MANAGE RISK SERIES PART 1—3 Reasons Collections Data is Critical to a Risk Management Strategy in 2021
DRN is a 2020 Champion Partner with Allied Solutions
The COVID-19 pandemic has had a widespread and challenging impact across industries, disrupting all sorts of plans, strategies, and protocols. On top of that, 2020 has seen historically high unemployment, presented financial challenges for consumers and employers, and rising concerns about delinquencies.
Specifically, in risk and recovery management, that has included:
- Fewer cars on the road due to stay-at-home orders and business/school closures
- Increased accuracy of license plate scans due to large numbers of people working from home and sheltering in place, cars are parked at home more than usual
- Many borrowers relocated at a much higher rate than usual during the pandemic
Data becomes incredibly important for lending institutions to make sound recovery decisions and effectively know how collateral is impacting risk exposure. With rising debt levels and new vehicle costs higher than ever, like other lenders, you may be extending loan terms, loaning deeper into the pool, and lending higher amounts. Add the increasing rate of job changes, relocation, and updates in customer contact information, and it’s easy to see why traditional data no longer tells the full story of the borrower. Knowing where and understanding how your collateral is moving are both critical in developing your risk management strategy.
View Part 2 here: 3 Ways to Manage Data Effectively & Efficiently
View Part 3 here: 3 Steps to Implement a Strategic Risk and Recovery Plan in 2021
3 Reasons Collections Data Remains Critical
- Available scan data can allow lenders to prioritize repossessions
There’s a lot of uncertainty around what’s next for our industry, especially surrounding collections and repossessions. If there’s a wave of delinquencies, resources may be stretched or unavailable. By leveraging current, accurate location information, lenders can use data to develop a better strategy to locate and evaluate vehicles in states open for repossession. This allows you to make sure you’re within state and federal guidelines while slowly getting repossession processes moving again. Data scans can help provide a story that gives insights into borrower behaviors by providing locations for making contact or help predict skips by better understanding your borrower. - Lenders deferred payments and repossessions by 90+ days in 2020
Additionally, some states implemented legislation requiring deferred payments and repossessions moratoriums. Location data can help assess risk and influence decisioning after origination and before repossession. Leveraging risk data can help accelerate your collections process and better know when to execute on recovery efforts. - Access more accurate risk scoring models
The COVID-19 pandemic brought on other financial changes in the broader economic downturn for both lenders and consumers. Putting data toward risk scoring can become a solution to build a broad picture of your overall risk exposure. Machine learning and other artificial intelligence developments allow enormous amounts of data to be rapidly processed and categorized. Tasks, such as validating state names, improve efficiencies without losing accuracy. At DRN, tools such as risk scoring, license plate recognition, and heatmaps are all ways that data is utilized.
The bottom line: Repossession volume is expected to increase as we look toward 2021. Accurate and timely collections data helps drive better decisions, validates borrower information, lowers lender risk, and improves repossession timing. Data can help manage your risk, locate collateral, and gain accurate insights that build a borrower’s history.
DRN is a 2020 Champion Partner with Allied Solutions.
About DRN
DRNsights Puts Real-time Vehicle Location Data and Advanced Analytics to Work.
From lending to insurance to collections to repossession, DRNsights software and services bring unique insights into your customers and portfolios that can transform your business processes and drive revenue. Our vast network of license plate recognition cameras feeds an expansive database of vehicle images. Our platform of analytic solutions then uses these images to help detect fraud, reduce risk and find vehicles with more speed and accuracy than relying solely on public data.
About Allied Solutions
Allied Solutions, LLC is one of the largest providers of insurance, lending, and marketing products to financial institutions in the US. Allied Solutions uses technology based products and services customized to meet the needs of 4,000 clients along with a portfolio of innovative products and services from a wide variety of providers. Allied Solutions maintains over 15 regional offices and service centers around the country and is a subsidiary of Securian Financial Group, Inc. Allied Solutions has tools and resources that can help you keep an eye on the potential areas of impact, protect against collateral losses, and stay on top of any new events, bulletins, and regulations as they happen.