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
David.Huizinga@experian.com
Craig Combs
KYR Financial Services LLC craig.combs@kyrcredit.com
Virginia Soderman, CCE
V. Soderman Consulting LLC virginias405@gmail.com
Scott Blakeley, Esq.
seb@blakeleyllp.com

 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?

Customer’s Use to Market and Promote
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Find and Connect with their Customers
Post upcoming events
Create groups
 Centered around
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Sharing
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Links
Supplier’s Use to Evaluate and Monitor Credit Risk
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 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
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Customer’s Use to Market and Promote
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

Customer’s Use to Market and Promote
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Simplest of all social media platforms
Messages are:
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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?

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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
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 Profiles are basically virtual resume
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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

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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
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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?

 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?

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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?

 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?

 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

B2C

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Focus has been on validation of facts
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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?

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Potential uses (cont’d)
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“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
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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?

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