Savvy Decision Making through Rear and Windshield Views

This article was originally published on AFSA.

Will we see a recession? 

Is the housing market going to crash?

Are auto loan originations tanking?

These are questions the industry asked during the financial crisis of 2007-2009, and here we are asking them again in 2023. What’s the difference between then and now? Today we have more consumer behavior data! Consumer data - or big data - steps outside of FICO scores and demographic information to not only identify but also predict risk factors. Here’s how consumer behavior data is leading the way for the future. 
 

Here are four ways that consumer behavior data is leading the way for the future:

1. Follow the leader.
   Think back (maybe way back) to high school economics class and lagging indicators versus leading indicators. More prominent industry factors like originations, delinquencies, and repos, are lagging indicators. Their effects won’t be felt immediately, and they are important for the overall picture of portfolio health. On the other hand, analytics centered around consumer behavior are leading indicators. These indicators can proactively predict consumer buying habits and saving trends.
   
   When it comes to making decisions with indicators, lagging indicators are the rearview mirror view and leading indicators are the windshield view. Both indicators are important, but on their own they don’t provide the whole picture. Making decisions based on only leading or only lagging indicators is like driving without either a rearview mirror or windshield. Combining leading and lagging indicators strengthens strategic planning.
   
   
2. Silos are only good for grain. 
   Silos have their place in the agricultural world but not in information technology and decision making. The goal of data analytics is not to piecemeal multiple data solutions into your core processor. This will create siloed information. When one set of consumer data resides in a different silo than the rest it’s nearly impossible to accurately piece the right information together at the right time to make the right decision. A single source of data truth is needed to integrate data from your core processor to a pool of industry data analytics. A single data engine will power smarter… Read the full article here.

Allied Solutions is an AFSA Innovation Spotlight award winner for Portfolio Analytics. Learn more here: https://www.alliedsolutions.net/solutions/portfolio-analytics