April 24, 2017
The client is a major bank operating in the Kingdom of Saudi Arabia who needed a holistic credit control solution that would measure the performance and risk characteristics of each individual customer. This would form the basis for an informed strategy to maximise its returns on loans and other forms of credit. By creating a system to generate detailed credit bureau data for each consumer, the bank would have a mechanism to increase limits on higher revenue generating accounts, decrease limits for higher risk customers, maintain a balanced portfolio based on informed decisions and significantly increase profits as a result.
The Qarar Approach
Through utilising the domain expertise of Qarar Consultants and Data Scientists, the client’s data was obtained to analyse various segments for both limit increases and decreases. This data was enhanced with and matched to Portfolio360, a solution from the Credit Bureau incorporating more than 200 credit bureau behaviour based measures and indices for each consumer. Utilising the combined data ensured that identified account level actions were driven through a holistic view of the consumer’s behaviour.
The combined data was modelled utilising CHAID modelling techniques, coupled with the consultant’s business insights, to produce eligible segments for both:
Once the segments were identified, the potential impact on profitability, for both limit increases and decreases was forecasted, utilising the various revenue / cost levers impacted through the changes in limits. Examples of these levers include balance, revolve rate, utilisation, cost of funds, reserve coverage rates and provisioning. For credit line increases, incremental profitability and loss rates were also predicted.