Banks Priority? Improve Credit Risk Models

FICO, a leading predictive analytics and decision management software company, and Efma today announced the results of the seventh European Credit Risk Survey, which measures retail bankers´ outlook for the availability of credit along with their investment priorities for the year ahead. In the February survey, completed by 130 credit risk professionals from 41 countries, the forecast for a “credit gap” between credit supply and demand fell sharply from the last survey, conducted this past fall. For consumers, the projected gap was just 4 percentage points, with 30 percent of respondents projecting some increase in the amount of credit requested and 26 percent projecting an increase in supply. By comparison, in the autumn 2012 survey the spread between projected demand and supply was a full 20 percentage points.

For small businesses, the gap was even smaller. In the new survey, 31 percent of respondents reported that they expect the aggregate amount of credit requested by small businesses to increase, and 29 percent expect the amount granted by lenders to also increase.

“Most of the new business growth in our corporate sector is coming from the SME segment,” said Dr. Cüneyt Sezgin, board and audit committee member at Turkey´s Garanti Bank in the FICO/Efma report. “Loans represent the primary relationship between banks and SMEs, as other financing alternatives for smaller companies are not well-developed in this market. Cash loans to SMEs represented 37 percent of total Turkish lira cash loans in 2012, and this ratio has been continuously increasing.”

“Despite the economic challenges in many countries, lenders are telling us they´re prepared to meet a modest increase in credit demand,” said Mike Gordon, senior vice president for FICO sales, services and marketing. “Given last month´s report that European banks have dramatically cut their Basel III capital shortfall, it appears that they gradually may be able to make more capital available for borrowers.”

European bankers also laid out their priorities for investment in analytics. More than 40 percent of respondents reported they will invest in improving their analytics, with the highest priorities being credit risk models for both new credit applicants (61 percent of respondents) and existing customers (50 percent). In addition, 38 percent of respondents said they will increase their investment in risk analytics that incorporate Big Data.

“Although consumer lending is a mature process using analytics to support risk classification, marketing, underwriting and authorizations, predictive models must constantly be calibrated to accommodate changes in consumers´ behavior,” said Manuel Goncalves, director of the Risk and Decision Models Unit at Portugal-based Millennium bcp in the report. “These changes are driven not only by the adverse economic context but also by greater mobility and social networking. At the same time, there are new and richer sources of data that can be used to improve risk management and deliver a better customer experience.”

The delinquency forecast was nearly unchanged from the last survey, with at least 40 percent of respondents forecasting an increase in delinquencies during the next six months on mortgages, credit cards and small business loans. “We don´t expect a reversal of this trend until the economies of Europe show greater recovery,” said Patrick Desmarès, secretary general of Efma. “That said, Europe is a heterogeneous region, with some countries preparing for a triple-dip recession while others, such as Turkey, look quite robust. The uncertainty across much of the region is particularly challenging for multi-national banks.”


Click here for the article on the web.



<< Click here to see more recent news articles >>

 

Latest Jobs

Salary

US$100000 - US$135000 per year + 10% Bonus

Location

New York

Description

This dynamic, growing, values-driven fintech is seeking an experienced risk analyst to drive their acquisition strategy within the small business lending space

Salary

US$100000 - US$135000 per year + Bonus

Location

New York

Description

Are you a stats master? Don't miss this opportunity to join a leading Fintech in the consumer lending space where you will build predictive scorecard models!

Salary

US$90000 - US$110000 per year + Benefits

Location

New York

Description

A leading Fintech is seeking a Risk Analyst to build predictive models and analyze data. This is a great opportunity to join an innovative business!

Salary

US$200000 - US$250000 per year + Benefits

Location

District of Columbia

Description

A leading Fintech in the lending space is seeking a Senior Director of Underwriting. This is a fantastic opportunity to join a market leader poised for growth!

Salary

US$130000 - US$150000 per year + Benefits

Location

New York

Description

A market leading Fintech that specializes in lending is seeking a Senior Loss Forecasting Analyst to join their New York Office. Join a growing business!

Harnham blog & news

With over 10 years experience working solely in the Data & Analytics sector our consultants are able to offer detailed insights into the industry.

Visit our Blogs & News portal or check out our recent posts below.

Finance 4.0 – Who Determines Credit Risk in the Fourth Industrial Age?

If you’ve applied for a credit card or loan recently, you’ll be aware of the swift response you now receive. No human can crunch the numbers and make the determination that fast, right? Although big banks are now adopting Big Data, Machine Learning, and AI into their legacy processes, startups have been disrupting the sector for a few years now. As banks and credit unions scramble to keep up, Fintech innovation is bringing together machine language, analytics, and AI to help form Big Data decisions in the industry. The forward-thinking potential of these technologies has led to some real-world uses to combat fraud, offer access to alternative data sources, and suggest real-time analysis for risk. So, Robots are Determining My Credit Risk? Well, yes and no. Often, those in the financial sector are using AI to assess Credit Risk. What once required Risk Analysts to determine manually, is now done in a matter of seconds with an early warning system developed by ING, PwC, and Google. This AI-powered system helps analysts make faster and more informed decisions about potential risk. How do they do this? Using pre-set criteria, they can gauge and analyze risk based on parameters such as whether or not a client has negative media coverage or if a share price falls below a certain percentage. If the world today is based on perception, even such items as bad reviews, negative coverage, and lower than average share prices can affect determinates. In addition, having these parameters can also help determine best practices and how businesses and individuals can be given opportunities outside the scope of big bank processes. However, as data breaches continue to mar profiles of both individuals and business, Machine Learning components offer platforms the chance to stem the tide of negativity. How Machine Learning Helps Prevent Fraud This is a simple process which requires two key measures. The first is to feed the machine not just a large amount of data, but knowing the parameters set, so the machine is fed relevant information. The second is human input which gives the machine its parameters to operate by. From there, the software will take the information, gain an understanding of the data patterns, and identify any signs of fraud. If done well, the automation process will employ solutions without sacrificing quality. Machine Learning in Determining Scorecard Models Alternative data sources offer more options not only to banks and credit unions, but also to borrowers. Using Machine Learning creates a more flexible, robust model when it comes to the type of information most useful to various borrower profiles. Having profiles prepared allows for automated scorecard updates and can generate better responsiveness and intelligence of a borrower’s risk profile. This process can be empowering for both startup and big bank tech.  The Matured State of Analytics Though humans must initially input parameters, the benefits of Machine Learning using a decision engine can dig deeper and reach farther than ever before. This type of platform can gather a variety of scenarios across the industry and can constantly analyze the information, helping inform the processes of setting credit limits, loan origination, and risk-based pricing. As an extension of a modern analytics platform, these processes fill in the gaps where other platforms may lack the data or programming required to run effectively. But, as these platforms mature, they are helping to drive innovation throughout the Fintech industry and shaking up the outdated, cumbersome processes of old for a much more streamlined efficient operation. Want to inform decisioning and work with data engineers to build validation frameworks? Are you looking to get in on the ground floor of a startup opportunity in the Fintech industry?  If so, we may have a role for you. If you’d like to learn more, check out our current vacancies or contact one of our expert consultants to learn more.  For our West Coast Team, call (415) 614 - 4999 or send an email to sanfraninfo@harnham.com.   For our Mid-West and East Coast Teams, call (212) 796 - 6070 or send an email to newyorkinfo@harnham.com. 

How Businesses Can Build Better Trust through Fraud Security

In the wake of Cambridge Analytica, Facebook data misuse, the Equifax breach, and the latest round of political finger pointing in regard to voter and election fraud, it’s no small wonder that demand for Fraud Analysts and Cybersecurity professionals is high.  If you search: “why should businesses hire fraud analysts”, you’ll see Amazon near the top, hiring for fraud security roles. If they’re taking action, should you be as well? And as the 2018 mid-terms near, Facebook is back in the news. Determined to curtail a repeat of the issues surrounding the 2016 election, the social media giant is working diligently to remove misinformation from the platform.  But with all these giant companies making fresh efforts to tackle fraud, what does this mean for you and your business? Fraud Security Begins at Home Your employees are your first line of defense when it comes to security of your business. No matter the size, it’s important to build a culture of anti-fraud policies right from the start. Below are a few essentials that all businesses should consider: Create a list of anti-fraud policies and share them with your employees, staff, and board members. Offer fraud training for both management and employees. Create a culture of reward for whistleblowers and open lines of communication such as a hotline/tip line. Though any business should be wary of prevailing scams and frauds in the marketplace, small businesses should be especially vigilant. Business News Daily offers additional tips for small businesses looking to prevent fraud right from the hiring process. The Customer Is Always Right: Balancing Fraud Risk Management with Customer Experience Experian® released their 2018 Global Fraud and Identity Report, based on results from 500 businesses and over 5,000 customers worldwide to understand what customers think of today’s security protocols. Trust was, far and away, the biggest talking point. With over 90% of consumers using smartphones and mobile devices followed by over 80% on laptops to search and buy, online security is paramount, and the new digital currency is trust. However, businesses are now having to grapple with the tension between managing fraud and maintaining a positive customer experience. Whilst they may need to lead customers to better solutions, businesses are finding that customers favor more familiar, time-tested methods like passwords. Ironically, those methods just might be compromising the experience they are advocating for by introducing an unintended nuisance and security risk; one-quarter of consumers have forgotten a username or password within the past six months.  Building a Fraud and Risk Management Team In order to protect against fraud, IT needs to play a big role in guiding your business and bringing multiple solutions together. However, we all understand that teams dedicated to technology, risk, fraud detection, and data security take time and resources to integrate.  So, to begin, here are a few ways to introduce Fraud Analysis and Risk Management into your business: Make data and fraud security guidelines part of your business plan and include them in your budget process – will the risk outweigh the reward? Involve staff, employees, management, and stakeholders at every level in the process. Be a hero in the eyes of your customer – balance detection with the customer experience. No matter where you are in your fraud detection and security hiring efforts, we may be able to help you. We specialize across roles of all levels in Data and Analytics on a global scale, with an eye for placing the right candidates in the right roles. For more information about recruiting top talent in the credit & risk sector, get in touch: Our West Coast Team can be reached at (415) 614 4999 or sanfraninfo@harnham.com. Our Mid-West and East Coast Teams can be reached at (212) 796 6070 or newyorkinfo@harnham.com.

Recently Viewed jobs