Let’s look at a point made earlier a little more carefully – A bad customer to one company can be a good one for another.
Take the real case where two mobile telephone provider companies in a single advanced country compete with each other head-on. One company has built a reputation as the high-quality (and expensive) provider whilst the other provides cheaper services to a different mass market. What if they both used the same credit model to filter new customers? How long would this carefully engineered two-tier strategy last, and what would be the consequences as both companies try to attract the exact same people?
The answers should be obvious but the fact is, of course, that few telecommunications companies do any rigorous credit assessment for new customers or those existing customers buying new products, but when they do, we can be assured that one model for all operators will bring nothing but grief for operator and consumer alike. We quickly learn that credit models must be in tune with the acquisition and retention strategies of each specific provider.
Let’s examine another phenomenon – A person who defaults on a few payments may be a very good long-term customer.
In a mobile world, as we have already mentioned, it is very difficult (and dangerous) to screen customers out completely based on credit worthiness prior to providing them with any services at all. This is why traditional credit scoring is not the answer to most such problems. What we want is to provide service and then monitor usage and payment history over a time period (perhaps three to four months) to determine behaviour and then treat any subscriber showing ‘abnormal’ behaviour. Over this ‘bedding-in’ period we might:
- Ø Discover those people who have received mobile phones as presents and who really have no intention of payment because they don’t value the service (or maybe even suddenly realise they have to pay).
- Ø Discover those people who obviously didn’t understand that mobile telephony can be expensive and are horrified at the bills, finding suddenly that they can’t or won’t pay.
- Ø Discover those people that didn’t read the contract note carefully enough to understand that they still need to pay line rental even when they have given up using the phone.
- Ø Discover those people who have a phone only for incoming calls.
- Ø Discover those people who only use the phone for emergency use.
- Ø Discover those people who habitually pay bills late (or quickly).
- Ø Discover those incidents of non-payment that were caused by some malfunction in the service provided (failures of the billing system for example).
- Ø etc., etc.