With Experian Automotive set to launch a gamut of product and data updates in 2013, managing director Alistair Scullion spoke to Richard Brown about the evolving credit reference market.
Experian Automotive, the motor arm of credit reference agency Experian, has launched Finance Alerts, a monitoring feature for use by car dealers and finance companies and the latest update to its AutoCheck vehicle provenance tool.
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The service will provide dealers with "purely automated" alerts when retail finance arrangements are cleared, amended or re-added, explained Alistair Scullion, managing director of the global information provider’s automotive business in the UK and Ireland.
Scullion added the upgrade would reduce motor retailers’ and finance providers’ time spent on the telephone to one another when checking for outstanding finance on a vehicle.
"It’s a lot of work for the dealers, a lot of work for the motor finance companies," said Scullion. The motor retailer "no longer has to worry" to check when finance is signed-off and finance companies no longer need to field "hundreds of thousands of calls", which "frees up capacity".
Scullion said Finance Alerts was also the result of extensive work with the Finance & Leasing Association (FLA) to ensure "finance data is as accurate, up-to-date and timely as it possibly can be" and cited the latest figures from the FLA which showed dealer finance reached a 71.2% penetration into UK new private sales. Paul Harrison, head of motor finance at the FLA, endorsed the feature, saying it "will provide valuable insight to dealers and other businesses on the finance status of a vehicle as it passes through the sales process".
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By GlobalDataHowever, the feature is only the first of several upgrades and ventures planned at the company for 2013, part of Experian Automotive’s commitment to organising data services around clients’ needs and the continued and increased investment in data by the company, as Scullion explained.
What’s changing at Experian Automotive in 2013?
Alistair Scullion: Last year we had big investment plans for the business centring on core vehicle data and our core provenance-checking product AutoCheck, and then investing in our account manager team and customer service team. We’ve completed those investments, we’ve relaunched AutoCheck and we’ve got three further, functional releases. Also, as part of our responsibility for exchanging finance data, we’re now sending more to our competitors than they are sending to us for the first time in a couple of years.We’ve been doing that now for the past six months and that’s only increasing.
We’re supporting the finance industry to help get CDL [Vehicle Information Services] finance data across the exchange. A lot of our motor finance clients are now using us as sole supplier. They will send all of their data to us and we will send that across. That’s all been made possible by some of the investments we’ve made. We’re really pleased with the way that’s gone. Motor finance has always been a key area for Experian – nine out of the top 10 motor finance companies are credit risk clients of Experian, and we also supply vehicle data to them. Until now we’ve treated those two groups, motor retailers and motor finance companies, as different parts of the business. That’s worked fine, but we think there’s a bigger opportunity to manage them in the same part of the business.
As of 1 April, we will physically move the responsibility for those motor finance companies into the Experian Automotive business. We will be able to bring the full range of vehicle data, credit risk data and marketing data together into our propositions and solutions, which clients are asking for, in a much more joined-up way.
We’ll also be able to have our account managers go out with clients, both in the motor retail space and in the motor finance space. We’ll be working in the same office space, talking and sharing the issues and challenges of those two. It makes sense in a whole number of areas. Organisationally, it’s a big change for us which we believe will have a big benefit for clients. Behind that, we’ve got a number of big data and product innovations we’re building up towards.
Experian has identified automotive, amongst a number of others, as a strategic market for the group, globally. As a result of that, Experian Automotive is able to draw on a larger proportion of investment across the group and is able to invest, heavily, in our products and data. That’s helping to drive the pace at which we’re changing.
How does this upgrade fit in with that?
Scullion: At the moment, a motor retailer, when they’re buying a used car, will need to check if there’s finance on that vehicle. The way they currently check is physically to pick up the phone or email the finance company to ask. They’ll wait another couple of days, phone up again. They have to keep checking to see if the finance is cleared. That creates a lot of work for the finance companies, also for the dealers.
With Finance Alerts on our AutoCheck product there is now the capability to set up an automatic alert that finance is cleared. If you’re the dealer, you get a particular vehicle you’re looking to trade; you’ll be able to ask the system to alert you when either the finance is cleared or it’s been amended or if any finance is re-added.
From a motor finance perspective, they will no longer have the influx of calls. It frees up motor finance companies to do something more effective with those people.
What else is planned for launch in 2013?
Scullion: Talking to clients, one of the challenges is where a customer of a finance company is going into distress. If there’s no corrective action, it will lead to repossession of the vehicle. It’s in the finance company’s interest to avoid that situation. Equally, it’s in the motor retailer’s interest to avoid that situation and, clearly, it’s in the consumer’s interest. We’re working with motor finance and retail clients. Can we create a capability that identifies the right point where you can offer the consumer refinancing, probably over a longer term, lower repayments and a new, probably downsized vehicle, whereby you take the consumer out of a distressed financial position? You allow the motor retailer to sell another new car and the finance company retains a customer at a profitable position.
At the moment, the finance company would probably think: ‘This is going toward a collection’. The retailer would think: ‘I’m not going to market to this person anymore’. The consumer would be left in a horrible position where they can’t get finance, they can’t get a car. What this does is wrap that all up.
Rarely, in business, there is good news for everybody in this transaction. It’s funny; the idea seems simple once somebody’s said it. We’re in the fortunate position of having vehicle, credit information and other data. Blending that all together, and using our large team of motor finance analysts, we can start predictive modelling and integrate it into relevant software to help drive this through.
It’s one of a number of concepts we’re working on. It’s something we’ve only really been able to do because we have brought our whole motor finance and motor retail work and our investments in data into a lot of our indebtedness and affordability indexes. We’ve got no timescale on that, but it’s an example of what we’re doing.
What are the data innovations?
Scullion: There’s the Rental Exchange, which we are looking to take into market in the spring. The number of people who rent, rather than own their own houses, is increasing. There are some forecasts which say, in three or four years’ time, it will be greater than the number of owners. Within that population, there is a significant number, over a million people, who will be paying their rent on time, each month, but that information is not going onto their credit profile. As a result, their credit profile is not as strong as it ought to be.
Working with landlords and other organisations, a person who rents a property will be able to put their payment record onto the exchange. That data, like other data, is highly regulated, but will go onto your credit profile. The reason that’s important for motor finance companies is they will be turning down strong-credit consumers because this data is not going onto their pile. This is something we’ve put together in response to consumer groups who saw large segments of consumers struggling to get credit they ought to have. Clearly there was an interest from finance companies to understand accurately the credit profile of an organisation. From that came the idea for the exchange.
We’re really excited. It starts to open up more business opportunities for finance companies. We will blend that into our motor finance offering. I was with the operations director of one of the major captive finance companies and was taking him through this for the first time. You could see his eyes open up. We’re going down there in April to look at how that might work with the new business update.
There’s another example – I was talking about innovations and data, and how important they are because we can then improve affordability models. Another data innovation is something we’ve called our National Property Database. It doesn’t sound like it’s going to be relevant to motor finance companies, but it is.
What we have is a unique database on all 28 million properties in the UK, in partnership with Rightmove. We’ve got data from estate agents, the Land Registry, etc. We have credit information on all of these properties, the number of bedrooms, bathrooms, etc. It gives a better picture of a consumer’s wealth and that’s critical when it comes to affordability. That’s something which we launched to market very recently and we’re looking to build into our affordability scorecards, again to help our motor finance providers. That will come as a big benefit to the non-prime lenders.
How has Experian adapted to increased consumer awareness of credit reference agencies, post-2008?
Scullion: It hasn’t really felt like a transition. If you were to come up to Nottingham [where the company is based], you would experience this for yourself: Experian is a studious and modest organisation. We tend to spend a lot of our time working on data, on analytics and with customers. We don’t spend a lot of time thinking about how prominent our brand is in the consumer world. It hasn’t felt so different inside the organisation.
What does matter for me from a brand perspective is for the automotive industry, be it motor finance or retailing, to know that Experian has a strong, dedicated automotive business.
How are consumers’ credit scores doing?
Scullion: Generally, the consumer credit position is pretty robust. We’re not seeing, when we talk to clients, the signs of distress you would have seen four or five years ago. Employment is a key factor. People can continue to service their debt while they’re employed. Employment has held fairly well given the nature of the downturn. That’s helping the overall consumer credit profile.
The turn in economic events focused everybody’s minds, lenders included, to make sure they understood a consumer’s indebtedness level, their affordability level. That’s been a good thing. That’s why you see a pretty robust picture. Informed, responsible lending decisions have been taken, particularly accelerated from 2008 onwards.
A large proportion of Experian’s overall investment goes into new data sources. The more you’ve got, the more you can tell about a person. The analytics in the areas of affordability and indebtedness bring a huge amount of focus. Personally, that’s the really interesting thing about this downturn. Economists will say this is the longest downturn since before the Great Depression and yet employment has held up, household repossessions are at an all-time low for a recessionary period, new car sales grew by 5.3% in 2012, and motor finance penetration is growing. It’s a paradox.
Scullion on subprime
There’s a greater awareness, from the consumer and the lender, of prime, subprime and non-prime lending. Consumers are aware that they take something which they can repay. Non-prime lenders are using indebtedness and affordability models to complement traditional credit scoring and setting their own credit-risk policies at the right level. There is a much better match of product to individual. The consumer is getting the right product, they’re able to afford that product and we’re seeing very low delinquencies.
Scullion on Scor:
There is nothing Experian takes more seriously than its responsibilities around data and doing the right thing as a custodian of that data, including on other people’s behalves, as is the case with Scor. This company is built on our integrity of being a data custodian. We will work with Scor’s members, who are also our clients. We will work with the industry and support the sharing of data and its regulation. That will always be our priority. Sometimes that will lead to frustrations whereby somebody would like an update from us. We would like to give an update but, because conversations are still ongoing, it would not be proper of us actually to disclose what was being discussed. There is a topic of discussion, which is public knowledge, around credit pre-screening. We’re working with Scor and its members to agree the rules around that. It would be great for me to be able to share everything. There are certain situations where it’s not the right thing to do and this is one of those situations.
richard.brown@timetric.com
