1. 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
Craig Combs
Virginia Soderman, CCE
V. Soderman Consulting LLC
Scott Blakeley, Esq.

2. Customer Use of Social Media as a Tool
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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?

3. Use of Social Media by Credit Organizations
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Use of Social Media by Credit Organizations

4. Credit Today Survey Findings
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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

5. Facebook Customer’s Use to Market and Promote
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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 :

6. Yelp Customer’s Use to Market and Promote
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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

7. Twitter Supplier’s Use to Evaluate and Monitor Credit Risk
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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?

8. 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

9. Google & Google+ Customer’s Use to Market and Promote
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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?

10. VALIDATE, VALIDATE, VALIDATE!!!!
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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.

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

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

13. The Credit Team's use of SM at the New Account Stage
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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?

14. The Credit Team's use of SM
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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.

15. The Credit Team's use of SM
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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?

16. SM Laws Decision Tree B2C
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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

17. SM and Customer Disparagement
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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

18. Summary and Observations
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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?

19. Summary and Observations
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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?

20. Interested in continuing the discussion
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