The Data Analytics Blog

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

The Pros and Cons of a Multi-Bureau Strategy in Credit

Although not a new concept, very few lending organisations have deployed a true multi-bureau strategy (MBS). It is however talked about fairly regularly, but often dismissed as “too hard” or “not important enough”. So why should you consider a multi-bureau strategy? What are the key considerations? How do you go about deploying a MBS? This blog hopes to address all these questions.

What is a credit scorecard?

A scorecard is a mathematical model that is used to predict a certain outcome. In credit this might be the probability of default. The information used in a scorecard can vary, but common fields include demographic characteristics (e.g. age of applicant, number of dependants, time spent in current job) and credit bureau data (e.g. number of personal loans registered to applicant, worst arrears status on all accounts in the last 6 months).

The often-overlooked tech. in digital credit originations

With the large drive in account origination towards digitisation and automation, in our experience much focus has been on bedding down omni-channel capability. But the real unsung hero of an originations’ project is the API hub. In this blog I unpack API hubs and APIs available in originations. 

Collections Technology in the aftermath of a pandemic (Part 2)

In part 1 of this 2 part series, we looked at the available tools in working accounts optimally as well as tools available in connecting and engaging with the customer.

Collections Technology in the aftermath of a pandemic (Part 1)

We all know the importance of technology within the call centre … or do we?

Model validation and adjustment

The time is NOW for model validation and adjustment. One of the major premises used in credit scoring is that “the future is like the past”. It’s usually a rational assumption and gives us a reasonable platform on which to build scorecards whether they be application scorecards, behavioural scores, collection scores or financial models. That is reasonable until something unprecedented comes along. You can read about this black swan event in our previous two blogs here and here.

Payment holidays – what did everyone do?

Payment holidays have been used throughout South Africa and around the world to help alleviate the economic stress during the COVID-19 lockdown. In this blog we look at some of the steps taken internationally and by some of South Africa’s major lenders (specifically in the consumer space).

Psychometrics in Credit Originations

If 2020 was not hit by the COVID-19 global pandemic, many were touting 2020 as the year of alternative data. In the credit assessment world, data has typically incorporated demographic data and credit bureau data (where available), but now we are seeing alternative data playing more of a role namely in cellular behavioural data and psychometrics.

Main requirements when considering a Collections System (Part 2)

Principa specialises in providing data driven solutions that will optimise your business' collections strategy, improve your recovery yields, and increase your business revenue. 

Account Management Credit Strategies: A profitable Pursuit (Part 2)

In our previous blog we introduced the value of effective account management strategies.  In this blog we continue to run through different account management decision areas. In our next blog we will discuss what is needed for an effective account management strategy.

Account Management Credit Strategies - A Profitable Pursuit: Part 1

Onboarding good new customers in a very competitive market is difficult and not always that profitable. That is why prudent credit managers often look to account management strategies to reap the greater rewards. Once a customer is on-boarded and has proved herself to be an exemplary re-payer, offering her money is more of a sure-thing for repayment.Behavioural scorecards offer far better Ginis than application scorecard. This means you can afford to be more aggressive in account management.

10 ways of combating application fraud Part-2

In our previous blog, we covered five steps to help lenders avoid application fraud. Application fraud has been an increasing blight on credit books particularly with the growth in digital channels. In this blog we explore another five fraud-mitigation steps.

The time is NOW for model validation and adjustment.

One of the major premises used in credit scoring is that “the future is like the past”. It’s usually a rational assumption and gives us a reasonable platform on which to build scorecards whether they be application scorecards, behavioural scores, collection scores or financial models.  That is reasonable until something unprecedented comes along.  You can read about this black swan event in our previous two blogs here and here

10 ways the COVID-19 crisis will affect your credit models (PART 2)

This is the second of a 2-part blog. You can read the first blog here.

10 ways the COVID-19 crisis will affect your credit models (PART 1)

One of the basic principles of credit scoring and modelling is that the “future is like the past”.  Whilst robust credit models may be calibrated on multiple time periods, this assumes that trends in the past represent what is going on today.  COVID-19 is a black swan event – meaning in the modern day it really is unprecedented.  If you have never come across the term black swan, or if you have but no idea the origin, I recommend taking two minutes to read its really interesting etymology.

Cash Vs Credit For Retailers: A Principa Case Study

Principa’s Cash Vs Credit offering uses advanced analytics to help retailers answer a variety of questions. We have undergone such projects for many of South Africa’s leading retailers, and this case study describes the methodology Principa utilises to help retailers in the fashion industry.

A Calculated Guess: Affordability Determination In The South African Market

With a recent judgment being upheld in favour of the National Credit Regulator (NCR) against Shoprite Investments Limited, we thought it would be a good time to re-look at the process of affordability assessment.

Our Top Blogs On Credit Risk Management Of 2019

We’ve had an excited year in credit, with a brand new partnership with UK-based Welcom Digital, to resell their award-winning account management system, Financier, in South Africa. You can read more about our partnership here.

Why A New Account Processing System Should Be A Priority For 2020

Recently Principa announced their partnership with UK-based Welcom Digital. Welcom Digital’s platform Financier is one of the leading account processing platforms. Principa is now the sales and delivery partner in South Africa for Financier. We speak to Principa’s Eric Hay – a technical specialist with over 25 years’ experience with credit systems include account processing systems – who has been now appointed technical delivery head for Financier.

  • 5 min read
  • November 11, 2019 at 2:59 PM

Welcom Digital And Principa Announce Partnership To Create End-To-End Credit Management Solutions

Cape Town, South Africa – Welcom Digital, a UK company specialising in Loans management software, and Principa, a South African data analytics company, are delighted to announce a new strategic reseller partnership that includes the resale of Welcom Digital’s Award winning Loan Management product Financier™ to the South African market and reciprocally, Welcom Digital will market Principa’s specialised credit risk software solutions to the UK market.  

A Peek Inside AppSmart V4

 

Frequently Asked Questions On Self-Service AI Chatbot, Atura

What is Atura? Atura is a powerful artificial intelligence chat solution that uses cloud technology to deliver the right answers to your customers via any device, albeit mobile, desktop or tablet. Built on the Microsoft Azure technology stack, Atura uses its advanced algorithms and machine learning techniques to correctly understand your customer request and then deliver the correct response. In the event that the AI doesn’t understand the customer request, the entire messaging conversation can be seamlessly redirected to a physical agent to further respond to your customer. The result: a fluent and seamless customer experience!

Mathematical Optimisation In Five Phases

For businesses wishing to improve their credit decisions, the adoption of Mathematical Optimisation is an important consideration. Mathematical optimisation is more than a straight data-driven strategy design as it incorporates prescriptive analytics.

Amazon Web Services Vs Microsoft Azure: Which Cloud Provider Should You Host Core Business Systems On?

Deciding on which cloud service to host your core business systems on can be a daunting task. Amazon Web Services (AWS) and Microsoft Azure are two of the biggest players around, while Google Cloud and IBM Cloud are also gaining market-share.

How To Adopt Credit Scoring

Bringing automation into the credit assessment process through credit scoring brings about significant benefits. Some of these benefits include:

Why Companies Cling To Legacy Systems

Innovative companies know they must embrace digital transformation in their business to stay competitive in the world of the fourth industrial revolution. But legacy systems often get in the way of transformation. In this blog, we look at why companies are reluctant to move away from their legacy systems and how to know when it really is time to modernise.

Frequently Asked Questions On Decision Engines And DecisionSmart

This blog was originally published on 13 March 2019 and updated on 3 April 2019.

IFRS9 Expected Credit Loss (ECL) Models For Retail Lending

It is expected that IFRS9 adoption should lead to an increase in provisions (initially a balance sheet / retained earnings adjustment only with commentary on retrospective impacts). Typically, the increase is mostly a result of loss provisions for all accounts (regardless of a loss event) and the extension of the loss period from a typical 12 months to lifetime (e.g. for structured loans the remaining term of the loan plus time to default/write-off plus the recoveries window).

Our Top Credit Risk Management Blogs From The Past Year

In our third roundup of 2018, we list the most popular blogs from our Credit Risk Management topic. Our credit risk blogs have mainly revolved around IFRS 9 and legislation changes this year, and have aimed to provide expert advice and insights into the current landscape.

Economic Modelling Guidelines In IFRS 9

As part of the group that was the second company worldwide to become IFRS9 compliant, IFRS9 has been at the forefront of what we do.  We have assisted nearly 20 companies on their IFRS9 journey over the last two years.  This blog forms part of a more extensive series on IFRS9.

Cloud Versus On-Premise: Which Solution Is Best For Credit Lifecycle Software?

If you're tasked with selecting a credit lifecycle software for your business, one of the most significant decisions facing you is whether to go with cloud-based or on-premise software. It's a question we get asked often, but the answer is often more complicated than an outright recommendation of one or the other. Each solution has pros, but also cons and therefore you’ll need to compare the two in-depth and select the option that suits your business strategy, and more importantly, your IT strategy.

Key Considerations When Managing Your IFRS 9 Forward-Looking Overrides

As part of the group that was the second company worldwide to become IFRS9 compliant, IFRS9 has been at the forefront of what we do.  We have assisted nearly 20 companies on their IFRS9 journey over the last two years.  This blog forms part of a more extensive series on IFRS9. In this blog, we explore the administering of management overrides.

Stay On Top Of Industry Trends With MFSA's Contact Sessions

As a debt collection professional, there’s no doubt that you occasionally feel like you are out in the trenches. The nature of the industry is ever changing, as are the laws and regulations. And you need to stay on top of new technology and trends.

Getting The Most Out Of IFRS 9

Whilst the journey to International Financial Reporting Standard 9 (IFRS 9) compliance has come at quite a cost to many credit-granting businesses, many are using the in-depth analytical exercise as an opportunity to make more informed decisions in their business. (Click to Tweet!)

Mastering The Swiss-Army Knife Of Business Software: The Business Rules Management System

Business Rules Management Systems (BRMS's) are the Swiss-army knives of business software. Despite this, very few companies we work with are getting the most out of their decision engines. In this blog, we explore how BRMSs are used across the customer lifecycle.

The Predicted Impact Of The Change In NCA Proof Of Income Regulation

Does Proof of Income (POI) enable creditors to lend more responsibly? Or does it reduce the access to credit for many South Africans? Last week a controversial court ruling was passed effectively eliminating the requirement for proof of income documentation on credit applications in South Africa.  In this blog, I take a look at how the initial POI regulation impacted consumers and the credit world, why and how the changes came about and what these new changes will mean to South-Africans.

Our Top 2017 Blogs: Credit Risk Solutions

As 2017 draws to a close, we reflect back on the year of credit.  Some of the key themes that featured this year for us included:

The History Of Fashion Retail Credit In South Africa

Most industries owe their levels of sophistication to the visionaries in their space.  The South African credit industry is no different.  Whilst the bureaux and the banks have played a significant role in developing the South African credit landscape, arguably the fashion retailers have also played a pioneering role in revolving credit. And so our vibrant industry owes much to the role of the fashion retailers.  But how did it all begin?

Everything You Ever Wanted To Know About Mathematical Optimisation

Today we explore some of the frequently asked questions around mathematical optimisation.  For the most part the questions are answered in the context of credit risk.  However mathematical optimisation and operations research in general have many applications. 

The Pros & Cons Of A Multi-Bureau Strategy In Credit

Although not a new concept, very few credit-granting organisations have deployed a true multi-bureau strategy in their organisation.  It is, however, talked about fairly regularly, but often dismissed as “too hard” or “not important enough”.  So why should you consider a multi-bureau strategy?  What are the key considerations? How do you go about deploying a multi-bureau strategy? This blog series will address these questions.

What Is Mathematical Optimisation And How Does It Benefit Business?

The word optimisation is used quite loosely and can relate to many different areas.  For example, there is search engine optimisation (getting your website pages to the top of online search results), process optimisation (making existing processes more efficient), code optimisation (making your code run more efficiently) and then there is mathematical optimisation.  In this blog post, we'll be focusing on mathematical optimisation: what it is, how it can be applied in making more optimal business decisions at a customer level, and specifically how it's applied in credit risk. And you can even try using optimisation yourself - using an optimisation tool we've shared in this post - to see the various scenarios resulting from your decisions. Scroll to the bottom to try it for yourself!

What Is Scorecard Monitoring And Why Is It So Critical?

Scorecards form the back-bone of decision making for many financial institutions. They are used in the account management of key decision areas like collections and authorisations, for example. They can tell us whether to accept or decline a customer for a particular credit based product, or tell us the percentage of a customer’s outstanding balance that will be recovered over a certain period of time. In this blog post, we’ll be covering what scorecard monitoring is, its importance and the consequences of not carrying out the exercise regularly.

All You Need To Know About Randomisation In The Credit Lifecycle

If you’re involved in credit risk and existing customer marketing you’ll know that random numbers are frequently used when deploying different strategies.  As strategies grow more complex and numerous, so the role of the random number grows more important. In this blog post, I’ll cover what randomisation is, why you should do it, when you should do it and what else to consider.

[Infographic] Understanding IFRS 9 For Retail Lending

The International Accounting Standards Board published IFRS9 Financial Instruments in July 2014, a framework that introduces a number of new principles into bad debt provisioning that would require lenders to change the provisioning methodology and possibly some business practices in order to remain compliant.

3 Ways To Manage Credit Risk Governance In A Volatile Economic Climate

Credit companies are facing an increasingly volatile global financial climate. A person has to look no further than the impact the unexpected Brexit results have had on the global market. And if that’s not enough, the highly accelerated pace of technological development means that companies need to always be prepared to update their processes and methodologies to accommodate ever-changing client needs and to mitigate risk.

3 Ways Credit Risk Managers Should Be Using Big Data

As developed countries experience a slow but steady recovery, credit risk managers in emerging markets face growing default rates as household debt continues to rise with little relief in sight. The Institute of International Finance stated at the end of 2015 that global household debt had risen by $7.7 trillion since 2007 to more than $44 trillion, and that $6.2 trillion of that rise was in emerging markets. Household debt per adult in emerging economies also rose by 120 percent over that period to some $3000, it added.

Machine Learning Is Placing Risk Managers On Fraud's Front Lines

Few take on a larger portion of the responsibility to steer their organisations to success than Risk Managers. And with fast-moving consumers, a globalised marketplace, unabated industry disruptions and shifts seemingly all occurring in unison, modern Risk Managers face a new set of challenges to that of their predecessors. But now, banks and other financial institutions are using historical customer transactional data to detect unusual activity on buyers' debit and credit cards to freeze transactions until purchases can be verified by the card owners.

How Mobile And Social Data Are Changing The Face Of Credit Scoring

In emerging or developing markets where formal credit history collection infrastructure or credit bureaus are lacking, the majority of people without reference data would struggle to achieve anything resembling an impressive credit score. As a large contingent of previously unbanked individuals join their respective middle classes in increasing numbers worldwide, lenders are finding creative ways of profiling and welcoming newcomers to the world of financial services.

How To Choose A Scoring Engine

Introducing scoring into your business, means the adoption of a reliable and feature-rich scoring and segmentation engine that can calculate predictions or make recommendations that will minimise risk and maximise return on investment. This guide will identify critical features and nice-to-haves when assessing a scoring engine.

Data Analytics 101: Turning Credit Risk Managers Into Data Addicts

In the field of credit risk management, few would challenge data’s role in financial forecasting, lender analysis, credit-modelling and risk aversion. In short, credit risk managers are no strangers to data. But it could be argued that the value and volume of data they have access to largely determine the quality of their decision making. The shift towards more technology and data-centric business models has created new opportunities for those in the credit risk landscape to play more collaborative roles and engage other business divisions to produce positive outcomes in shorter time-spans.

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