personally I never received a bad one of these given the names and addresses were provided by the prospective customer.
In the early 1980’s a thing called ‘Minitel’ was introduced which was essentially an electronic terminal connected to your phone with a directory enabling subscribers to search for everything from weather in a particular town to business information, on-line shopping and banking. From a credit management perspective this was the beginning of ‘self-searching’ provided you were a subscriber and of course your target subject was listed. By 1995 there were 25,000 services offered by Minitel with 87 million hours of connection. The service was provided by France Telecom and the vast majority of users were in France and because of this it never really caught on as it wasn’t supported anywhere else.
There was a paper written in April 1999 called ‘Minitel vs. The Internet in France’. The conclusion of the report was very clear ‘France online resources are largely on Minitel and not the internet. The Minitel has led to France being behind the rest of the world on technology… the French have paid the price by using a system that the rest of the world does not support.’ So why is this relevant? It is relevant because the way in which business information is presented and how it is used is changing constantly and indeed every business transaction and action taken by a customer is now captured, tracked and analysed.
We started with credit reports, moved to scoring, behavioural scoring, bespoke scorecards, we would originally buy a number of reports in bulk of varying degrees of detail for a cost per report, we then bought the scorecards, or paid per score, we moved onto monitoring and payment indexes where we subscribe to a service, submit our data and then gain access to others payment experience.
All of these services are available from all of the business information providers. However, in the words of two senior executives from two of the major business information providers, Graydons and Experian, ‘The days of the credit report are now dead’. The way that business information is being presented means that the rating itself may not be visible as this happens in the background, but the effect of the result is now the outcome, we jump from new account to ‘collections strategy’ with little or no input from a credit assessment clerk. In other words once the rules are set and tested X score = Y treatment and Z behaviour = B change in action.
The result of many years of credit assessments, scoring, payment histories, public record information means that there is a vast amount of data out there which is all open to interpretation and interrogation. To illustrate that I have recently been told that something simple like an ‘…@aol.com’ email address indicates you are likely to be in your mid fifties. Data is the number of people with ‘…@aol.com’ email addresses the information is they are all likely to be over 50. So data in itself is useless but turning this into information is the key. Your supermarket shop says more about you to the supermarket that you may care to reveal, clicking on a dash-cam advert on Facebook results in emails from Amazon suggesting the latest dash-cams available through their site. So beware looking at jokey stag party accessories at it could be embarrassing when the ‘suggested sites’ pops up when you are browsing your emails at work!
So if we are to believe that the ‘credit report is dead’ let alone the ‘bank and 2 trade’ we grew up on, what is the trend of credit management business information and how will this be used? As individuals we are much more ‘savvy’ on what is available and what our digital footprint means. Like many people I subscribe to a personal credit score service and check my score every month or so. This information once cost £5 per month now this is free as this information has become just another commodity, if one organisation offers it for free then everyone has too, and this is true of general company information the majority of this information is available with a bit of searching for nothing, so the vast data warehouses of business information that the credit reference agencies have need to be used more productively.
Both information providers I spoke to have said that the nature of the requests for business information are changing. ‘We have these customers you have that information, what can you tell us?’ is a common theme now, organisations looking not only at the credit worthiness of their customers but opportunities to grow the business and the margin in specific markets and segments. With the increase in app based open systems the extraction of data is becoming a major part of how organisations are beginning to understand their customers, what they do, how they do it and how they behave as the market changes.
You may be aware of the term ‘Predictive Analytics’ which is where you are trying to gain information on what will happen, but the trend now is for ‘Prescriptive Analytics’ where organisations are looking at ‘…the actions required to achieve those predicted outcomes and the interrelated effects of each decision’. In short knowing what you need to do to drive a certain behaviour and achieve a consistent outcome.
These systems are making organisations more intelligent and aware of customer behaviour, I mentioned in the ‘Robot Wars’ article in that the real benefit is when all of this information is linked together in an end to end process and having a predictable outcome in a process is a key requirement for automation. Capturing information that company A always pays on the 3rd of the month will determine the collections action you take, knowing what you need to do to achieve this payment pattern where it didn’t exist before is where these tools are leading.
When looking at these interrelated actions and analytics the overriding requirement, if the thought leaders and business surveys are to be believed, is for self-serve, in other words for the savvy organisations to pull data themselves from their own systems and then be able to access 3rd party information for comparisons, likely outcomes, potential actions and future strategies.
This is obviously a continuous process, you predict, change the action, predict again, get a new norm, change the action to improve and so on, if this is the business norm than why would you want a 3rd party to ‘run the reports and tell you the outcome’, in a fast moving world you want to do this yourself and be in control, or at least have your systems in control as these learning processes become more automated. The latest collection software has all of these analytics available to the user now, not the vendor or programmer, enabling the collector to add and subtract variables to achieve an improved outcome. This sort of thing takes ‘Champion Challenger’ strategies to a whole new level and new business norm; knowing what the outcome is going to be as you pull the relevant levers.
When you boil it down 3rd party business information providers have always had one simple objective as far as the credit control function is concerned ‘to predict non-payment or company failure’ but this is no longer enough in the joined up business big data world of today, the amount of data out there today is too much to comprehend and as Credit Professionals we need to assist the business in understanding how the information we use can benefit them, it isn’t just about predicting failure anymore it is also about predicting success and knowing what success looks like.
The 3rd party information providers can assist in helping organisations understand what is available, the big question is how this will be delivered to the end user or will the end user just be given access and determine their own requirements for a fee, one thing for sure Minitel is unlikely to feature as a method of delivery as it was finally switched off 30th June 2012.
Sources & Acknowledgements:
wired.com, Rimilia Ltd, Cforia Software, Wikipedia, Experian, Graydons, Orbit Analytics, Gartner