More than half of Australian lenders can only identify customers facing financial stress when payments are missed, and only a small number of lenders have data analysis tools sophisticated enough to identify a stressed customer from transaction data. These are key findings from Experian’s latest Business Insight Report, which said that despite increases in missed payments and hardship last year, few lenders are in a position to proactively identify stressed customers. A quarter (23 per cent) of respondents said they don’t know a customer is financially stressed until the customer tells them. The findings come from a survey of 75 Australian “risk leaders” who were among 889 surveyed globally. More than half (77 per cent) said that to navigate the heightened credit risk environment they were exploring new data sources (including artificial intelligence) to better understand their risk profile. Nearly two-thirds of risk leaders who responded to the global survey said they expected an increase in defaults this year. “This puts pressure on lenders to deliver more accurate predictive decisions at origination and use customer insights to better identify signs of vulnerability and take preventive action before defaults occur,” the report said. But being able to detect early warning signs is a big hurdle for the majority of lenders. They survey found that lenders were pinning their hopes on investment in advanced data analytics, such as AI, but there were ongoing challenges, including connecting different data sets in an organisation and the lack of maturity in open banking.