Study: 27.78 Percent of NCTC Member Operator Credit Inquiries From ‘Deep Subprime’ Prospects
March 18 2018 - 12:51PM
Business Wire
SubscriberWise reveals proprietary segmentation technology
representative of the majority of 800+ independent cable/broadband
operators across the nation
SubscriberWise, the nation’s largest issuing CRA for the
communications industry and the leading protector of children
victimized by identity fraud, announced today characteristic
segmentation analysis among the hundreds of nationwide member
operators served by the National Cable Television Cooperative.
The analysis involved SubscriberWise proprietary segmentation
data from prospective subscribers in the majority of U.S. states
with a focus on SubscriberWise’s ‘Level 7’ and ‘Level 8’ consumers
who originate in the bottom 12 percent of the adult credit
consuming population as indicated by the Fair Isaac Corporation’s
nationwide distribution of FICO scores (http://www.scoreinfo.org
and http://www.fico.com/en/blogs/tag/score-distributions/).
“This revelation is a tough pill to swallow,” said David Howe,
SubscriberWise founder and president. It’s especially tough for
marketing managers who are tasked with increasing sales but often
navigate with blinders while unintentionally increasing an
operator’s liabilities by selling non-pay disconnections because of
a lack of access to this type of data. Worse, according to S&P,
‘today’s subprime customer appears to be a weaker cohort than that
of several years ago’
https://www.bloomberg.com/news/articles/2017-03-28/-deep-subprime-becomes-norm-in-car-loan-market-analysts-say).
“But what does it mean when, on average, 28 percent of
NCTC-member-operator-prospects originate with a SubscriberWise
‘Level 7’ or ‘Level 8’ decision,” continued Howe. “From a ‘FICO
Score 9’
(http://www.fico.com/en/newsroom/fico-score-9-now-available-to-consumers-at-myficocom-03-08-2016)
standpoint, it means that the prospective consumer has a scorable
file with a FICO Score of 300 to 549.
“And according to scientific analysis of millions of consumer
reports by the Fair Isaac Corporation, these score rankings reflect
consumers who have high risk of failing to pay as agreed on any
obligation over a two-year period.
Related: Why 'deep subprime' auto loans are beginning to worry
Wall Street
“Specifically, according to FICO, the percent of people who
default on any credit account over a two-year period is 79% for
scores between 300 to 499, and 63 percent for scores between 500 to
549,” Howe stated.
“In other words, these are consumers who are in a financial
crisis and -- despite the best intention to pay as agreed -- these
individuals will disproportionately fail to meet their obligations
as evidenced by the deep subprime scores calculated from extremely
adverse credit reports that contain substantial and serious
delinquency.
“From the standpoint of SubscriberWise’s proprietary decision
technology, it’s also relevant to highlight that this extreme level
of credit risk is reflective of Fair Isaac’s latest scoring model,
FICO Score 9, which treats unpaid medical collection accounts
differently than other types of unpaid collection accounts,
offering a better opportunity for many people to regain their
credit standing,” added Howe.
Related: FICO 9: SubscriberWise is First in Nation to Integrate
the New Score for Consumer-Initiated Underwriting; MCTV is First
Communications Operator to Utilize
“But why should a communications operator care about this
scientific analysis, including similar trends among other industry
segments? Because from a risk and selling standpoint, the deep
subprime consumer represents more than the hundreds of dollars of
potential write-off from unpaid programming and unreturned
equipment,” continued Howe. “Unfortunately, it’s also a data-driven
fact that prospects who originate in the very bottom rungs of the
adult credit consuming population, they correlate significantly
with high negative churn, statistically higher rates of fraud and
predatory behavior, increased burdens on the call center, and other
high-risk scenarios that translate into disproportionate revenue
losses and operational inefficiencies across the entire MSO.”
Related: Cord Cutting Not the Only Issue Facing Industry Says
21-Year Cable Veteran
“To be crystal clear, however, the facts revealed today are not
meant to be a personal indictment on any individual who is
struggling with extreme credit delinquency and a demonstrated
inability to manage finances at the moment she or he is scored,”
emphasized Howe. “Rather, the analysis is meant to inform operators
about the mathematical and scientific probabilities of rank-order
technology -- specifically the marked and demonstrated risk of
non-payment -- at origination. It’s meant to help operators
navigate accordingly. It’s proactive vs. reactive.
“The proven approach,” concluded Howe. “Accept the hard data and
approve with confidence every prospect – regardless of credit risk
– by asking deep-subprime prospects to consume services responsibly
for a short time prior to over-extending offerings that will almost
certainly guarantee huge liabilities.”
About SubscriberWise
By incorporating years of communications performance data and
decision models, including FICO's latest analytic technology (FICO
9 Score), SubscriberWise® delivers unprecedented predictive power
with a fully compliant, score driven decision management system.
SubscriberWise is a risk management preferred-solutions provider
for the National Cable Television Cooperative (www.nctconline.org).
The NCTC helps nearly 1000 members nationwide.
SubscriberWise is a U.S.A. federally registered trademark of the
SubscriberWise Limited Liability Co.
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SubscriberWiseDavid Howe, 888-596-1119 x137