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Navigating Consumer Financial Hardship in Uncertain Times

Monday June 29, 2020

How SCORE’s data-driven insights helps lenders proactively manage customer hardships, pre-delinquency  
 
It’s no secret that many Canadians are facing unprecedented financial hardships due to the COVID-19 pandemic, including their ability to repay debt obligations. Yet with more uncertainty ahead, lenders are forecasting economic headwinds that could result in emerging risks across mortgage, credit cards, and other personal lending segments.  
 
To-date, many lenders have worked with customers to offer deferment and accommodation options, to temporarily provide financial relief.  
 
But as businesses’ continue to operate under "a new normal,” how can lenders better refine their processes to work with customers? How can they become more efficient in debt collection, managing aspects of financial hardship and attrition where volumes are predicted to swell?  
 
HOW SCORE ADDS VALUE TO YOUR BUSINESS 
 
SCORE delivers robust delinquency scoring models based on our unique, in-depth consumer risk and payment behavior measurements. These credit bureau-based delinquency models help you better segment, prioritize, and action on portfolio risk.  
 
Put simply, our collection models provide you with deeper insights to understand who to target and better qualify and personalize financial hardship options. This intelligent targeting allows you to optimize your customer relationships and retain your most valuable customers for future returns.  
 
The result is significantly improved accounts receivable management performance, including:  
  • Reducing credit losses and operating expenses
  • Lowering attrition for longer lifetime customer value
  • Improved customer satisfaction and Net Promoter Score (NPS) 
 
HARDSHIP IDENTIFICATION: HOW OUR MODELS HELP 
 
Built solely for delinquent accounts, our collections scores offer unique features:
  • Targeted – over a dozen delinquency scorecards developed on credit bureau data, utilizing homogeneous predictive datasets estimating a customer’s ability and willingness to pay
  • Dynamic performance window – uses an "ever”’ cure definition to determine the probability of curing in 90 days or less, which is particularly sensitive to downward collection score migration
  • Ease of use– leverages similar statistical methodology as traditional scorecards, proven effective as a supplementary tool to identify meaningful swap set opportunities 
 The short performance window and dynamic nature of our collection scores provide a use case as an early warning indicator of financial stress. By complementing the lender’s existing risk framework with collection scores, businesses can more strategically fine-tune their loss mitigation approach to maximize the bottom-line.
 
OUR APPROACH
 
For over 20 years, our team has developed the depth and breadth of experience to objectively analyze, clarify, recommend, and execute strategies and solutions that deliver unparalleled results.  
 
We work collaboratively with you to find solutions that increase returns with little disruption to your internal operations. Our process includes:

  • Research - Validations to evaluate the efficacy of our models in your current business environment.We analyze how existing processes, strategies, and risk tools interact with SCORE collection scores to demonstrate the added-value opportunity. 
  • Analysis - Portfolio analysis to identify account segments and strategies for your contact and collection treatment paths. With more intelligent portfolio segmentation, SCORE can recommend tactical approaches providing focus for your customer care and collections resources.
  • Recommendation - Refining your current pre-delinquency and early-stage delinquent segmentation strategies. Leveraging our delinquency debt models can yield insights into leading risk indicators. This, in turn, can capture the behavior or risk profile of your customers for more targeted action and improved business results.  
SCORE has proven results in a pre-delinquency application where our scores were used as an additional overlay to better identify cohorts of at-risk customers in advance of a delinquent event.  In fact, a recent joint study with our credit bureau partner analyzed 2MM current credit card customers, demonstrating how a blended score approach (generic bureau risk scores and collections scores) can complement one another in a pre-delinquency risk mitigation strategy to support improved major derogatory risk identification, retention, and profitability. 
 
PROVEN RESULTS
  • 4 out of 5 major Canadian banks leverage SCORE collections scoring
  • Successful use cases include:
    • 12% write-off lift in a pre-delinquency strategy
    • 30% lift in the first 60 days and a 10% lift over four years for outsourced accounts
    • 10% to 20% lift in recoveries for post-write off accounts with a similar benefit to OPEX
"SCORE has helped us review our agency outsourcing. The SCORE team developed a strategy on how to maximize returns, and introduced us to top-performing partners in the market. Through the modeling process, we were able to get a lot clearer on what we needed to do, and we were certainly pleased with the 20 percent lift in returns.

I can't say enough about the SCORE team and their approach. They are a great group of people who provide clarity and are able to simplify the process for their clients. SCORE always has great ideas, and they are particularly good at getting down to the bottom line benefit. I would highly recommend them to anyone in the accounts receivable management space”.

Director of Collection, Schedule 1 Chartered Canadian Bank
 
"We have worked on multiple scoring validation projects with SCORE Statistical over the past several years, and they have always delivered on time and at a more detailed level than required. Their flexibility and ability to take on projects on short notice allows us the flexibility to manage our internal resources and projects more effectively.”

Thomas Higgins, Director of Credit Risk & Fraud, PC Financial

"It was a pleasure to tap into an experienced advisory. We learned how to analyze our competition, improve underwriting and risk management and drive immediate business value. SCORE acted as our trusted advisors on every front, providing macro impact that took us to the next level.”

Natalie Bell, Co-founder and COO, Magical Credit 
 
If you’d like to find out more about SCORE’s capabilities in pre-delinquency, collections and hardship, contact us today on 647.309.1803 for a free consult. SCORE helps lenders predict which accounts are most likely to collect through advanced segmentation and over 20 years of trusted advisory to improve your bottom line.
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