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Social Media as a Tool to Identify and Evaluate
Credit Risk: The Technology, Potential Best
Practices and Legal Considerations for the Credit
Team
David Huizinga
Experian
[email protected]
Craig Combs
KYR Financial Services LLC
[email protected]
Virginia Soderman, CCE
V. Soderman Consulting LLC
[email protected]
Scott Blakeley, Esq.
[email protected]
Customer Use of Social Media as
a Tool

68% of companies that sell products or services to other
businesses said they engaged in social media marketing

79% of consumer brands use social media for marketing
purposes

Given the proliferation of Social Media activity, is there
an opportunity to “plug in” and use the data?
Facebook
Customer’s Use to Market and Promote

Find and Connect with their Customers
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Post upcoming events
Create groups
Centered around


Sharing
Links
Supplier’s Use to Evaluate and Monitor Credit Risk.

Show business presence of brands or organizations as well as how they
are perceived by:

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:
Volume of activity and current postings
Numbers of “Likes”
Number of followers
Research of negative comments
Yelp
Customer’s Use to Market and Promote

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Crowd-sourced reviews about local businesses
Users

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Rate, review, provide tips, and publish experiences regarding businesses
Small businesses

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Respond to reviews
Host social events for reviewers
Provide information about their business
Supplier’s Use to Evaluate and Monitor Credit Risk


Utilize reviews for indications of business acceptance and market
penetration
Sheer volume of reviews either favorable or negative can provide
early indications of change in circumstances
Twitter
Customer’s Use to Market and Promote

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Simplest of all social media platforms
Messages are:
 Limited to 140 characters or less
 Links
 Images
Trade information regarding businesses, products and influencers
Supplier’s Use to Evaluate and Monitor Credit Risk
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Does the customer have a large following?
Is there frequent activity around the product or organization?
Is the general tone positive or negative?
Has the number of followers increased or decreased dramatically?
LinkedIn
Customer’s Use to Market and Promote
 Only mainstream social media sites that’s geared
towards business

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Meeting customers
Getting in touch with vendors
Recruiting new employees
Latest in business or industry news
Connecting with prospective clients
Profiles are basically virtual resume
Supplier’s Use to Evaluate and Monitor Credit Risk

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Typically a company or professional’s “Best Foot Forward”
Goals and objectives are openly published
Much Comment Activity can be monitored for actionable data
Connections can be evaluated to assess overall market situation
Google & Google+
Customer’s Use to Market and Promote

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Search results are as much about “Sponsored Links” as they are about
frequent access
Groups and activities are promoted in various segments
Visibility on Google Maps as a labeled business
Supplier’s Use to Evaluate and Monitor Credit Risk

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Does the business show in the results listing?
Is the “Google Earth” photo of the location consistent with the type of
business that is presented?
Is the level of marketing what you would expect from a legitimate
and growing business?
SM Decision Tree
The Credit Team's use of SM at
the New Account Stage
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Sites to consider
Must supplier disclose to customer that SM used
as a factor to approve B2B credit request?
Must customer consent to SM use?
May supplier decline credit based on SM
grounds?
SM and Monitoring Accounts
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Sites that may be early indictors of credit risk
May the supplier terminate the credit relationship based
on SM information?
Should the supplier update its T&C’s to address SM
use?
May industry group members share customer SM
information with group members?
SM and the Delinquent Account
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Sites that assist with collecting the delinquent
account
Legal restrictions on using SM to collect
delinquent account
A distinction if collecting against a personal
guarantor?
SM and Customer Disparagement

Defamation in the Internet age
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Generally, defamation is by either libel (false and unprivileged writing) or
slander (false and unprivileged verbal statement)
Anything written on social media can and will be used against the sender
Harvard Business Case Study ex.
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Salesman posted negative comments about his company on Facebook
Posts affected how business was perceived by customers and
competitors
No policy on social media posting
SM Laws Decision Tree
B2C
Summary and Observations

Focus has been on validation of facts

Much of the data relates to market share and success with
target audience

The degree to which SM is pertinent for the credit team
depends on supplier's willingness to expand credit
considerations

Potential uses

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Provides rich potential for small and mid-sized business data
potential
Data associations: Is there a relationship between negative
reviews on a business and that business’s ordering pattern with
supplier or in the industry?
Will payment patterns be impacted as a result?
Summary and Observations

Potential uses (cont’d)

“Big Data’s” role seems assured, due to the sheer massiveness of
the data elements, worldwide geography and constantly refreshed
input

Silicon Valley analysts are testing full integration of data as an
alternative to FICO Scores

With leading edge data input, the SM factor will need to be
integrated into the credit evaluation and credit scoring
process…..preferably

Is it the only factor utilized?

Is it a component of the overall scoring process with many
facets analyzed?
Interested in continuing the
discussion?
We are gauging interest in a panel discussion
Please send us your name, email address and company affiliation and
we will include you in our planning
[email protected]