Credit Risk - Retail
An organization is exposed to various kinds of risks on its retail customer portfolio. Predictive analytics helps you to understand the sources of these risks and predict them so that you can proactive in controlling them.
Acquisation Risk Models
Application Risk Models help to assess the Credit Risk of new applicants in order to reduce defaults
Framework
- Past application form data from earlier approved and rejected applicants are used for building the scorecard
- Scorecard uses information provided by the customer on the application to calculate the probability of him or her going delinquent. It is based on the past experience of the organization
Business Benefits
- Identification of likely defaulters
- Quantification of customer risk
- Objectivity & consistency
- Faster processing, process efficiency savings
- Lower credit losses from same business volumes or Higher business volumes for same credit losses
Behavioral Models
BrainMatics has developed sophisticated behavioral models which analyze transaction patterns to quantify credit risk and help manage limits. These models help to assess the credit risk of existing customers so as to enable proactive risk management. For existing customer it is used very often for limit management and assessing the ongoing customer credit risk of existing customers to enabling a repricing decision
Framework
- Behavioral models uses the most recent behavioral information of customer like payment history, outstanding loan amount, delinquency status etc
Business Benefits
- Makes objective & proactive loan re-pricing possible
- Enables risk based repricing so that good customers get better product than sloppy payers
- Provide early warnings of default
Collection Optimization Models
Collection Models enable differentiated collections strategy for increased collections efficiency. These models identifies amongst a large base of delinquents those cases which could go into a situation of protracted default if no corrective action is taken & also measures the collectibility.
Framework
- Scorecard considers recent behavior of the customer like delinquency status, due amount, etc and also demographics
- Helps to evaluate the probability of customer going severely delinquent
Business Benefits
- Design the collection strategy - reminders, soft-calls, hard-calls, legal/repossession
- Minimize collection efforts to reduce net credit outstanding
- Builds better relationship with customers by sparing collection calls to self-curing type of customer
Fraud Management System
BrainMatics has designed a comprehensive fraud management system which encompasses fraud analysis at both application and transaction stages.
Framework
- Sophisticated system which identifies fraud “patterns” in applications and ongoing transactions
- Rules & Thresholds to identify files that needs to be picked up for screening & sampling at application stage
- Critical flags set/alarms raised for suspicious transactions
- Includes Link analysis - Checking against key risk indicators e.g. Specific dealers, Banks, schemes that historically have presented a risk problem
- Customer population for matches against a unique identifier such as passport no, ration card no, driving license no etc
- Extensive audit reports to monitor system performance
Business Benefits
- Helps arrest fraud at the loan application stage itself and and contain early delinquency
- Ongoing transaction analysis to prevent transaction fraud as it occurs in real time
- Defines a composite acceptance threshold by combining Fraud score with Risk score
- Can be easily integrated into the current application processing systems
Credit MIS and Loss Forecasting System
BrainMatics has realized that banks need a comprehensive Credit MIS and a robust Loss Forecasting System to track portfolio performance. Keeping this in mind, we have designed a user friendly, forward looking risk dashboard for different portfolios and an aggregate pan bank dashboard for enterprise wide risk monitoring and proactive "ring fencing"
Framework
- A comprehensive credit risk management dashboard will incorporate “forward” looking indicators and disseminates information on
- Logs
- Originations Reports
- Portfolio Performance
- Vintage analysis
- Collection Reports
- Forecast portfolio losses
- Loss Forecasting System gives an organization a hold on the expected future losses & hence helps in allocating the capital optimally
- Various loss forecasting models are implemented in the Fractal Loss forecasting (FLF) system
- Net Flow Rate
- Vintage Curves
- Score Distribution
Business Benefits
- Benefits of Credit MIS
- Keep a track of various policy, event, scorecard, campaign, product portfolio, pricing and product feature changes and their impact on the organizations operations
- Origination Report- indicates the performance of the underwriters
- Portfolio Performance Report – target vs achieved, KPI, Benchmarks, account/customer level profitability
- Track flows to various buckets to indicate overall portfolio quality
- Collection Reports – capacity planning and efficiency
- Benefits of Loss Forecasting System
- Accurately estimates the future losses, thereby enabling optimum capital allocation
- Helps in assessing the quality of portfolio being acquired
- It can be used as a forward looking indicator of the health of the portfolio
- Acts as an input to collection planning & helps in gauging the collections efficiency
- Forecasting can be done for different periods such as 12, 24 months etc.