Credit risk assessment: Why we're harnessing our powerful drive to improve the status quo
Eva and I have been working in retail consumer credit risk for a while; between us, we have over 50 years of experience.
When it comes to credit risk scoring and analytics, we’ve seen the good, the bad and the ugly. I thought I would share a little about how we met and the reasons why we’re doing what we do, and why we feel so strongly about it.
Back in 2002, I was working as a Consultant at PIC Solutions, and Eva joined as Head of Predictive Modelling and Analytical Solutions. As Eva was new, not only to the company but to Cape Town, I took it upon myself to invite my new colleague out for coffee.
I mean, what’s the worst that could happen??
So, we headed off to the V&A Waterfront one sunny Saturday afternoon, for (what I assumed would be) a coffee and a bit of a ‘getting to know you’ chat.
Well, one coffee became two, which turned into 6 – yes, 6 coffees in quick succession.
The conversation flowed, and we discovered that we had more in common than retail consumer credit risk. We share a love of the ocean, the environment, and wildlife. We also share some core values – integrity and an innate drive to make the world that we can influence better than it was when we found it.
As I mentioned, we both have extensive experience in retail consumer credit risk. For my part, I’ve delivered hundreds of analytical projects across multiple geographies and industries, including profitability analytical models and credit risk champion/challenger strategies catering for the full credit-risk life cycle, such as account acquisition, credit limit management and collections. I’ve delivered more than 300 direct marketing campaigns, including modelling and execution. And I’ve delivered best-of-breed provisioning models and gross bad debt estimates.
Just quietly, I’ve learned that not everyone is a fan of bad debt estimates and provisioning forecasts, especially when the estimated numbers are unfavourable. I’ve learned that some people would like a little more sugarcoating…
Last year I published It’s a Risky Business, a field guide to retail consumer credit risk analytics, because most (all?) of us have learned from our managers, and they learned from their managers before them. And, to be quite blunt, I don’t think a field that can impact the bottom line as much as retail consumer credit risk can, ought to be an oral tradition.
Eva is a force to be reckoned with!
She has delivered over 200 bank and retailer projects across the full customer life cycle. This includes profitability and affordability analytics, business process audits and the implementation of customer-level relationship management systems (as opposed to account-level systems, which are the easy ones). She has also delivered collections and direct marketing campaign analytics including channel optimisation. Eva has built thousands of scorecards. In short, Eva has delivered credit risk solutions across Banking, Consumer Finance, Small to Medium Enterprise Finance, Retail Finance, Insurance and Telcos, and she has done this across more than 30 countries.
Both of us have trained credit risk analysts, be they on our teams’ or in our capacity as external consultants, to ensure that more analysts deliver robust analytics and recommendations to their organisations.
It’s fair to say we’re passionate about credit risk and data science.
So, we’ve done quite a bit of stuff, but why do we care? Why have we decided to create a new company, what will this company do, and how are we different?
When you’ve been working in a specific field for as long as we have, and you’ve seen it all, you realise that those organisations that can leverage the power of scorecards in decision strategies can (and do) outperform their peers who cannot or have not invested in scorecards.
And why is this a problem?
Surely it is a company’s prerogative to invest in scoring technologies or not?
Well, yes, and then a resounding no.
If the reason that an organisation ‘chooses’ not to invest in scorecards is that, for whatever reason, implementing scorecards falls into the “too hard” basket, then I hardly consider this a choice. Both Eva and I have spent our careers looking at the status quo and finding better, more efficient and more effective ways to do things.
This means that we’ve found ways to free up time and resources. And this means that the teams we’ve worked with have been able to deliver more value to their organisations. And this creates a cycle of continuous improvement.
Along the way, we may well have ruffled a few feathers.
We strongly believe that there is room for disruption. There are ways of making scorecards available to all organisations that would like to use them, regardless of how many customers they have or their internal resource constraints.
Our goal, our key objective, is to bring retail credit risk scorecards, the gold standard of retail credit risk assessment, to all organisations. Regardless of their number of customers, regardless of the level of data that they may (or may not) have available, and especially by minimising their internal resource requirements.
Our goal is to take the pain out of scorecard development, implementation and governance, without compromising on quality or predictive power. We’re here to make it easier for all organisations to implement models, but especially for those organisations who have found themselves “locked out”.
And we’re doing this because we know that by including scoring technologies in their credit risk assessment, organisations can include individuals and SMEs they’re currently excluding because they cannot estimate their likelihood of meeting their repayment obligations.
We’re doing this because, by offering credit to these customers, organisations are driving an increase in financial inclusion. And an increase in financial inclusion means that people can buy the car that they need for work, or they can pay for their studies which means they get that promotion. It means that they can invest in their business.
It is our sincere hope, that by enabling organisations that currently cannot see their way clear to implementing scorecards, to do this, we can help drive an increase in financial inclusion and economic prosperity for all.
We’re here to ruffle features.
We’re here to do what others say is impossible and cannot be done.
We’re here to democratise retail consumer credit risk assessment.