Experian like its peers still feel the pain of the credit crunch in their core segments of credit and marketing solutions causing a drag on their overall corporate results1. Experian’s credit services in its US and UK markets are still down 6%, decision analytics are down 7%, marketing services are down 7% (46% of total revenues). Equifax’s US credit information solutions are still down by 6% (41% of total revenues, contributing 50% of total income) (Q1). Dun & Bradstreet (D&B) credit information services in North America declined by 6% (AFX), its Sales & Marketing Solutions declined by 7% (AFX)(70% of D&B’s revenue) (Q1).
Serasa saved the Year. Experian’s acquisition of Serasa, Brazil was very timely because it offset weaknesses in its core markets North America and the UK. See slide of credit services on left.
Management stated that its global footprint was growing offsetting lackluster demand in key markets. It has set its sight on India and Russia, however significant growth contributions from these markets cannot be expected for at least three years. Dependency on core markets is still high with 73% of revenues coming from North American and UK markets. Decision Analytics is Experian’s global flagship business which still suffers the effect of the credit crunch. Experian was able to lift its margins notwithstanding difficult market conditions. Like its peers, Experian engaged in intensive cost cutting, pruning product lines, to become leaner and more nimble.
Occasionally there are murmurs about cost cutting having been too deep in the industry at the expense of quality. That will be hard to judge, however with regulators requiring lenders to explain to borrowers why credit was denied, the information at the heart of the credit decision will come under greater scrutiny.
Economic conditions in the financial services sector may prompt customers to question the wisdom of consumer credit information players maintaining 30% plus margins. Perhaps the intense competition for a greater share of the customer’s wallet may take care of the margin issue sooner or later.
Summary: Since demand for credit information in mature markets is still in negative territory Experian is pushing for greater diversity: expanding its global footprint, market verticals, other information uses, and faster product innovation.