The last three years has brought a range of micro and
macroeconomic storms. Shifts in spending behavior and the influx of
stimulus payments early in the pandemic led to a reduction in credit
balances and delinquencies – and a rise in credit scores. But more
recently, rising inflation has caused dwindling savings and an
uptick in delinquencies.
Where does this leave lenders? And what is the most
important thing they should be doing right now when it comes to
In episode 30 of the Market
Pulse podcast, our panel of experts from the Equifax Risk
Advisory group discuss how lenders can leverage account management to
find hidden risk in their portfolio. My guests include Maria Urtubey,
Thomas Aliff, Jesse Hardin
and Dave Sojka.
Listen to our podcast episode for the full interview
or keep reading for an abbreviated Q&A.
What is the most important thing a lender should be doing
right now when it comes to account management?
Jesse Hardin: The most critical thing lenders can
do right now is use account management strategies. The idea of
booking an account and forgetting about it is not a wise strategy.
So, managing a customer relationship, and I may use customer and
consumer interchangeably here, but managing a customer relationship
via account management is about understanding the value a consumer
represents to the lender. And value takes into account things like
cost. So real investment dollar or opportunity cost of that
investment. And then things like the benefit the consumer brings to
the organization. Only after understanding value can the lender
develop strategies via account management that help promote growth
I'd also like to point out that account management is more
than risk mitigation. The telco and energy portfolios I help cover
are acquiring customers and developing those customer relationships.
That's as important, if not more important, of a strategy as managing
or mitigating risk. Lenders must build an account management strategy
that uses all types of data to help inform how the consumer will react
once they become a customer. And it's imperative, as we've seen and
you mentioned with the economic shocks that we've had over the past
few years, whether it's COVID, inflation, elections and loan
forgiveness, lenders must be proactively managing a customer across
the customer lifecycle. And they should reach out as those customer
Dave Sojka: Great point, Jesse. I would say the
account management strategy should be complimentary to your
adjudication strategy. What you do at the front end should be
complemented by what you do once that customer has accepted whatever
product offer you have given them. If you are conservative on the
initial line or loan amount or rates, account management allows you
to be potentially more aggressive.
The converse is also an option. Acquisition costs are
usually much higher than the cost of retainment. To your point,
Jesse, it's not only about the risk side of things. It's also
about keeping the customer. And whether that's through cross-sell,
line management or reissue, these things are all part of a cohesive
strategy that work hand in hand.
The last point I'll make is if you're looking to adjust your
strategy, know how much lead time it will take to go through your
portfolio and have an impact. A strategy that starts in the beginning
of the year will have significantly more impact than one that begins
in November and is expected to change results for the year.
Maria Urtubey: Adding to what Dave said, tying
management in with origination strategies should be a continuous
process. Particularly since the scores and the data used to make the
origination decision is not as valid after six months. You want to
ensure that the picture that you’re considering when making decisions
to differentiate treatment of your customers includes the best filters
and colors and definition. And that in a way will tie into the type of
reaction and frequency of that reaction. What are you currently doing
and how quickly do you want to anticipate or react to rising
delinquencies or retaining customers that are decreasing utilization?
These are some aspects to consider.
Listen on Your Favorite Podcast App
Listen to the full episode of this podcast on your favorite
app. And don’t miss our previous episode, Financial
Industry: Assessing Risk as Federal Student Loan Payments Resume.
If you like what you hear, tell your colleagues and friends