With each digital movement a customer makes, useful data for credit risk managers is created.
Telcos are also increasingly employing data-driven decisioning tools to help refine existing products and services, as well as innovate new business segments, while limiting further organizational complexity. UK-based Vodafone, for example, uses real-time driving and environmental data to enable auto insurers to better assess their risks and more accurately price their policies. The British telco has even embarked on machine-to-machine (M2M) solutions for retail banking because, it says, “data communication happens in real-time — without the need for human intervention”. Using data-driven decisioning tools to address complex credit risk challenges Given the explosion of telcos’ product and service lines, telecommunications credit analysts no longer focus solely on whether a customer has sufficient creditworthiness to add international dialing or call waiting to their landline phone bill, but are now faced with enormous complexities that demand simple, real-time solutions. The sector’s transition from single fixed phone lines to wireless and digital services has enabled many telcos to capture critical customer information in real-time on a daily basis, and operators are increasingly using this data in their decisioning models and analytics tools. With each digital movement a customer makes, whether filling out an online loan application, or changing their employment status on LinkedIn, useful data for credit risk managers is created.
By analyzing data—which may be sourced from mobile phone bill payments, social media feeds, electronic transactions and location information— telcos are generally better equipped to achieve more efficient credit scoring, reduce churn, fine tune their advertising, improve upon their portfolios of products and services, limit capital spending, and even tap into hidden pools of new potential borrowers. Credit scoring When the popularity of wireless mobility began to eclipse fixed-line services, and financing arrangements for the trendy handheld devices quickly mushroomed, the need for faster, and more adept credit scoring on a larger scale became increasingly critical—not only at the time of application but also over the life of the loan. Credit managers know that when consumers become unemployed or focus on savings, they will abandon their telecom-related debt in favor of other payment priorities, such as their mortgage, auto loans or credit cards. Amid the financial crisis of 2008, for example, US incumbents Verizon and AT&T lost more than two million subscribers in the first quarter of that year alone. Data and decisioning tools can help score and assess borrowers’ creditworthiness in real-time, identify opportunities to cross-sell and upsell products, and may even uncover prospective borrowers without credit histories, or so-called ‘credit invisibles’, to increase lending opportunities.
Source: J.D. Power Survey
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