Social Media as a Tool to Identify and Evaluate Credit Risk:  The Technology, Potential Best Practices and Legal Considerations for the Credit Team Carl Stronach Carl.Stronach@experian.com Craig Combs craig.combs@kyrcredit.com Virginia Soderman, CCE V. Soderman Consulting LLC virginias405@gmail.com Scott Blakeley, Esq. seb@blakeleyllp.com

Customer Use of Social Media as a Tool V. Soderman Consulting LLC 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?

Use of Social Media by Credit Organizations V. Soderman Consulting LLC Use of Social Media by Credit Organizations

Credit Today Survey Findings V. Soderman Consulting LLC Credit Today Survey Findings 42% use LinkedIn to gather credit information 27% use Facebook to gather credit information 12% use Google to gather credit information 5% use Yelp to gather credit information 3% use Twitter to gather credit information 11% use other SM sites to gather credit information Other Findings: Helps when there is limited information Additional verification

Facebook Customer’s Use to Market and Promote V. Soderman Consulting LLC Facebook Customer’s Use to Market and Promote Find and Connect with their Customers 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: Volume of activity and current postings Numbers of “Likes” Number of followers Research of negative comments :

Yelp Customer’s Use to Market and Promote V. Soderman Consulting LLC Customer’s Use to Market and Promote Crowd-sourced reviews about local businesses Users Rate, review, provide tips, and publish experiences regarding businesses Small businesses 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 Supplier’s Use to Evaluate and Monitor Credit Risk V. Soderman Consulting LLC Twitter Customer’s Use to Market and Promote 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 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?

V. Soderman Consulting LLC Linkedin Customer’s Use to Market and Promote Only mainstream social media sites that’s geared towards business 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 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 V. Soderman Consulting LLC Google & Google+ Customer’s Use to Market and Promote 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 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?

VALIDATE, VALIDATE, VALIDATE!!!! V. Soderman Consulting LLC A WORD OF CAUTION……. VALIDATE, VALIDATE, VALIDATE!!!! As anyone who has ever dated online will tell you, what you see is not always what you get. Consider a “filtering” process to understand and validate what is being found.

The API economy is the latest extension of the Digital Revolution V. Soderman Consulting LLC The API economy is the latest extension of the Digital Revolution “By 2020, there will be over 26 billion connected devices.” -Gartner

What is an Application Programming Interface (API)? V. Soderman Consulting LLC What is an Application Programming Interface (API)? Interface Programming Application Experian Data End Users 27/02/2018 Private and confidential Presentation Title

The Credit Team's use of SM at the New Account Stage V. Soderman Consulting LLC The Credit Team's use of SM at the New Account Stage 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?

The Credit Team's use of SM V. Soderman Consulting LLC The Credit Team's use of SM Internal considerations – IT access to SM sites for the Credit staff. How do you know what is a “best practice” in social media for the type of customer you are evaluating? Good opportunity to interface with Sales and Marketing to identify what is considered effective for the customer type. Determine a sense of “grading” Best Practice> Strong Practice> Adequate> Poor etc.

The Credit Team's use of SM V. Soderman Consulting LLC The Credit Team's use of SM As a credit professional what would you think if a company you were doing a review on did not have a Facebook page or not on Twitter? Could be “OK” given the type of business What if this is not the case? Not using social media as a vehicle to promote their product or service – why?

SM Laws Decision Tree B2C V. Soderman Consulting LLC SM Laws Decision Tree • 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? B2C

SM and Customer Disparagement V. Soderman Consulting LLC SM and Customer Disparagement Defamation in the Internet age 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. 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

Summary and Observations V. Soderman Consulting LLC Summary and Observations Focus has been on validation of facts In addition to fact validation, the trend is to now look at and evaluate SM behaviors Much of the data relates to market share and success with target audience, which provides more detailed business facts, beyond an SIC code The degree to which SM is pertinent for the credit team depends on supplier's willingness to expand credit considerations Potential uses Provides rich potential for small and mid-sized business data 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 V. Soderman Consulting LLC 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 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 kwenzel@blakeleyllp.com