June 20, 2021 at 2:00 PM
Although not a new concept, very few lending organisations have deployed a true multi-bureau strategy (MBS). It is however talked about fairly regularly, but often dismissed as “too hard” or “not important enough”. So why should you consider a multi-bureau strategy? What are the key considerations? How do you go about deploying a MBS? This blog hopes to address all these questions.
Many countries enjoy an environment with multiple credit bureaux. South Africa alone has 11 bureaux registered through the Credit Bureau Association.
There are indeed many reasons that a multi-bureau strategy should be considered. This post deals predominantly with customer originations.
Some of the key reasons:
Pricing Leverage: utilising more than one bureau will give you a position to negotiate price. We have witnessed organisations that have locked into one bureau taking two years to shift bureaux simply because scorecards, strategies and systems have been built to cater for the incumbent bureau. This has meant they have been in no position to negotiate price. There is much talk about the commoditisation of bureau data, however price per live record can vary by over 1,000%.
Contingency: occasionally links to certain bureaux are down and while bureaux are fairly good at ensuring down-time is kept to a minimum, applications still need to be scored and processed. Similarly, even the leading bureaux suffer from large scale data-issues that may take months to resolve. Having an alternative bureau allows you to make decisions with more certainty during these times. Ultimately having a fall-over bureau will ensure peace-of-mind.
Continued Bureau Comparison: running two bureaux also allows for continued comparison of each bureau. As mentioned earlier, each bureau occasionally has data issues. If you are stuck with this bureau your business strategy will be exposed. Also, if you are using a credit bureau score in your strategy and the bureau is migrating over to a new score, you may be exposed here too, forcing you to redesign your new strategies immediately. If you are running a second bureau, you have the ability to rely on their trusted score and simply test the new score from the other bureau.
Diverse data sources: although much of the bureau data available is commoditised and offered by all leading bureaux, certain bureau offer some data not offered by others. Examples of this may be municipal collections data, vehicle registration data, insurance claims data, geo-spatial data, call-centre data, etc. It may be that these data are crucial for certain segments of the population (e.g. “thin-file” applications) and it may be useful to bring it into the application process.
Unique bureau products: some bureaux offer unique products that can assist in part of the originations process. Examples of this are products relating to authentication – here digital applicants are asked automated questions about their credit profile to verify that the ID number is indeed of the individual applying. Some bureaux offer quick-apps; others offer application fraud services. It should also be noted that while each bureau may receive the same payment profile information, they all aggregate the data differently (this is the data used in credit scoring). So the explicit data may be the same, the summarised data is unique and this may offer new opportunities in scorecard builds.
Belts-and-braces: another good reason for a joint bureau strategy is that occasionally a credit bureau does not have the same shared-data as another. Although credit provider groups (like SACCRA in South Africa) do what they can to ensure consistency, occasionally data is omitted from a profile. A second check for those that pass the initial bureau call can give peace-of-mind.
Key challenges of MBS
The two key challenges of MBS are listed below.
1. Developing and running two strategies: instead of an originations’ strategy incorporating one bureau, you will need to support two strategies which can literally mean double the work and double the monitoring. The extra cost and time of this needs to be weighed against the benefits listed above.
2. Software supporting two bureaux calls and strategies: dependent on your use of MBS, you will need suitable software to support MBS. This comes down to a variety of functionality, but essentially a decision engine or originations engine that supports a dual-bureau strategy (this should have champion/challenger capability). The allocation percentage to each bureau should be easily configurable. The second software consideration is the joint bureaux connector. This should support the communication to each bureau (you may wish to test out a third/forth bureau too). It may also deal with ensuring that similar fields are sent back to the originations system regardless of source bureau. It should also have the ability to store bureau enquiry data so that duplicate enquiries to a bureau are not performed incurring additional cost. For Principa’s bureau connector/ API hub offering – see BridgeSmart
Despite the challenges there are many benefits that can add significant value to credit granting organisation from tier 1 to tier 3. Principa offers BridgeSmart as a Smart connector to multiple bureaux (including all South African bureaux). Similarly, Principa’s originations platform AppSmart and business rules management system DecisionSmart are capable of supporting a multi-bureau strategy.