A significant number of Australian “risk leaders” expect higher levels of default and hardship to last for the next couple of years, and are tightening their credit criteria in response. Two-thirds (66 per cent) of risk leaders in financial services and telecommunications surveyed for the latest Experian Risk Radar Report said they had already seen increased consumer defaults and hardship in the past six months. Twenty-three per cent said this trend would last for the next two years and close to one-third (32 per cent) have tightened their lending criteria in response to rising levels of hardship. A majority have made it a priority to make sure their processes can help them identify customers in financial stress. Many risk leaders acknowledged that their organisations were not particularly good at this: 16 per cent said their organisation was highly effective at proactively identifying customers in financial stress; 45 per cent said they were moderately effective; 23 said they were “slightly effective” and 16 per cent said they were “ineffective”. Use of comprehensive credit reporting data appears to be limited. Only 16 per cent of respondents said they had enough data to identify red flags in transaction data and only 7 per cent could see a missed payment with another lender. Sixty-four per cent said their risk management resources were limited. In the home loan market, borrowers who have taken out a home loan since 2019 were rated three times more likely to miss repayments than those that took out a loan before 2015, and twice as likely as those who borrowed between 2016 and 2018. Respondents said one thing that is different about this downturn is how quickly people’s financial circumstances can change. This is a result of the rapid increase in rates over the past 18 months, plus increased cyber crime risks.