Remember Walter Mitty from ‘The Secret Life of Walter Mitty’, ‘Jim Lowell from ‘Apollo 13, Billy Beane from ‘Moneyball’ or more recently, Mark Watney from ‘The Martian’? The protagonists all take big, rather huge risks for something extraordinary to land on their plate, in the end.
If there’s anything that movies have taught us is ‘bigger risks entail bigger rewards‘.
Only if we were to believe that everything in the movies is possible and practical, especially when it comes to making financial decisions. Make it about financial risks at a corporate level and the doubts and apprehensions become multi-fold.
And this fear of the unknown, the uncertainty, and the risk of losing it all, prevent many businesses from taking risks that could transform into rewards.
This is why risk management is one of the key pain points for organizations dealing with diverse types of risks across multiple industries. A methodical approach to assess, identify and eliminate risks that can impact the operations, overall performance, the reputation of the company and its key people and the financial aspect of the business are critical, which is exactly what risk management does.
Needless to say, for finance companies or organizations that deal with financing of any kind, Risk management is crucial, essential, and quite honestly an irreplaceable part of the puzzle.
Risk management, as daunting as it sounds, is, however, a blessing in disguise. Like the central characters of the movies listed above (and many more of such heroic movies), risk management can be rewarding for organizations. It carefully assesses the elements that could potentially be risky and help prepare a strong game plan to combat the same.
Just like it could benefit any industry, risk management does a ton for the telecom carriers and the finance companies that offer device financing. This is where, Device Financing Risk Management, a super-niche subcategory of risk management comes into play. And for finance companies and telecom companies venturing into device financing, a Device Financing Risk Management platform is imperative.
Before we delve into how device financing risk management or DFRM platforms transform the device financing business for telcos and financial institutions, let’s explore what the underlying risks for device financing are.
Challenges faced by telecom carriers and finance companies in device financing:
- Credit default risk
You guessed it, the risk of a customer defaulting on the device financing and finance companies incurring losses. Especially in disconnected markets and geographies that have complex navigations to assess credit scores or a complete lack thereof, device financing could practically mean that telecom carriers and finance companies ‘never see a dime’.
- The risk created by changing device prices
Ever-fluctuating values of devices, which historically depreciate, can lead to the financing companies incurring losses even after collateral or the actual device is retrieved. For example, the device financed costs the financing company or telco 150 USD, which when retrieved after a defaulted payment may have a market value of fewer than 100 USD, making the financing a poor deal overall.
- Risks created by technology failures
For telecom companies, device financing is profitable when tightly integrated with carrier services. If the financed devices port to another carrier before payout, the deal is not worth the trouble. While telecom carriers implement multiple layers of protection that can prevent this from happening, a minor glitch or a malicious workaround in tech can cause the deal to be a complete failure.
- Operational risks
Since device financing entails a considerable amount of operations to tend to compliance and regulations, the operational costs of driving a device financing program are not insignificant. Any fallout in these processes can lead to huge costs (and losses in all likelihood) not to mention the reputation that is at stake.
This is why having a strong device risk management plan in place is more than necessary for telecom companies or any financial institution that is venturing into device financing. But what deters these organizations from getting a headstart in device financing is the lack of a reliable, dependable device financing risk management platform that nibs these concerns in the bud and helps make device financing a risk-free and profitable endeavor.
In markets where a centralized credit score system is absent, device risk management platforms could be game changers. Opening up previously passive markets for revenues through device financing, DFRM platforms truly eliminate the hesitation behind extending finance for devices such as smartphones or laptops (and more diverse device types in the future). DFRM platforms minimize the possibility of defaulting payments and make complete device loss next to impossible. It effortlessly helps bridge the gap between the customers who want to procure a device but do not have the means to purchase it outright and finance companies and telcos who can leverage this business opportunity for a total win-win.
But what makes DRFM so great?
DFRM platforms are designed to resolve the frustrations (quite literally) and the risks associated with device financing. The DFRM platforms are tightly integrated with a unique set of features that make them specific to a device or technology leasing as opposed to conventional leasing.
The key attributes of device financing risk management platforms that help telecom carriers and finance companies include:
- Credit risk assessment
DFRM platforms have mechanisms in place to assess how risky financing a device for an individual or a company will be. These platforms aggregate data points such as credit scores, income sources, and even employment history to apply a unique algorithm to evaluate the creditworthiness of potential borrowers.
- Fraud detection and prevention
A DFRM platform is equipped with tools that can detect and take corrective actions to prevent any fraudulent activity. This includes sim-swap detection (pivotal for telecom carriers), identity verification and device fingerprinting that ensures no unauthorized access or subleasing and behavioral analysis to determine the likelihood of defaulting payments on past payment history. DFRM platforms make use of advanced analytics to predict fraud and prevent them from happening.
No fraud, no foul.
- Default and delinquency management
With automated payment reminders, periodic nudges, and notifications, telecom companies, and financial institutions can streamline payments that would otherwise be missed due to human errors. DFRM platforms can create a phased lockout of the device that is defaulted, first by restricting usage to certain functionalities and later a complete lockdown preventing any user access. Furthermore, to recover from delinquencies, DFRM platforms offer borrowers a step-by-step approach to bring users to a payment plan.
DFRM platforms make use of automation to simultaneously handle multiple tasks, such as fraud detection and automated payment reminders. This reduces the cognitive load of the staff, making it cost-effective for telcos and finance companies to run device financing programs. Automation also helps in increasing efficiency and accuracy while reducing errors.
DFRM platforms are highly integrable and work seamlessly in tandem with credit bureaus, identity verification technologies, payment processing, payment gateways, data analytics tools, compliance protocols, and customer relationship management tools that telecom carriers and finance companies use. This helps in maximizing the ROI from the pre-existing tools.
- Reporting and analytics
Device financing risk management platforms make detailed reports and analytics readily available to enable telecom carriers and finance companies in tracking the performance of their financed devices, check the payment history of users, assess delinquency, track the defaulters, and make data-driven decisions to fine-tune leasing and lending.
- Mobile and web access
Needless to say, DFRM platforms offer web-based portals as well as applications to make the key information of financed devices accessible. This makes monitoring and management of financed assets effortless.
Like all things web and finance, telecom carriers and finance companies venturing into device financing need to pass through multiple compliances and regulations. DFRM platforms are hence built to last thorough compliance requirements and industry standards, such as the General Data Protection Regulation (GDPR), ISO/IEC 27001:2013, and SOC-2 Type-2 Compliance.
DFRM platforms truly revolutionize the way telecom carriers and finance companies perceive device leasing.
NuovoPay – the only DFRM platform you need
NuovoPay is a device financing risk management (DFRM) platform that provides a comprehensive solution to manage the risks associated with financing devices such as smartphones and laptops. Incorporating contemporary technologies including default and delinquency management, automation, and third-party integrations for credit risk assessment, risk-based pricing, and fraud detection. This helps finance companies and telecom carriers to make informed choices about qualifying candidates for device financing, setting the terms for device financing retrieval, and minimizing the financial risks or losses associated with payment defaults.
As the famous saying goes, the biggest risk is not taking a risk. While it may be a tad far-fetched for telecom carriers or finance companies or any businesses dealing with finance, to be honest, with a DFRM platform like NuovoPay, delving into unchartered territories of device financing may be totally worth a shot.