Equifax, Inc. · NYSE:EFX
Equifax — Market Pulse Webinar: Buy Now, Pay Later Credit Score Impact Analysis (February 2022)
57 slides from Equifax's conference presentation, Feb 10, 2022
Slide 1: Buy Now, Pay Later Credit Score Impact Analysis
Buy Now, Pay Later Credit Score Impact Analysis Webinar | February 10, 2022
Slide 2: The opinions, estimates and forecasts presented herein are for general information use only. This
The opinions, estimates and forecasts presented herein are for general information use only. This material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete. No person should consider distribution of this material as making any represe
Slide 3: Agenda
Agenda Take our free test to get your Revenue IQ! U.S. Economic Update Commercial Indices flowcode.com/p/PbsNd4M2A?fc=0 Consumer Credit Trends FICO Score Analysis Questions? Contact us here. linkedin.com/company/equifax/ twitter.com/EquifaxInsights PROPRIETARY | 3
Slide 4: Presenters
Presenters Suna Hafizogullari Bob Hofmann Senior Director of Data Science Risk Solutions & Consulting SME FICO Equifax Amy Crews Cutts Sarah Briscoe President & Founder Lead Commercial Statistical AC Cutts & Associates Analyst Equifax PROPRIETARY | 4
Slide 5: Additional Resources
Additional Resources Market Pulse Webinars • Register for upcoming Market Pulse webinars • View replays and download slides from past webinars Market Pulse Podcast • Listen for additional timely economic and credit insights • Subscribe today where you listen to podcasts Small Business Indices • Down
Slide 6: U.S. Economic Update
U.S. Economic Update Amy Crews Cutts AC Cutts & Associates PROPRIETARY | 6
Slide 7: Revisions to the Payroll Employment Data Shows More Strength Recently
Revisions to the Payroll Employment Data Shows More Strength Recently, Weaker Labor Market Last Summer Monthly Change in Nonfarm Payroll Employment By Net Change in Nonfarm Payroll Employment Level Series Release Date, SA, In 1000s Mar’20 Thru Jan’22, SA, in Millions 1,200 0 | = Dec-21 mJan-22 -2.87
Slide 8: The Great Supply (Inflation) Crisis
The Great Supply (Inflation) Crisis Consumer Price Index (CPI) and CPI less Food and Energy (Core CPI) Percent Change from a Year Ago, SA Fed’s Target Rate for inflation 2021 2020 Chips, Ships, Trucks, Bucks, ... Container by Sea (Jan-Feb'20=100%, NSA) Freightos Baltic Index™ Cost of Shipping a 40’
Slide 9: Interest Rates Are Likely to Rise, But When? How Quickly?
Interest Rates Are Likely to Rise, But When? How Quickly? Projections of the Federal Reserve Open Market Projections of Respondents in the WSJ Survey of Committee: Fed Funds Rate Upper Bound Economists Jan’22:10-Yr Constant Maturity Treasury Rate 5.5% [—- 3.0% 5.0% 45% 2.5% 4.0% I 50% 3.5% : 3.0% 1.
Slide 10: BNPL Is Meeting Many Needs With Implications for Competition Among Providers
BNPL Is Meeting Many Needs With Implications for Competition Among Providers The Ascent Survey of BNPL Purchasers: Reason for Using BNPL Service te 45.0% 36.9% Source: AC Cutts & Associates, The Ascent (fool.com, AC Cutts & Associates LILC = To make purchases that wouldn't fit in my budget = To borr
Slide 11: BNPL Is Meeting Many Needs With Implications for Competition Among Providers
BNPL Is Meeting Many Needs With Implications for Competition Among Providers The Ascent Survey of BNPL Purchasers: Reason for Using BNPL Service = To make purchases that = To avoid paying wouldn't fit in my budget credit card interest ANS = To borrow money = To safeguard without _a credit check pers
Slide 12: BNPL Is Meeting Many Needs With Implications for Competition Among Providers
BNPL Is Meeting Many Needs With Implications for Competition Among Providers The Ascent Survey of BNPL Purchasers: Reason for Using BNPL Service ie 45.0% 36.9% Source: AC Cutts & Associates, The Ascent (fool.com, AC Cutts & Associates LILC = To make purchases that wouldn't fit in my budget = To borr
Slide 13: How Consumers Paid for their Black Friday 2021
How Consumers Paid for their Black Friday 2021 In-Store Purchases Share of Consumers Reporting Purchases Made with These Payment Options on Black Friday 2021, % Gift/prepaid cards Debit Card BNPL Credit Card Apple Pay Samsung Pay Cash Storecards Cryptocurrency Paypal Google Pay Venmo Contactless Deb
Slide 14: How Consumers Paid for their Black Friday 2021: Frictionless Payments
Gift/prepaid cards Debit Card Credit Card Apple Pay Storecards Google Pay Check How Consumers Paid for their Black Friday 2021 In-Store Purchases: Frictionless Payments Share of Consumers Reporting Purchases Made with These Payment Options on Black Friday 2021, % Samsung Pay Cryptocurrency m 2021 =
Slide 15: How Consumers Paid for their Black Friday 2021: BNPL Players
How Consumers Paid for their Black Friday 2021 In-Store Purchases: BNPL Players Share of Consumers Reporting Purchases Made with These Payment Options on Black Friday 2021, % Gift/prepaid cards Debit Card BNPL Credit Card Apple Pay Samsung Pay Storecards Cryptocurrency Paypal Google Pay Venmo Contac
Slide 16: How Consumers Paid for their Black Friday 2021: Online Purchases
How Consumers Paid for their Black Friday 2021 Online Purchases Share of Consumers Reporting Online Purchases Made with These Payment Options on Black Friday 2021, % Credit Card BNPL Venmo Debit Card Apple Pay Cryptocurrency PayPal StoreCards Samsung Pay Gif Prepaid Google Pay Other Cards Source: PY
Slide 17: How Consumers Paid for their Black Friday 2021: Online BNPL Players
How Consumers Paid for their Black Friday 2021 Online Purchases: BNPL Players Share of Consumers Reporting Online Purchases Made with These Payment Options on Black Friday 2021, % 53.8% Credit Card 54.3% Bide 54.3% 9.8% Venmo 7.8% Apple Pay 8.2% Cryptocurrency Debit Card 7.1% StoreCards 7.3% Samsung
Slide 18: Commercial Indices
Commercial Indices Sarah Briscoe Equifax PROPRIETARY | 18
Slide 19: Small Business Lending Index (SBLI)
Small Business Lending Index (SBLI) PROPRIETARY | 19
Slide 20: Small Business Lending Index (SBLI)
SMALL BUSINESS LENDING INDEX (SBLI) JANUARY 2005–DECEMBER 2021 PROPRIETARY | 20
Slide 21: SBLI Year-over-Year Change
SBLI YEAR-OVER-YEAR CHANGE DECEMBER 2021 VS. DECEMBER 2020 PROPRIETARY | 21
Slide 22: SBLI National by Industry
SBLI NATIONAL BY INDUSTRY DECEMBER 2021 VS. DECEMBER 2020 PROPRIETARY | 22
Slide 23: Small Business Delinquency Index (SBDI)
Small Business Delinquency Index (SBDI) PROPRIETARY | 23
Slide 24: Small Business Delinquency Index (SBDI) 31-90%
SMALL BUSINESS DELINQUENCY INDEX (SBDI) 31-90% JANUARY 2005–DECEMBER 2021 PROPRIETARY | 24
Slide 25: SBDI 31-90% Year-over-Year Change
SBDI 31-90% YEAR-OVER-YEAR CHANGE JANUARY 2006–DECEMBER 2021 PROPRIETARY | 25
Slide 26: SBDI 31-90% Index Values
SBDI 31-90% INDEX VALUES DECEMBER 2021 PROPRIETARY | 26
Slide 27: SBDI 31-90% National by Industry
SBDI 31-90% NATIONAL BY INDUSTRY JANUARY 2005–DECEMBER 2021 PROPRIETARY | 27
Slide 28: SBDI 31-90% National by Industry
SBDI 31-90% NATIONAL BY INDUSTRY DECEMBER 2021 VS. DECEMBER 2020 PROPRIETARY | 28
Slide 29: Small Business Default Index (SBDFI)
Small Business Default Index (SBDFI) PROPRIETARY | 29
Slide 30: Small Business Default Index (SBDFI)
SMALL BUSINESS DEFAULT INDEX (SBDFI) JANUARY 2005–DECEMBER 2021 PROPRIETARY | 30
Slide 31: SBDFI Year-over-Year Change
SBDFI YEAR-OVER-YEAR CHANGE JANUARY 2006–DECEMBER 2021 PROPRIETARY | 31
Slide 32: SBDFI Index Values
SBDFI INDEX VALUES DECEMBER 2021 PROPRIETARY | 32
Slide 33: SBDFI National by Industry
SBDFI NATIONAL BY INDUSTRY DECEMBER 2021 VS. DECEMBER 2020 PROPRIETARY | 33
Slide 34: Consumer Credit Trends
Consumer Credit Trends Bob Hofmann Equifax PROPRIETARY | 34
Slide 35: First Mortgage and Auto Originations Trends
First Mortgage originations were 12.2% higher than 2020 levels and subprime share has decreased significantly; Auto YTD originations are running at historic highs, and subprime share has dropped from 2018-2020 levels. First Mortgage Originations Auto Originations Total Credit Limits November YTD in
Slide 36: Bankcard Originations Below Pre-Pandemic Dollar Limits
November Year to Date Bankcard $ limit originations remained below pre- pandemic levels; subprime share has been growing steadily (left), but # of new cards originated November YTD is above 2019 levels (right) Bankcard $ Limit Originations Bankcard Unit Originations Total Credit Limits November YTD
Slide 37: Private Label Card Originations Remain Below Pre-Pandemic Levels
November Year to Date Private Label $ limit (left) and unit (right) originations remained below pre-pandemic levels, but well above 2020; subprime share remains steady. Private Label Card $ Limit Originations Private Label Card Unit Originations Total Credit Limits November YTD in $Billions, NSA Tot
Slide 38: Mortgage and Non-Mortgage Debt Increases
Mortgage Debt has increased by $2.54T since March 2013; Non- Mortgage Debt increased by 1.6T, dropped back in 2020, and is now back above pre-pandemic levels. Mortgage Debt Non-Mortgage Debt First Mortgage, Home Equity Lines and Loans; Auto, Bankcard and Private Label Credit Card, Student Loan, Othe
Slide 39: Revolving Debt and Non-Revolving Debt Trends
Revolving Debt trending to pre-pandemic levels after record increase in December 2021; Non-Revolving Debt has continued to grow buoyed by strong Auto and Alt-Fi lending. Revolving Debt Non-Revolving Debt Bankcard and Private Label Card; Auto, Student Loan, and Other; Balances in $Billions; NSA Balan
Slide 40: Credit Limits and Utilization Rates
Credit Limits and Utilization have started to slowly increase for both Bankcard and Private Label Card; Home Equity Line utilization continues to decrease. Credit Limits and Utilization Rates Bankcard Private Label Card Revolving Home Equity Credit Limits in $ Billions and Utilization Rate %; NSA Cr
Slide 41: Severe Delinquency Rates by Product
Delinquencies on Auto are following consistent seasonal patterns and levels; Bankcard and Private Label delinquencies are below pre-pandemic levels; First Mortgage delinquencies remain at historic lows Severe Delinquency Rates Percentage of Accounts and Balances, Excluding Severe Derogatory, NSA Aut
Slide 42: BNPL: FICO Score Impact Research
BNPL: FICO® Score Impact Research Bob Hofmann Equifax Suna Hafizogullari FICO PROPRIETARY | 42
Slide 43: What is BNPL?
What is BNPL? Equifax BNPL Policy Definition BNPL ● Short term installment loans or lines of credit made at POS Merchants Traditional FIs ● Typically 6 weeks, paid in 4 biweekly installments ("pay-in-4") ● No consumer interest, merchant pays “merchant transaction fee” ● Typically used for retail pur
Slide 44: FICO Score Impact Research
FICO® Score Impact Research BUY Equifax researched the effect of short- NOW term, low-dollar tradelines — aka Buy Now, Pay Later (BNPL) products — on the FICO® Score distribution of consumers with BNPL trades on their credit files PAY LATER PROPRIETARY | 44
Slide 45: Methodology
Methodology Select Consumers with BNPL Line of Credit (LOC) trades on Equifax credit file: Segment Product Snapshot Credit amount Terms # Files $250-4,000 BNPL LOC Jul 2021 4 Months 123K with an average credit limit of $1,212 CALCULATE FICO® Score 8 on consumers with and without BNPL tradelines incl
Slide 46: Overview of BNPL LOC Profile
Overview of BNPL LOC Profile 5.5 months of Average utilization High concentration repayment history of 17.9% (including of subprime reported on average consumers who paid (FICO® Score 8 • LOC trades can off their BNPL <670) consumers have multiple tradeline) “Pay-in-4” loans leading to extended repa
Slide 47: Risk Class at a Glance
Risk Class at a Glance 91% of BNPL consumers in analysis dataset have a FICO® Score 8 <670 PROPRIETARY | 47
Slide 48: BNPL: Line of Credit FICO Score Impact Results
BNPL — line of credit FICO® Score 8 Impact Results PROPRIETARY | 48
Slide 49: Impact to FICO Score with the Inclusion of BNPL Tradelines
Impact to FICO® Score with the Inclusion of BNPL Tradelines in the Credit File ● Consumer’s stage in their credit journey matters ● Consumers (re)building their credit profiles more likely to benefit from the inclusion of positive BNPL tradeline data ● Inclusion of BNPL tradelines with on-time payme
Slide 50: Score Impact for FICO Score 8: BNPL LOC Sample
Score Impact for FICO® Score 8: BNPL LOC Sample Alignment with common risk segments Majority of consumers Thin/Young (<=2 tradelines/<=24 months) experience a positive impact on credit files exhibit the most variance in score their FICO® Score 8 impact since the additional data is more likely to sub
Slide 51: Summary of BNPL Results
Summary of BNPL Results Summary Statistic BNPL LOC Avg. FICO® Score 8 without BNPL 573 Avg. FICO® Score 8 Change with the BNPL +9 pts % of Consumers with Score Increase with the Inclusion of BNPL / Avg. FICO® Score 8 69% / 15.5 pts Change % of Consumers with Score Decrease with the Inclusion of BNPL
Slide 52: Score Impact: Current vs Non-Current BNPL LOC Sample
Score Impact for FICO® Score 8 – Current vs Non-Current (30+ DPD) BNPL LOC Sample Inclusion of on-time BNPL payment behavior drives Inclusion of delinquent BNPL payment behavior increases in FICO® Score 8 has negative impact on FICO® Score 8 PROPRIETARY | 52
Slide 53: In Summary
In Summary… The precise impact to FICO® Score of the inclusion of the BNPL tradelines depends on − Overall credit profile ■ e.g., Subprime segment more likely to benefit, thin/young segment exhibit impact in either direction − Payment behavior on BNPL Tradelines ■ Consistent with other types of lend
Slide 54: Q & A
Q&A The opinions, estimates and forecasts presented herein are for general information use only. This material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete. No person should consider distribution of this material as making any rep
Slide 55: Upcoming Market Pulse Webinars
Upcoming Market Pulse Webinars Register to Attend: March 10 - Entrepreneurship and Financial Inclusion April 14 - Supply Chain Risk Management May 12 - Digital Banks and Access to Credit and Capital June 9 - Driving Smarter Revenue with Data-Driven Marketing July 14 - Auto Inventory and Driving Cust
Slide 56: Market Pulse Webinar & Podcast Series
Market Pulse Webinar & Podcast Series Register to Attend: Listen Now: PROPRIETARY | 56
Slide 57: Thank You
Thank You Market Pulse: Buy Now, Pay Later Credit Score Impact Analysis Visit us online today at equifax.com/marketpulse PROPRIETARY | 57