Romanian%20Credit%20Bureau%20%20TransUnion/CRIF%20Approach%20to%20Successful%20Implementation%20and%20Value-added%20Services

1
Romanian Credit BureauTransUnion/CRIF Approach
to Successful Implementation and Value-added
Services

• Bucharest, February 10th, 2004
• Petr Kucera
• Senior Regional Manager

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Table of contents

• RomanianCredit Bureau

• TransUnion, CRIF IPACRI Introduction
• Credit Bureau Experience
• Credit Bureau Solution overview Proposed
  involvement
• The future Added-value credit bureau services

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TransUnion Introduction

• TransUnion

• The USAs leading consumer credit reporting
  agency.
• Operate credit bureaux in more than 10 and have
  offices in over 20 markets.
• One of the largest databases of consumer
  information in the world.
• More that 4 million credit reports sold daily (1
  million online, 3 million in off-line/batch
  mode).
• Receive 12,500 input files per month from 9,000
  data contributors.
• 3.4 billion rows of data updated monthly on 200
  million consumers.
• 33 thousand public records updated each day.
• Strict policy enforcement to protect credit
  information confidentiality.

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CRIF TransUnion worldwide
Slovakia
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CRIF Introduction

• CRIF

• A European, private- and bank-owned company with
  headquarters in Bologna (IT).
• Over 500 employees in 6 countries extensive
  growth in terms of revenues and employees.
• Leading European provider of information,
  decision systems, technology and consultancy to
  evaluate credit risk and develop marketing
  strategies.
• Started in 1988 as the Italian Credit Bureau for
  the retail and small-medium business credit
  market (over 90 of market share).
• More than 24.000 Users branches connected daily
  on-line. More than 60 million managed and updated
  lines of information in CRIF databases.
• Over 400 scoring and decision solutions systems
  in 10 countries.
• Services provided to Banks, Financial Houses,
  Insurance Companies and Utilities.

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Local Partnership

• IPACRI Romania

• Established in 1994 as a joint venture with ELSAG
  (Italy).
• ELSAG involved in the TRANSFOND project for
  Clearing and Settlement project.
• Key competences in financial/banking market,
  postal systems, public administration,
  wireless/PDA applications, document management.
• IPACRI Banking and Finance experience covers
  namely retail banking, treasury systems, credit
  and market risk management, e-and m-banking.
• International exposure Italy, Germany, Denmark,
  Saudi Arabia, USA.
• Focus on integrated Credit Risk Management
  Solutions with special regard to Basel II
  requirements.

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Credit Bureau Experience

• Credit Bureau Operations

• Current TransUnion and CRIF credit bureau
  operations in more than 15 markets
• USA, Canada, Mexico, Italy, Australia, South
  Africa, Hong Kong, Thailand, China.

• Credit Bureau Scoring

• US, Canada, South Africa, Bundes Schufa
  Germany Serasa Brasil Buro de Credito
  Mexico ICB Ireland KSV Austria (Feasibility
  study) BIK Poland Czech Credit Bureau (2Q 04)

• Credit Bureau Feasibility Studies

• Association Panamena de Credito Panama
  Tireasias - Greece

• Other Credit Bureau related activities

• KEY FACTOR Cross-border Data Exchange ACCIS

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Eastern European Experience

• Czech Credit Bureau

• Launched in June 2002 (2 years of preparations)
  5 founding members (90 of the market)
  TransUnion, CRIF and a local partner selected by
  BA.
• High hit-rate of 70 c. 4,500 inquiries daily
  expansion of the bureau to leasing companies and
  construction savings banks (telecommunications).

• Slovak Credit Bureau

• Current establishment process 3 largest banks as
  shareholders (TU-CRIF are operators) EURISC
  System in outsourcing (Bologna) currently passed
  legislation (consent not necessary for historical
  data inclusion)

• Croatian Credit Bureau

• Banking Association selected TransUnion/CRIF as
  operators in July 2003 Newco establishment in
  progress (Feb 04) all Croatian retail banks to
  participate.

• Other CEE markets

• Credit bureau project activities Romania,
  Russia, Hungary, Bulgaria, Serbia.
• BIK Poland Credit Bureau scoring

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Types of Credit Registries

• We can distinguish credit registries by the
  following criteria

private/commercial public/central
obligatory voluntary/with consent
negative positive
banking general/cross-industry
consumers SME, corporations
national local/regional

• 16 European developed economies operate a private
  credit bureau (6 CEE markets in various stages
  of development).
• Statistics show that positive commercial CB
  improve credit activity/GDP from 45,1 to 75,7 in
  33 observed markets (as opposed to negative
  bureaux).
• Recently, absence of positive data sharing caused
  substantial financial market collapses in
  Thailand, South Korea,

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Private Credit Bureau CEE situation
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Credit Bureau Benefits

• For Credit Grantors
• Assess overall indebtedness level of clients
• Avoid Credit Shopping
• Reduce transaction time and costs
• Apply rates according to risk level
• Increase operation volumes at the same risk
  level
• For Borrowers (consumers and small business)
• Get credit more easily
• Obtain lower rates according to own risk level
• Be protected against future over-indebtedness
• CROSS-INDUSTRY POSITIVE CREDIT BUREAU STRONGLY
  COMPLEMENTS THE RECENT NBR CREDIT GROWTH
  REGULATIONS !

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Credit Bureau Benefits

• Time for loan processing 31 - more than 100
  reduction 33 - between 25 and 100
• Costs of lending over 60 - an decrease of at
  least 25
• Default probability 70 - decrease by 25 or
  more
• Source World Bank study CREDIT REPORTING
  SYSTEMS AROUND THE GLOBE, June 2000

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Credit Bureau Data Flow

• Data Flow Overview

Control Committeemonitoring usage
Credit Bureau
Request sent to CB
BANK
Client Contract info appendedor updated in
master CB db
Client requesting a loan
CB DB
Credit report retrieved
Bank sends an online/batchdata update (to close
open contracts)
Data update accepted Or anomalies report
generated(other reports)
Bank Production data
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TransUnion-CRIF proposed involvement

• Project management involvement
• Operations and organisational consultancy
• Assistance to the technical architecture and
  data-centre operations setup
• Credit Bureau system implementation
• Ongoing system maintenance
• Constant upgrades via other markets
  installations
• Development of ancillary value-added services

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TransUnion/CRIF credit bureau system

• International Credit Reporting System (iCRS)

• New generation credit reporting system for
  international clients
• Benefits of current and near future
  implementations on several markets (both new and
  current system replacements)
• Modular architecture (allows incremental releases
  of functionalities in line with market demand)
• Built on open, standard technology architecture
• Reusable, configurable product platform
• N-tier, scalable architecture for small to large
  markets
• Flexible system meets unique in-country
  requirements
• Full compliance with valid legislation

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TransUnion/CRIF credit bureau system

• iCRS TransUnions International Credit
  Reference System CRIFs European and CEE market
  knowledge and team support IPACRI local
  technological and operational support.
• Modular System FunctionalitiesDivided into
  several stages (based on functional
  analysis)1st stage provides basic
  functionalities (data update in online and batch
  mode data matching and normalisation features
  credit report retrieval - online and batch
  reporting accounting user administration).2ndn
  -stage implemented in line with the market demand
  (focus on added value services ASP application
  processing, decision engine, detailed statistical
  reports, anti-fraud support, credit bureau
  scoring, CPU-CPU connectivity, account
  monitoring, etc.).
• 1st phase
• Application processing generic scoring
  decision engine integration integrated existing
  solutions using Credit Flow and Strategy One
  products.

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Data security and confidentiality issues

• Technological security
• Secure private lines (VPN technology, data and
  transmission encryption, CA)
• Detailed access logs automatic monitoring of
  excessive use
• Personal organizational security
• Closed-end user group reciprocity rule (only
  data contributors have access to data)
• Strict contractual regulations (MFA, membership
  agreement strict rules and regulations,
  sanctioning system towards members)
• Physical access rules personnel requirements on
  CB staff
• Control committee
• Composed of CB staff and users representatives
• Monitors activity logs makes inspections at
  users
• Authority to impose immediate rectification,
  temporary disconnection, and sanctions.

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Operational organisational consultancy

• Long-term success of a credit bureau is more
  dependent on the following operational issues
  than on the software solution itself.For this
  reason, majority of efficient bureaux work in
  partnership with established credit referencing
  agencies.
• Shareholding/corporate structure/decisioning
  issues business model
• Legal support Personal Data Protection, Consumer
  protection laws, Anti-Monopoly, cross-industry
  data sharing, consumer consent, etc.
• Pricing structure (model) for Users
• Contractual agreements between members
• Organisation of Control Committee
• Help-desk/client centre organisation (operations
  manual, etc.)
• Support for consumers (issuance of reports for
  general public, compliance)
• Legal disputes handling (individuals
  authorities)
• Public Relations Media issues

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Credit Bureau Data Usage
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Value-added Credit Bureau Services

• Basic and future functionalities of the Credit
  Bureau System
• CREDIT DATA SUBMISSION (ONLINE AND BATCH)
• CREDIT REPORT RETRIEVAL (ONLINE AND BATCH)
• APPLICATION PROCESSING SUPPORT (INTEGRATION OF
  GENERIC/CUSTOM SCORING MODELS AND CREDIT
  STRATEGIES)
• INTEGRATION WITH STRATEGY DESIGN MANAGEMENT SW
  PACKAGES AND OTHER PRODUCTS OF TRANSUNION AND
  CRIF
• CUSTOMISED STATISTICAL AND USAGE REPORTS
• AUTOMATED MONITORING FEATURES (ALERTS)
• MONITORING OF TOTAL CREDIT EXPOSURE
• ANTI-FRAUD SYSTEM
• CREDIT BUREAU SCORE IMPLEMENTATION
• SUPPORT FOR INTERNAL RATING SYSTEMS (BASEL II)

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Romanian Credit Bureau Summary

• Credit Bureau is NOT an IT projectKnow-how
  transfer Proprietary TransUnion/CRIF knowledge
  of banking systems in many markets Complex data
  normalization/validation checks,
• Handling Personal Data Protection Anti-monopoly
  LawsSpecific ability to overcome obstacles in
  non-IT areas.
• Proven CB solution providers for CEE
  marketsTransUnion/CRIF are the only players with
  experience in CEE markets (current CB work in
  progress in 6 CEE markets) dedicated CEE team of
  professionals.
• Synergies with Additional ServicesApplication
  processing, Credit scoring Anti-fraud database
  systems, etc.
• Cross-border Data ExchangeCRIF is the initiator
  of Key Factor (information sharing among European
  credit bureaux).
• Strong local market supportIPACRI Romania is an
  established local company providing services on
  the Romanian financial market.