Experian - Making the Data Talk: The Importance of Analytics

MAKING THE DATA TALK: THE IMPORTANCE OF ANALYTICS

We chat to Mohammed Chaudhri, Chief Economist and Director of Market Intelligence at credit reference agency, Experian.

ohammed Chaudhri, Chief Economist and Director of Market Intelligence at Experian, explains, “We help our B2B clients, including the financial services institutions, big banks and challenger institutions, to understand what is happening in the credit market day to day, so they can better serve their customers. A large part of my job involves looking at the trends and insights to get an idea of what is going to happen, giving our clients a forward-looking view so they

can adjust their strategies, always with the end customer in mind.”

Speaking of the market trends, Mohammed says the UK is on the cusp of a recession, with the economy going backwards and inflation at the highest it has been in 40 years. That said, Mohammed prefers to focus on the positives. He continues, “There are some glimmers of hope. If the government had not acted with the Energy Price Guarantee, households would have been facing bills that are

double what they are now. Everyone’s energy bill has significantly increased, but many forecasters expected them to be much higher. This winter is going to be better for all households than what it would have been if the government had not intervened.”

The current situation with interest rates and mortgage rates is a story of two facts, according to Mohammed.

1. Interest rates are going up globally. (In economic theory, the way you combat inflation is to increase interest rates.)

2. In the UK, there was a market reaction to the announcement of the mini-budget. However, we are continuing to see credit markets remaining open, with credit card lending at good pace and personal loans still available. Mohammed adds, “There has been some re-pricing in the mortgage market, but in an era of increasing interest rates, this is to be expected. The fact is that we have not been in this position for almost 15 years. When

you do not know how far interest rates are going to rise, it is prudent for lenders to re-price to make sure they are able to lend on longer products, and that they remain profitable.”

Experian’s depth and breadth of data sets the company apart from its competitors. Mohammed says, “We have a long, established view of the UK credit market, which we continue to supplement with new data. Our ability to be the first in the market with our analytics solution allows us to drive forward with the trends. At a granular level, we help lenders understand where they sit in the market, as well as the benchmarks of banks B, C and D. We are able to provide those missing parts to their market strategy.

“We are the only credit reference agency with an economics team, and the ability to train our models on our world-leading data. Living and breathing that credit data allows us to look more deeply at the key themes of the day, such as affordability, interest rates etc. We are in the unique position of bringing our data and analytics together to set ourselves apart for our customers.”

“Our ability to be the first in the market with our analytics solution allows us to drive forward with the trends”

Within the UK, Experian begins at the top macroeconomic level to set a view for its clients, but it doesn’t just stop there. Mohammed explains, “We want to turn that high-level view into actionable insights that can be used by businesses. We bring it into our regional model, focusing on industries in different parts of the UK, and we then take it one step further by looking at the local areas of employment. Linking the industrial view to local areas gives insights at a town-by-town performance level.”

If you consider the cost of living crisis and increasing energy bills, how does a lender take that headline and apply it to its customer base? Mohammed elaborates, “At Experian, we are able to understand which industries will be hit hardest (such as hospitality and transport, for example), and we know where those sectors are in the UK, so we know which local areas are most likely to be affected. Crucially, we can get a view of the household balance sheets. We are able to understand how much households are spending on energy, and whether they are seeing a pay increase that is larger than this spending. Some households will survive the crisis better than others, so we want to identify them

Becoming AI-driven

Technology Practice, UST

At UST, we work with our clients to accelerate their journeys to becoming digitised and data driven. This includes developing and implementing data strategy and focusing on the areas in which they need guidance and assistance as they strive to innovate with and leverage their data. And also, helping them to be agile and efficient through automation and digitisation.

Across industry and our wider society today, you don’t have to work in data to appreciate the impact data innovation is having all the time around us. Data underpins AI, and AI is increasingly changing our lives.

We’ve all been told that within a few years, cars will be self-driving, and we will be plugging into the Metaverse to visit people and places. While it may take years for these two things to make a significant impact, they are innovations that will drive big changes and have a major impact on behaviours within society.

Right now, however, the smaller changes AI is continually affecting - helping us complete tasks faster and more effectively - are having a greater impact on our lives Think about when you go through passport control, pay for your groceries, book a table at your favourite restaurant, or make an appointment with your GP

All these are examples of everyday processes that have elements of AI underpinning them, combining the cognitive power of AI with Automation, making them smoother and easier to follow. There are, of course, many more such examples, and they’re increasing in number every day. End to end journeys like customer and employee onboarding are completely being re-imagined, outages are prevented proactively in IT operations and ecosystems are built and managed far more efficiently.

As our society becomes increasingly digital and data-driven, there is an implicit expectation that the products and services we use each day will keep up. These expectations are one of the key drivers of the digital revolution. This was sped up by the pandemic, during which many of us spent more time online. But even as the pandemic steadily wanes, the pressure is still there to digitise, and it is becoming the new normal.

Leveraging data to develop actionable insights and AI is a key element of successful digital transformation. Within any Enterprise, there are a plethora of ways AI and Automation can be used to make operational efficiencies and improve quality and user experience. A data-driven and digitised Enterprise is one that has its data in order and processes fully digitised. Few are fully there yet, but those who have progressed in the transformation journey, have the strategies to develop, use actionable insights, AI and Automation are realising the benefits.

using our forecasts. We are then able to go back to our customers with account-level economics. When they look at the insights, they can identify households at a certain account number that will be hit hardest by inflation etc, and those that will be more resilient. Our clients have limited resources, so we want to help them prioritise where to put them.”

From a sustainability perspective, how is climate risk affecting businesses? Mohammed answers, “Most

is well-protected from the physical part of climate risk, but as the area is largely supported by the oil and gas industry, and with the increased focus on achieving net-zero 2050 targets, the transition risk will be high. Mohammed adds, “The industry must get smaller to fulfil its sustainability commitments, so the area will not be able to attract people beyond its local borders. As the jobs start to dry up or move to other parts of the economy, the transition risk will be a huge factor.”

businesses are facing two key risks. The first is physical risk. As a business, are you located in an area of the country that is more prone to flood risk, subsidence, storm damage, or coastal erosion, for example? Not all businesses will be hit by the physical element of climate risk, but they are all likely to be affected by transition risks. These are changes in the economy or law that businesses must respect.”

Mohammed shares the example of an education firm in Aberdeenshire that

Experian partners with companies that share its values and focus on innovation. Mohammed continues, “Our partners help us to bring new solutions out to market at pace. We have partnered with UST to deploy our market-leading machine learning solutions much quicker than we could have done on our own, which gives us a competitive advantage.”

Mohammed says Experian really believes in creating models that are transparent, so people are able to understand them. He explains, “We

“We have partnered with UST to deploy our market-leading machine learning solutions much quicker than we could have done on our own, which gives us a competitive advantage”

create very sophisticated and advanced models that tick a lot of boxes, but being able to make sure our clients really understand them is a top priority. We bring our faces to our solutions, along with our rationality and explain-ability, so the human touch is upfront and centre for our business, making sure our analytics is something we can stand behind.”

The pandemic, cost of living crisis and war in Ukraine have kept economists on their toes over the last few years. Mohammed says, “It has been a frantic but very exciting time. As we move forward into the future, we are trying to double down on what the market is telling us is working, making sure we continue to have the best data and bringing new opportunities into our eligibility framework. As lenders move into this era of higher interest rates, we need to be able to verify income for mortgage applications. Moving that data into the analytics space, how can we drive the new models? We are looking at launching our AIS (Ascend Intelligence Services) to constantly monitor and report on the data. We cannot simply build a model, deploy it, and then leave it there. The future is all about managing that model, bringing in new information and making sure you are standing up to the macroeconomic risks. We want to

launch a service alongside our model that will continuously monitor it and give clients the option to upgrade seamlessly.”

Mohammed spends a lot of time listening to clients to ensure

Experian’s innovation strategy addresses the market needs. He adds, “Having regular touchpoints drives our innovation pipeline, building those ideas out and allowing them to prioritise our own work so that we are continually seeking solutions.”

“At Experian, we are focusing on what climate risk means for businesses, lenders, consumers and borrowers”

From Mohammed’s perspective, climate risk is the key issue facing credit reference agencies today. He concludes, “I believe for credit risk, sustainability is something that is going to need to be addressed. We know the PRA (Prudential Regulation Authority) of the Bank of England launched in 2019 to stress-test UK banks against climate changes, but a lot has happened since then, so climate risk is getting pushed down the pecking order for some

companies. At Experian, we are focusing on what climate risk means for businesses, lenders, consumers and borrowers. Watch this space for our solution to this market need! We believe it is something that must be addressed and can’t keep getting pushed down the pecking order.”

For further information on Experian, visit www.experian.co.uk

www.experian.co.uk