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Our news and views relating to Data Analytics, Big Data, Machine Learning, and the world of Credit.

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How Geo-Location Analytics Is Being Used In Marketing

March 23, 2018 at 1:23 PM

Geo-location analytics is defined as the analysis of IP address data to determine a user’s location. With geo-location being the new buzzword in marketing, brands who ignore this powerful tool risk losing out on a valuable way of reaching new customers.

In this blog, we discuss three powerful ways in which geo-location can be used in marketing.

Driving traffic to brick-and-mortar stores

In 2018, any store needs a digital presence. With the help of geo-location, your digital strategy could drive traffic to your physical stores. Setting up geo-fencing around your stores creates a radius for digital ads to be served. If someone steps inside the zone while reading an article on their phone, your ad will appear, and with the right messaging, direct them towards your store.

With predictive analytics making great strides, this type of advertising can even be pre-empted if customers don’t go online while in the physical zone. By gathering geo-data over an extended period, a predictive algorithm would be able to determine when it’s highly likely your customer will be in the vicinity of your store and show them your ad even before they’ve left their house. You’ll be able to forecast user’s locations and serve them relevant and targeted ads based on that.

Target display campaigns based on geographic, demographic and economic data

Display campaigns are a sure way of getting your brand in front of potential customers’ eyes, but the CTR is generally not very high. You are ultimately left reporting back to your manager or board on impressions served, and while that number is impressive, you are likely a bit disappointed in the results.

With advanced geo-location analytics that gives you the ability to determine economic and demographic data, your targeting can be improved, and your ads are shown to a more relevant subset of the population.

By pinpointing a user’s home location, instead of merely their location when they are online, you can determine a much more significant amount of information. Knowing which area a user lives in will give you their average household income, income class, LSM attributes, predominant language, ethnicity, amount of cars per household and average property value.

By targeting your ad campaigns based on these attributes rather than interest or location at the time of a search, you can target your ads to your intended target audience and show your ads to a very specific and relevant audience.

Geo-location identification in smartphone apps

Most big brands have smartphone apps nowadays. By adding a geo-location layer that links to in-store systems, apps will be able to let your store staff know when a customer (who has your app) has entered the store. Your in-store system should also be able to tell your staff when last the customer was in store, whether it was a good experience, what was purchased and make product recommendations. Your staff can read up on the new customer, identify them in store and, armed with data, create a personalised in-store and human experience for the customer. Your staff will be able to greet customers by name, check in on how they like the previous items purchased and make highly relevant product recommendations. You’ll create brand-loyal customers who purchase more in-store, as well as creating an environment in which your staff find it easy to score wins.

These three strategies include ground-breaking uses of geo-location data, but it’s highly likely you are already using geo-data in your marketing efforts. If you are interested in implementing an advanced strategy, read more on MarketWise, our tool that helps you build effective, targeted campaigns with real-world demographic and lifestyle data.

how to use predictive business analytics

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The 7 types of credit risk in SME lending

  It is common knowledge in the industry that the credit risk assessment of a consumer applying for credit is far less complex than that of a business that is applying for credit. Why is this the case? Simply put, consumers are usually very similar in their requirements and risks (homogenous) whilst businesses have far more varying risk elements (heterogenous). In this blog we will look at all the different risk elements within a business (here SME) credit application. These are: Risk of proprietors Risk of business Reason for loan Financial ratios Size of loan Risk industry Risk of region Before we delve into this list, it is worth noting that all of these factors need to be deployable as assessment tools within your originations system so it is key that you ensure your system can manage them. If you are on the look out for a loans origination system, then look no further than Principa’s AppSmart. If you are looking for a decision engine to manage your scorecards, policy rules and terms of business then take a look at our DecisionSmart business rules engine. AppSmart and DecisionSmart are part of Principa’s FinSmart Universe allowing for effective credit management across the customer life-cycle.   The different risk elements within a business credit application 1) Risk of proprietors For smaller organisations the risk of the business is inextricably linked to the financial well-being of the proprietors. How small is small? The rule of thumb is companies with up to two to three proprietors should have their proprietors assessed for risk too. This fits in with the SME segment. What data should be looked at? Generally in countries with mature credit bureaux, credit data is looked at including the score (there is normally a score cut-off) and then negative information such as the existence of judgements or defaults; these are typically used within policy rules. Those businesses with proprietors with excessive numbers of “negatives” may be disqualified from the loan application. Some credit bureaux offer a score of an individual based on the performance of all the businesses with which they are associated. This can also be useful in the credit risk assessment process. Another innovation being adopted internationally is the use of psychometrics in credit evaluation of the proprietors. To find out more about adopting credit scoring, read our blog on how to adopt credit scoring.   2) Risk of business The risk of the business should be managed through both scores and policy rules. Lenders will look at information such as the age of company, the experience of directors and the size of company etc. within a score. Alternatively, many lenders utilise the business score offered by credit bureaux. These scores are typically not as strong as consumer scores as the underlying data is limited and sometimes problematic. For example, large successful organisations may have judgements registered against their name which, unlike for consumers, is not necessarily a direct indication of the inability to service debt.   3) Reason for loan The reason for a loan is used more widely in business lending as opposed to unsecured consumer lending. Venture capital, working capital, invoice discounting and bridging finance are just some of many types of loan/facilities available and lenders need to equip themselves with the ability to manage each of these customer types whether it is within originations or collections. Prudent lenders venturing into the SME space for the first time often focus on one or two of these loan types and then expand later – as the operational implication for each type of loan is complex.   4) Financial ratios Financial ratios are core to commercial credit risk assessment. The main challenge here is to ensure that reliable financials are available from the customer. Small businesses may not be audited and thus the financials may be less trustworthy. Financial ratios can be divided into four categories: Profitability Leverage Coverage Liquidity Profitability can be further divided into margin ratios and return ratios. Lenders are frequently interested in gross profit margins; this is normally explicit on the income statement. The EBIDTA margin and operating profit margins are also used as well as return ratios such as return on assets, return on equity and risk-adjusted-returns. Leverage ratios are useful to lenders as they reflect the portion of the business that is financed by debt. Lower leverage ratios indicate stability. Leverage ratios assessed often incorporate debt-to-asset, debt-to-equity and asset-to-equity. Coverage ratios indicate the coverage that income or assets provide for the servicing of debt or interest expenses. The higher the coverage ratio the better it is for the lender. Coverage ratios are worked out considering the loan/facility that is being applied for. Finally, liquidity ratios indicate the ability for a company to convert its assets into cash. There are a variety of ratios used here. The current ratio is simply the ratio of assets to liabilities. The quick ratio is the ability for the business to pay its current debts off with readily available assets. The higher the liquidity ratios the better. Ratios are used both within credit scorecards as well as within policy rules. You can read more about these ratios here.   5) Size of loan When assessing credit risk for a consumer, the risk of the consumer does not normally change with the change of loan amount or facility (subject to the consumer passing affordability criteria). With business loans, loan amounts can range quite dramatically, and the risk of the applicant is normally tied to the loan amount requested. The loan/facility amount will of course change the ratios (mentioned in the last section) which could affect a positive/negative outcome. The outcome of the loan application is usually directly linked to a loan amount and any marked change to this loan amount would change the risk profile of the application.   6) Risk of industry The risk of an industry in which the SME operates can have a strong deterministic relationship with the entity being able to service the debt. Some lenders use this and those who do not normally identify this as a missing element in their risk assessment process. The identification of industry is always important. If you are in manufacturing, but your clients are the mines, then you are perhaps better identified as operating in mining as opposed to manufacturing. Most lenders who assess industry, will periodically rule out certain industries and perhaps also incorporate industry within their scorecard. Others take a more scientific approach. In the graph below the performance of an industry is tracked for two years and then projected over the next 6 months; this is then compared to the country’s GDP. As the industry appears to track above the projected GDP, a positive outlook is given to this applicant and this may affect them favourably in the credit application.                   7) Risk of Region   The last area of assessment is risk of region. Of the seven, this one is used the least. Here businesses,  either on book or on the bureau, are assessed against their geo-code. Each geo-code is clustered, and the projected outlook is given as positive, static or negative. As with industry this can be used within the assessment process as a policy rule or within a scorecard.   Bringing the seven risk categories together in a risk assessment These seven risk assessment categories are all important in the risk assessment process. How you bring it all together is critical. If you would like to discuss your SME evaluation challenges or find out more about what we offer in credit management software (like AppSmart and DecisionSmart), get in touch with us here.

Collections Resilience post COVID-19 - part 2

Principa Decisions (Pty) L

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Principa Decisions (Pty) L