Challenge faced by the client and why it came to Qarar

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 solution provided by Qarar 

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 limit increases and limit decreases. 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.

Benefit to the client

The limit increases improved spend  and value generating balance,  with mitigated dormancy & attrition on high revenue/profit generating accounts, leading to an overall improvement in profitability. There was an 84% increase in the number of qualifying accounts when compared to historic limit increase selection practices. This resulted in a combined incremental profit of $1.4M over a 12 month period through increasing limits by 30% whilst maintaining loss rates.

The limit decreases led to a reduction in average delinquent and subsequent write-off balances and improvement in per-account profitability through reduced write-offs. As limit decreases were not previously conducted by the client, a conservative view was adopted to test the impact of consumer response to limit decreases. This conservative view lead to loss savings in excess of USD  100,000 over a six month period.