Let’s fight the crisis together!
Now is the moment for risk innovation
Assessing risk of new customers is even more difficult in this time of COVID-19. Probably, every lender already had some doubts about the reliability of traditional data in risk assessment. To deeply understand if a consumer will pay back their loan is getting more and more challenging. Due to the pandemic traditional risk-management becomes somewhat obsolete. It might not help on the journey to the next normal we all are searching for.
As a lender, you continuously have questions like “How is the risk in my current portfolio? Who will be given the possibility for a payment vacation? Who will I grant a helping hand loan or any other credit relief?”
This is the moment for lenders to embrace advanced analytics and alternative credit scoring! Traditional risk approaches show high uncertainties in income predictions, pattern recognition on new data, like psychographics and internet behaviour will help lenders. Is a consumer or self-employed financially in a good shape? That is fine, but that is just one part of the decision.
“It is not only about the ability to pay back a loan, but also about the willingness”, says Diederick van Thiel, CEO of AdviceRobo. “The core question in this time of crisis is if the customer is going to pay back his loan! Looking at personality and behaviour of people when it comes to money, gives a deeper, objective and full picture of a customer’s likelihood to pay back. The challenge now for lenders is to enrich credit assessments with non-financial data that says something about the ability and willingness to pay back. Deriving psychographic profiles from transaction data, mobile & internet data, biometric data. That will make credit decisioning smarter, more reliable and future proof. In these disruptive times, using alternative credit scoring will help granting credit to self-employed and small and medium-sized businesses across the world.”
Also, on the existing customer base these methods need wide adaptation now! Lenders will see their NPL ratio’s strongly increase in the upcoming years. The combination of new data and new risk technologies like neural networks and reinforced learnings make it possible to better detect and prevent risks in your customer base. Think about pro-active servicing, collections and the valuation of loan portfolios for sale. Now is the moment for lenders to innovate their risk approaches and scale these solutions across their asset classes and geographies. AdviceRobo has developed approaches and experiences on how to do this effectively and at super low costs.