millennial credit: the insights you've been missing

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Experian Public.

Millennial credit The insights you’ve been missing

Michele Raneri Vice President Analytics and Business Development

2 © 2015 Experian Information Solutions, Inc. All rights reserved.

Experian Public.

The Millennial explosion


Experian Public.

Agenda Trends The millennial generation and key credit trends

Cohorts Point-in-time cohort comparison study and behavior generational differences

Entrepreneurs Key indicators on millennial small business owners

Segmentation Tools to effectively attract, maintain and retain the most profitable populations


Experian Public.

Millennial credit: The insights you’ve been missing


Experian Public.


Experian Public.

Generational review

Gen Y /

Millennials

Gen X /

Busters

Baby

Boomers

Greatest /

Silent

Range: 69+

17% file Average age: 81

Range: 50-68


Range: 35-49


Range: 18-34


12% unknown


Experian Public.

Generational review

Gen Y /

Millennials

Gen X /

Busters

Baby

Boomers

Greatest /

Silent

Range: 69+


Range: 50-68


Range: 35-49


Range: 18-34


But… Millennials are now also the largest generation,

numbering more than 75 million 12% unknown


Experian Public.

Millennials timeline

Graduate high

school

Barista

Coachella College

Travel more

Travel Move home

Apartment in Austin

Follow their passion

Credit


Experian Public.

world of credit?


Experian Public.

So, how

does this

translate in the


Experian Public.

3

17

28

-

5

10

15

20

25

30

35

Bankcard Auto Student

Th

ou

sa

nd

s

185

-

50

100

150

200

Mortgage

Th

ou

sa

nd

s

Average balance per millennial


Experian Public.

Cohort comparison – Average balance for Gen X Age 30 vs Gen Y Age 30

1

5

16

21

1

4

18

34

-

5

10

15

20

25

30

35

40

Retail Bankcard Auto Student

Th

ou

sa

nd

s

Gen X - Age 30 (2005) Gen Y - Age 30 (2015)

163

185

150

160

170

180

190

Mortgage

Th

ou

sa

nd

s

10 year look back

Gen X

Age 40

2015

Gen X

Age 30

2005


Experian Public.

VantageScore® by generation 2011-15

540

560

580

600

620

640

660

680

700

720

740

760

Millennials Gen X Boomer Greatest

2011 2012 2013 2014 2015

Growth with new entrants


Experian Public.

VantageScore® comparison

7%

27%

16%

32%

18%

10%

31%

15%

34%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Deep subprime 300-499

Subprime 500-600

Nonprime 601-660

Prime661-780

Super prime781-850

Gen X Gen YFull population Sep 2015 Experian MAD file


Experian Public.

160

165

170

175

180

185

190

195

-

5

10

15

20

25

30

35

2012 2013 2014 2015

Mo

rtg

ag

e

Th

ou

sa

nd

s

Auto Bankcard Student Mortgage

Millennial average balance comparison

Millennials

160

165

170

175

180

185

190

195

-

5

10

15

20

25

30

35

2012 2013 2014 2015

Mo

rtg

ag

e

Th

ou

sa

nd

s

US +12%

+19%

+15%

+15%

+14%

+3%

+13%

+2%


Experian Public.

Delinquency comparison 60DPD

60DPD

Delinquency Rate

June 2015 US

Millennials

Mortgage 0.6% 0.8%

Auto 0.6% 0.8%

Bankcard 0.5% 0.6%

Student 0.5% 0.5%


Experian Public.

Where are Millennials going financially? Forecasted growth through 2020

17

29

6

10

30

43

79

137

$0

$20

$40

$60

$80

$100

$120

$140

$160

$0

$10

$20

$30

$40

$50

2012 2013 2014 2015 2016 2017 2018 2019 2020

Bil

lio

ns

Bil

lio

ns

Auto Bankcard Student Mortgage


Experian Public.

How Millennial business owners compare Student loan payments and balances

$0

$50

$100

$150

$200

$250

$300

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Millennial Gen X Baby Boomers Greatest / Silent

Th

ou

sa

nd

s

Average Student Loan Balance Average Student Loan Payment


Experian Public.

Education levels of Millennial business owners

0%

5%

10%

15%

20%

25%

30%

35%

40%

Less than a highschool diploma

High schooldiploma

Some college Bachelor degree Graduate degree

Gen Y / Millennials Gen X Baby Boomers Greatest / Silent

Gen Y represents largest % of business owners with less than a high school diploma

Gen Y represents smallest % of business owners with less than a bachelors degree


Experian Public.

Top industries for Millennial business owners

0%

1%

2%

3%

4%

5%

6%

7%

Business Services Building Cleaning General Contractors Motion Picture / Video

% o

f s

am

ple

Millennial Gen X Baby Boomers Greatest/Silent

• Of the top 10 small business SICs Millennials are prominent in 4.

• Males are building small businesses that don’t require 4 year degrees.

• Millennials are noticeably absent from 3 of the top 10: real estate, consulting and gift/novelty.


Experian Public. 19 © 2015 Experian Information Solutions, Inc. All rights reserved.

Experian Public.

Who to target?

Risk and revenue analysis for bankcard


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The approach

to highlight the most predictive risk levers

in order to define the revenue breaks

to segment population for decisioning

Targeting… the ideal

Millennial

Chi-square analysis

Revenue calculation

Merge revenue and risk


Experian Public.

Targeting the ideal Millennial Step 1




Predict risk

Chi-square analysis

Revenue calculation



Experian Public.

Predicting risk

Vantage

Score®

Experian

TAPSSM

Trend ViewSM

attributes

Premier

AttributesSM

ERIC for

RevolvingSM

Debt-to-Income

InsightSM

CHAID analysis

LOW likelihood of bad

HIGH likelihood

of bad

Observation September 2013

Performance September 2015

Bad definition 90 DPD


Experian Public.

CHAID results Gen Y Probability 90+DPD

Subprime

(4.7%)

BC Utiliz <10%

(3.2%)

BC Utiliz 10-49%

(3.7%)

BC Utiliz 50%+

(4.8%)

Delinq 1+

(3.2%)

Delinq 1+

(4.9%)

Never Delinq

(3.7%)

Delinq 1+

(3.7%)

BC Utiliz <10%

(2.2%)

BC Utiliz 10-49%

(2.0%)

BC Utiliz 50%+

(2.2%)

Delinq 1+

(2.3%)

Delinq 1+

(2.4%)

Never Delinq

(1.7%)

Delinq 1+

(2.2%)

Never Delinq

(1.2)

Nonprime

(2.3%)

BC Utiliz <10%

(0.1%)

BC Utiliz 10-49%

(0.1%)

BC Utiliz 50%+

(0.7%)

Delinq 1+

(0.2%)

Never Delinq

(0.1%)

Delinq 1+

(0.0%)

Never Delinq

(0.7%)

Delinq 1+

(0.1%)

Never Delinq

(0.1%)

Super Prime

(0.2%)

BC Utiliz <10%

(0.3%)

BC Utiliz 50%+

(0.8%)

Delinq 1+

(0.5%)

Never Delinq

(0.2%)

Delinq 1+

(1.1%)

Never Delinq

(0.6%)

Prime

(0.8%)

BC Utiliz 10-49%

(0.4%)

Delinq 1+

(0.7%)

Never Delinq

(0.2%)

BC Utiliz <10%

(3.8%)

Delinq 1+

(3.8%)

Delinq 1+

(7.3%)

Delinq 1+

(5.7%)

Deep

Subprime

(7.0%)

BC Utiliz 10-49%

(5.7%)

BC Utiliz 50%+

(7.3%)

1.2% overall

bankcard bad rate

Never Delinq

(10.5%)

Never Delinq

(4.2%)

Never Delinq

(1.0%)


Experian Public.


Subprime

(4.7%)

BC Utiliz <10%

(3.2%)

BC Utiliz 10-49%

(3.7%)

BC Utiliz 50%+

(4.8%)

Delinq 1+

(3.2%)

Delinq 1+

(4.9%)

Never Delinq

(3.7%)

Delinq 1+

(3.7%)

BC Utiliz <10%

(2.2%)

BC Utiliz 10-49%

(2.0%)

BC Utiliz 50%+

(2.2%)

Delinq 1+

(2.3%)

Delinq 1+

(2.4%)

Never Delinq

(1.7%)

Delinq 1+

(2.2%)

Never Delinq

(1.2)

Nonprime

(2.3%)

BC Utiliz <10%

(0.1%)

BC Utiliz 10-49%

(0.1%)

BC Utiliz 50%+

(0.7%)

Delinq 1+

(0.2%)

Never Delinq

(0.1%)

Delinq 1+

(0.0%)

Never Delinq

(0.7%)

Delinq 1+

(0.1%)

Never Delinq

(0.1%)

Super Prime

(0.2%)

BC Utiliz <10%

(0.3%)

BC Utiliz 50%+

(0.8%)

Delinq 1+

(0.5%)

Never Delinq

(0.2%)

Delinq 1+

(1.1%)

Never Delinq

(0.6%)

Prime

(0.8%)

BC Utiliz 10-49%

(0.4%)

Delinq 1+

(0.7%)

Never Delinq

(0.2%)

BC Utiliz <10%

(3.8%)

Delinq 1+:

(3.8%)

Delinq 1+

(7.3%)

Delinq 1+

(5.7%)

Deep

Subprime

(7.0%)

BC Utiliz 10-49%

(5.7%)

BC Utiliz 50%+

(7.3%)

1.2% overall

bankcard bad rate

Never Delinq

(10.5%)

Never Delinq

(4.2%)

Never Delinq

(1.0%)

Nonprime segment

Have NEVER been

delinquent on any

trades

This node has a

lower bad rate than the

average bad rate

Treatment:

Protect or attract


Experian Public.


Subprime

(4.7%)

BC Utiliz <10%

(3.2%)

BC Utiliz 10-49%

(3.7%)

BC Utiliz 50%+

(4.8%)

Delinq 1+

(3.2%)

Delinq 1+

(4.9%)

Never Delinq

(3.7%)

Delinq 1+

(3.7%)

BC Utiliz <10%

(2.2%)

BC Utiliz 10-49%

(2.0%)

BC Utiliz 50%+

(2.2%)

Delinq 1+

(2.3%)

Delinq 1+

(2.4%)

Never Delinq

(1.7%)

Delinq 1+

(2.2%)

Never Delinq

(1.2)

Nonprime

(2.3%)

BC Utiliz <10%

(0.1%)

BC Utiliz 10-49%

(0.1%)

BC Utiliz 50%+

(0.7%)

Delinq 1+

(0.2%)

Never Delinq

(0.1%)

Delinq 1+

(0.0%)

Never Delinq

(0.7%)

Delinq 1+

(0.1%)

Never Delinq

(0.1%)

Super Prime

(0.2%)

BC Utiliz <10%

(0.3%)

BC Utiliz 50%+

(0.8%)

Delinq 1+

(0.5%)

Never Delinq

(0.2%)

Delinq 1+

(1.1%)

Never Delinq

(0.6%)

Prime

(0.8%)

BC Utiliz 10-49%

(0.4%)

Delinq 1+

(0.7%)

Never Delinq

(0.2%)

BC Utiliz <10%

(3.8%)

Delinq 1+:

(3.8%)

Delinq 1+

(7.3%)

Delinq 1+

(5.7%)

Deep

Subprime

(7.0%)

BC Utiliz 10-49%

(5.7%)

BC Utiliz 50%+

(7.3%)

1.2% overall

bankcard bad rate

Never Delinq

(10.5%)

Never Delinq

(4.2%)

Never Delinq

(1.0%)

Nonprime segment

Have NEVER been

delinquent on any

trades

This node has the

average bad rate, they are on

the cusp and a

decision would need

to be made

Treatment:

Watch


Experian Public.


Subprime

(4.7%)

BC Utiliz <10%

(3.2%)

BC Utiliz 10-49%

(3.7%)

BC Utiliz 50%+

(4.8%)

Delinq 1+

(3.2%)

Delinq 1+

(4.9%)

Never Delinq

(3.7%)

Delinq 1+

(3.7%)

BC Utiliz <10%

(2.2%)

BC Utiliz 10-49%

(2.0%)

BC Utiliz 50%+

(2.2%)

Delinq 1+

(2.3%)

Delinq 1+

(2.4%)

Never Delinq

(1.7%)

Delinq 1+

(2.2%)

Never Delinq

(1.2)

Nonprime

(2.3%)

BC Utiliz <10%

(0.1%)

BC Utiliz 10-49%

(0.1%)

BC Utiliz 50%+

(0.7%)

Delinq 1+

(0.2%)

Never Delinq

(0.1%)

Delinq 1+

(0.0%)

Never Delinq

(0.7%)

Delinq 1+

(0.1%)

Never Delinq

(0.1%)

Super Prime

(0.2%)

BC Utiliz <10%

(0.3%)

BC Utiliz 50%+

(0.8%)

Delinq 1+

(0.5%)

Never Delinq

(0.2%)

Delinq 1+

(1.1%)

Never Delinq

(0.6%)

Prime

(0.8%)

BC Utiliz 10-49%

(0.4%)

Delinq 1+

(0.7%)

Never Delinq

(0.2%)

BC Utiliz <10%

(3.8%)

Delinq 1+:

(3.8%)

Delinq 1+

(7.3%)

Delinq 1+

(5.7%)

Deep

Subprime

(7.0%)

BC Utiliz 10-49%

(5.7%)

BC Utiliz 50%+

(7.3%)

1.2% overall

bankcard bad rate

Never Delinq

(10.5%)

Never Delinq

(4.2%)

Never Delinq

(1.0%)

Nonprime segment

Have NEVER been

delinquent on any

trades

This node has

higher bad rate than average,

may still want to

originate balances

depending on revenue

Treatment:

Watch closely


Experian Public.





Calculate revenue

Chi-square analysis

Revenue calculation



Experian Public.

Revenue calculation anchors

The EIRC for RevolvingSM (Estimated Interest Rate Calculator for Revolving) is a yield algorithm that uses longitudinal credit data to proxy the last 6 months of interest on credit cards

Key fields delivered:

Average effective APR (%)

Average interest (in $)

Average daily balance

Average revolving balance

The Experian TAPSSM (Total Annual Plastic Spend) is a spend algorithm that uses longitudinal credit data to proxy the last 12 months of spend on credit and charge cards

Key fields delivered:

Total Annual Plastic Spend

Wallet share

Payment rate


Experian Public.

Revenue calculation

Estimated Interest Rate Calculation variable for average yield across all selected trades multiplied by 12 to annualize the output

Total Annual Plastic Spend on charge cards and bankcards multiplied by 0.0167 to get the estimated interchange

Total revenue per consumer per year

Annualized

Revolving

Interest Rate

Yield Interchange Revenue

Annualized

Spend

* 0.0167

Revenue


Experian Public.

Rank-ordered revenue by generation

High Medium Low

$2,675 $637 $116

$1,627 $394 $67

Gen X is higher by: +39% +38% +42%

Revenue segments

Gen X

Gen Y


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Millennial profiling

Key Statistics Gen Y Averages* Gen X Averages* Diff

Revenue $695 $1,143 39%

Total Annual Plastics Spend $12,978 $20,599 37%

Average bankcard balance $3,435 $6,672 49%

Average Debt to Income 14% 16% 13%

Average Income $41,000 $53,000 23%

VantageScore 635 657 3%

Bankcard utilization 42% 40% 5%

60DPD Bankcard Bad Rate 2.0% 1.8% 7%

*Consumers with at least one open bankcard


Experian Public.





Merge & segment

Chi-square analysis

Revenue calculation



Experian Public.

How to segment Millennials

Gen Y

Release Watch

Protect Attract


Experian Public.

High bad rates

High overall risk

Low revenue

CLD or close


Gen Y

Release Watch

Protect Attract


Experian Public.

Mid-low risk

Mid-high revenue

CLD or closely monitor lines


Gen Y

Release Watch

Protect Attract


Experian Public.

Mid-low risk

Mid-high revenue

High on-us utilization

May consider CLI


Gen Y

Release Watch

Protect Attract


Experian Public.

Mid-low risk

Mid-high revenue

High off-us utilization

May consider CLI or improved rate


Gen Y

Release Watch

Protect Attract


Experian Public.

Millennial segmentation

Segment Average

VantageScore®

Average

revenue

Average

bankcard

utilization

Average

delinquency

(90+)

663 $362 44% 2.2%

521 $26 85% 12.1%

625 $823 52% 2.0%

711 $1,386 43% 0.0%

BAU*

Comparison of the segments illustrates the balance between

risk and revenue to improve profitability.

*BAU = Business As Usual baseline portfolio


Experian Public.

Listening to Millennial needs

Inform me

Know who I transact with

Contact me at the right time

Provide me with the best offer

Know who I am

Know how to talk to me

Partner with me

Educate me


Experian Public.

Summary Trends Reviewed millennial Generation to display key credit trends

Cohorts Point-in-time cohort comparison study to analyze behavior of generations

Entrepreneurs Reviewed key indicators on millennial small business owners

Segmentation Illustrated tools to effectively attract, maintain and retain the most profitable populations


Experian Public.


Experian Public.

Experian.com/Millennials


Experian Public.

For more Gen Y insights:


Experian Public.

millennial credit: the insights you've been missing

Economy & Finance