A short interview where we find out about credit Scoring and Fraud and how they really relate.
Credit scores have long been the ubiquitous standard for screening new customers, whether it’s for a home loan, credit card or a new telecommunications service. The most widely used approach is based on scorecards that weight different factors such as demographics, income, employment information, resulting on a total credit score that allows a service provider to distinguish between a ‘good’ and a ‘bad’ customer, as well as predict the probability of a customer defaulting on their bill. However, today communications service providers (CSPs) are still struggling to manage customer bad debt.
We ask Mafalda Póvoas, product manager at WeDo Technologies, how CSPs can improve their collection ratios by pulling fraud data into their credit score checks.
Q: Credit scores are used across all industries and act as an important indicator of a customer’s future ability to pay. How can CSPs protect themselves from rogue customers?
A: [ Mafalda ] Credit scores are a commonly accepted mechanism for assessing new customers. However, in the telecoms sector, often the responsibility for assessing credit scores and managing fraud sit in completely different organizations. Therefore, at face value, a credit score could represent a ‘good’ customer - but by taking a deeper dive and exploring a different set of data, it could show signs of fraud. Because the two data sets – credit risk and fraud - sit in different departments, CSPs are challenged to connect those dots to accurately assess a customer’s true risk profile. When fraud data, such as blacklists are added to the credit check process, CSPs gain deeper insights into each customer’s creditworthiness and have the ability to prevent potential fraudsters from walking away with a new phone subscription more effectively.
Q: How do CSPs gain a 360º degree view of a customer’s risk profile?
A: [ Mafalda ] Combining fraud data with credit scoring models will go a long way towards improving the accuracy of credit scoring. In order to do this, CSPs must be able to call upon data from both credit scores and fraud data and pull them into a single view to make an accurate assessment. WeDo Technologies empowers CSPs to create drag and drop statistical scorecards with RAID Credit Scoring with Fraud, be it for acceptance, dunning probability or upgrade scoring. In addition, by integrating fraud information into credit scoring models business users will be able to get a 360-degree view of a customer’s effective default risk, recovery risk and exposure risk.
Q: Beyond the initial customer assessment, how else can CSPs use Credit Scoring with Fraud to protect their business?
A: [ Mafalda ] Credit risk scoring is not static as a metric, as well as changing alongside the ways in which customers use CSP’s services, how they pay (or don’t) for their bills, how and which new services they subscribe and more. It sometimes happens that customers who initially had good credit risk scores may start failing to pay their bills. This may happen because customers are dissatisfied with the CSP’s service or they can’t afford to pay. The reasons are numerous for changes in each individual risk level.
For this, CSPs need to remain vigilant and constantly and effectively monitor credit risk, by continuously updating credit scores based on usage and behavior, in order to adapt credit risk management policies, as well as relevant payment plans and lifecycle stages to each customer. The ability to automate the integration of credit scoring, fraud and billing data ensures that CSPs maintain an accurate view of their customers’ creditworthiness. By creating credit control and tailored collection strategies for each risk level customer segment, CSPs will be able to reduce customer debt and prevent fraud.
Photo sourced by Porapak Apichodilok in negativespace.co