Following a study of trends in consumers' credit card balance behaviour and movements between accounts over time, Experian has defined seven personality types that aim to give lenders a better way of managing their customers than traditional demographics such as age, disposable income, and shopping behaviour.
Using information from the company's new customer segmentation service, TrendView, Experian says that customers can be more easily managed based on behavioural changes that take into account external behaviour rather than pure interactions with a company's own brands or products.
Seven key personalities
The seven personality types Experian defined for credit card users are:
- Credit Rookies
Newest to the credit card or loan market, Credit Rookies are nurtured by companies who aim to gain their loyalty over time. They are usually young, but mature consumers can also enter this segment.
- Simple Lifers
The loyal bedrock for the card or loan issuer they choose, this segment likes to keep things easy. They rarely switch, have a very controlled approach to spending, and resist the temptation to adopt disloyal behaviour.
- Practical Shoppers
These consumers have multiple active cards or loans, but they are used practically. This segment also likes to make the most of store cards, so that they get the best offers. They often have a number of inactive cards, so companies like to nurture them.
- Rate Surfers
This is a well-known phenomenon where the consumer takes the best offer of credit or loan and then switches as soon as a better offer is available. There is often no sign of financial stress, but lenders frequently need to deal more effectively with this group as they can be very costly to service.
- Credit Maximisers
These consumers have more than one card but have no major financial stress. They like to spend, occasionally stretching beyond their means.
- Plate Spinners
These amusingly-named heavy users of credit cards and loans often switch balances between accounts rather than using special offers to pay off their overall debt. With the easy availability of credit, they are a hidden risk that can't always be spotted using standard profiling techniques.
- Credit Strangers
This group shows behavioural patterns that fall into no specific segment, either because the issuer has lost touch with the individual or because their information cannot be processed effectively.
Insights from external data
According to Peter Brooker of Experian, customer management relies on accurate data to create successful targeting for marketing and acquisition campaigns. But that data has traditionally been confined to the information available within the company using it, and many lenders have been confined to operating strictly inside their own databases. However, TrendView is already in use as a common best practice by a number of credit card issuers in the USA, and it has now been launched for UK lenders as well.
Brooker concluded: "We are seeing polarised trends of high spending and safe shopping, spread across cards and loans from different lenders. So one consumer may seem conservative to one lender but appear frugal to another. In fact, the bigger picture tells a different story."