the loan ecosystem - harland clarke · credit card spending gained market share over debit card...
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January 29, 2014
The Loan Ecosystem
Proprietary and Confidential. © Harland Clarke Corp. Shopper Alert, Refi Genius, Loan Magnet and First Touch are trademarks of Harland Clarke. All rights reserved
About the Presenter
Stephen Nikitas has more than 30 years of experience in strategic planning, marketing, public relations and executive speechwriting. He has been a senior executive at financial institutions in New York, California and Massachusetts, developing and implementing sales and marketing programs that resulted in significant growth rates in loans, deposits and accounts.
As a Senior Strategist at Harland Clarke, Stephen now provides consultative services to banks and credit unions, helping them to craft marketing and retail strategies and campaigns that take advantage of existing market and financial conditions in order to grow targeted portfolios.
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Loan Ecosystem
● Economic Trends
● Loan Ecosystem
Shopper Alert
Refi Genius
Loan Magnet
● Questions
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Our Industry Today
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Challenging Environment
Slow growth economy
Regulatory burdens
Uncertain consumers
Trends
Lowest loan to deposit ratios in years
Competition in the market has radically
increased
Added emphasis on
loan marketing
What to do?
Be proactive
Identify consumers with needs
Market effectively
and efficiently
Signs of Life
Home Lending
Auto Loans
Credit Cards
Economic Trends - Mortgages
5,283
5,741 5,585
5,695 5,845
5,936 5,915
4,000
5,000
6,000
7,000
Q4 - 2012 Q3 - 2013 Q4 - 2013 Q1 - 2014 Q2 - 2014 Q3 - 2014 Q4 - 2014
New And Existing Home Sales (In Thousands)
Source: Mortgage Bankers Association
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Economic Trends - Mortgages
3.4%
4.6% 4.8% 4.7% 4.8%
5.0% 5.1%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Q4 - 2012 Q3 - 2013 Q4 - 2013 Q1 - 2014 Q2 - 2014 Q3 - 2014 Q4 - 2014
30 Year Fixed Interest Rates
Source: Mortgage Bankers Association
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Economic Trends – Mortgages
$178.8
$205.8 $193.7 $198.1 $202.4 $207.5 $201.3
$250.2 $269.1 $270.2 $276.0 $282.0 $283.1 $279.4
$0
$50
$100
$150
$200
$250
$300
$350
$400
Q4 - 2012 Q3 - 2013 Q4 - 2013 Q1 - 2014 Q2 - 2014 Q3 - 2014 Q4 - 2014
Median Home Prices (In Thousands)
Existing Home Prices New Home Prices
Over 58% of homeowners now have an LTV under 80%, increasing the market for Home Equity products
Source: Mortgage Bankers Association Source: Zillow, Real Estate Research, August 2013
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Economic Trends - Auto
Source: R.L. Polk
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16.2
13.2
10.4
11.6
12.9
14.5
15.5
16.2
8
10
12
14
16
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2007 2008 2009 2010 2011 2012 2013 - Forecast
2014 - Forecast
New Vehicles Sales – U.S. (In Millions)
The total number of existing auto loans stands at 61 million, a 54-month high
Economic Trends – Auto
Source: R.L. Polk
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9.6 9.7
9.8 9.8 9.9
10 10.1
10.3
10.6
10.9
11.2 11.4
8.5
9
9.5
10
10.5
11
11.5
12
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Average Age of U.S. Vehicles (In Years)
Source: Nielsen Report
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State of Consumer Affairs
Credit Cards End Two-Decade Streak of Debit Cards
● Credit card spending gained market share over debit card spending in the U.S. in 2012, reversing a trend of more than 20 years
Credit cards accounted for 52.82% of 2012 spending, an increase from 52.63% in 2011.
Debit card spending on consumer and commercial goods and services accounted for 47.18% in 2012, down from 47.37% in 2011
The total number of credit cards issued by financial institutions reached more than 310 million at the end of June, a 43-month high
The credit limit on those cards is more than $2.4 trillion, a 43-month high
1.5 billion credit card offers mailed in Q3
Credit card delinquency rates fell to 1.81% at the end of August 2013, compared to August 2012
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Top Marketing Priorities
● Growing the loan portfolio
● Acquiring the right new account holders
● Deepening account holder relationships
● Increasing wallet share
● Encouraging channel shift
All of this while directing marketing dollars to the most efficient, cost-effective and measurable marketing plans
The Loan Ecosystem
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Loan Need/Timing Accuracy
Fam
ilia
rity
wit
h F
inan
cial In
stit
uti
on
Higher
Response Rates
Pre-Approved Offers to
Account Holders
Pre-Approved Offers to Prospects
Offers to Account Holders
Pre-Approved Account Holders
Considering Near–Term Loan
Offers to Prospects
Pre-Approved Prospects
Considering Near-Term Loan
Loan Marketing Response Rate Drivers
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Harland Clarke’s Loan Marketing Ecosystem
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Loan Marketing Ecosystem: What it Is
A range of complementary solutions that meets virtually all of our clients’ needs
Pre-Approval Considerations
● Regulatory Issues
Compliance Involvement
● Offer requirements
Firm Rate Offer
Minimum Dollar Amount
● Lending Department Involvement
● IT Department Involvement
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Pre Approval Requirements
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● An indication that the consumer is pre-selected, pre-qualified or pre-approved for an offer of credit or insurance
● A listing of the terms and conditions of the offer, including interest rate
This can include a range of interest rates for which the consumer may qualify, so long as there is an offer for which he or she does qualify if the stated conditions are met
● A minimum dollar amount of credit for which the consumer has been qualified
It is acceptable to say the consumer may be qualified for more and a range can be stated so long as there is a minimum amount
● Eligibility requirements that include a statement that credit may not be extended if, after the consumer responds to the offer:
The consumer does not meet the criteria used to select the consumer
• Income, Employment, LTV
The consumer does not meet other pre-established credit criteria
The consumer does not furnish the required collateral as specified on the mail piece
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Shopper Alert/Shopper Alert Prospector Program
How do Shopper Alert and Shopper Alert Prospector work?
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Trigger Alert Marketing Makes Sense
● Knowledge puts Marketing in control and creates powerful marketing programs that produce extraordinary results
● In a perfect world, marketers would know when account holders are applying for a loan with a competing institution
● Shopper Alert is a data-driven solution moves you closer to a perfect world by monitoring credit inquiries across the leading bureaus
Did you know?
• At any point in time, 4% to 6% of account holders are actively shopping for a new loan?
• More than 60% of shoppers will make their loan decisions and commit their loan to an FI within one week of starting the activity?
Source: Harland Clarke Data
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Shopper Alert Results
Texas Financial Institution
● $5.0 billion in assets
● Nearly $5 million in new mortgage, auto or personal loans
New Jersey Financial Institution
● $400 million in assets
● Nearly $4.9 million in new loans are in process or are already closed
● Borrower-to-member ratio has grown by nearly 6%
● Consumer loan portfolio has increased by 11%
California Financial Institution
● $200 million in assets
● Generated a 5.9% application rate
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Shopper Alert Results
California Financial Institution
● $8.1 billion in assets
● More than $15 million in funded loans
Pacific Coast Institution
● $5 billion in assets
● Nearly $400,000 in funded loans
Maryland Institution
● $1 billion in assets
● 10.1% application rate
Refi GeniusTM
Comprehensive loan refinance marketing solution − for mortgage, home
equity and auto − that identifies and targets account holders and prospects
who are eligible for pre-approved finance offers that include lower payments
Why Harland Clarke’s Refi Genius?
✓ Grows loan portfolio
✓ Identifies prospects with high-rate/high-payment loans at competing institutions and account holders who meet specific underwriting criteria
✓ Based on estimated origination date, current payment, home value, length of residence loan-to-value ratio, savings potential and other factors
✓ Pre-approved custom savings
© 2013 Harland Clarke Corp. Refi Genius is a trademark of Harland Clarke. All rights reserved.
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Refi Genius How does Refi Genius work?
Prospects and Account Holders
Refi Marketing Opportunity
High rate loans at competing insitutions
• Origination date• Remaining loan balance• Loan-to-value ratio• Home value, length of residence• Savings potential
High payment loans at competing insititutions
Meet your underwriting criteria
Calculate Potential Savings
Mortgages
Home Equity
Auto Loans
Call Center Follow-up
Pre-approved Refinance Offer
Program Analysis
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Refi Genius Auto
● Payment based on estimates of the loan’s current balance and interest rate
● Credit criteria
● Remaining balance on the loan
● “Save up to $x per month on your loan payments” messaging
Example of a lender that sets a minimum savings amount of $50
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Refi Genius Mortgage and Home Equity
● Based on origination date and estimates of:
o Remaining balance on the loan
o Value of the home
o Loan-to-value ratio
o Length of residence
o Range of other factors
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Refi Genius Results
Texas Financial Institution
● In its first few months, the campaign generated $1.2 million in funded loans
● $5 million in applications still in process, including more than $1 million in auto loans, and nearly $5 million in real estate and other loans
Tennessee Institution
● Grew the loan portfolio by 14%
● Increased loan-to-share ratio by nearly 10%
● Increased borrowers-to-members ratio by more than a full percentage point
● Achieved campaign response rates of roughly 8% for members and 1% for non-members
Washington Institution
● The mailings to HARP-eligible borrowers in the first 12 months helped the bank generate $107 million in loans
● $1.1 million in net income generated
● Loan conversion rate 5x greater than competing list provider
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Refi Genius Results
California Financial Institution
● Total Response Rate- 4.31%
● Total Auto Apps- 2.7%
● Fund to App Ratio- 83%
● Almost $2 million in funded auto loans
● $2.4 million in total consumer (auto, personal, credit card) loans
● Average Cost per New Loan- $50
● Average Cost per New Auto Loan- $72
Loan MagnetTM
Comprehensive loan origination marketing solution − for home equity,
HELOC, auto, credit card and personal lending − that identifies and
targets account holders and prospects who are eligible for a new loan
and are most likely to respond to an offer
Why Harland Clarke’s Loan Magnet?
✓ Grows your loan portfolio ✓ Identifies existing account holders and prospects at other financial
institutions who meet specific underwriting criteria and are most likely to respond to an offer
✓ Scoring based on dozens of consumer data points, including demographics, credit behavior and usage
✓ Pre-approved credit offers
© 2013 Harland Clarke Corp. Loan Magnet is a trademark of Harland Clarke. All rights reserved.
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Loan Magnet How does Loan Magnet work?
Prospects and Account Holders
Refi Marketing Opportunity
High rate loans at competing insitutions
• Origination date• Remaining loan balance• Loan-to-value ratio• Home value, length of residence• Savings potential
High payment loans at competing insititutions
Meet your underwriting criteria
Calculate Potential Savings
Mortgages
Home Equity
Auto Loans
Call Center Follow-up
Pre-approved Refinance Offer
Program Analysis
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Loan Magnet Results
Texas Financial Institution
● Identified nearly 11,000 First Financial Bank account holders that met its criteria
● The campaign generated almost $6.5 million in new auto, HELOC and home equity loans
● Case study in development
West Coast Financial Institution
● Program implementation October 2012
● Visa offer to existing members
● 15k+ offers mailed
● ~2% approval rate
Loan Ecosystem – Wrap Up
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Challenging Environment
Slow growth economy
Regulatory burdens
Uncertain consumers
Trends
Lowest loan to deposit ratios in years
Competition in the
market has radically increased
Added emphasis on
loan marketing
What to do?
Be proactive
Identify consumers with needs
Market effectively
and efficiently
Signs of Life
Home Lending
Auto Loans
Credit Cards
Solutions
Shopper Alert
Refi Genius
Loan Magnet
Thank You
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