Month: January 2022

While financial enterprises have been in the digital race lately, the industry hasn’t been able to efficiently leverage technologies in default management and subsequently improve efficiency and customer experience. In the post COVID-19 world, loan delinquency has increased at an alarming rate. So, how lenders can focus on reducing delinquencies and loss due to charge offs but without compromising customer experience. Solution is  Digital Debt Collection

 

Here we’ll discuss how lenders can bridge this gap by effectively mapping customer segments, helping collection agencies and lenders gain some traction on data and get insight as to what motivates individuals to pay or default their outstanding debt.

 

Traditional debt collection challenges

 

Traditional debt collection is driven by focus on delinquent accounts. Led by aggressive targets, the priority is to ensure the repayment of as much of the outstanding debt as possible. Traditional debt collection methods may be putting the relationship with the entire portfolio of delinquent accounts at risk due to lack of understanding of customer behavior and inaccurate risk segmentation.

 

In most cases, the intensive collection strategies are just measures to overcompensate for unknown and perceived risks posed by the ever-increasing delinquent portfolio. At the core of this problem is the inability to identify risk accurately. This is a big gap and the reason for the phenomenon, primarily, lies the inhibitive cost of conventional methods of risk modeling that a lot of times overweighs the returns. Additionally, there are costs associated with model governance and maintenance of the model.

 

Top challenges: 

 

  1. Lack of customer data
  2. Increased burden of regulations
  3. Failure to track and reconcile accounts
  4. Inability to execute
 

AI revolution in debt collection

 

Accurate customer risk segmentation achieved with the help of AI helps financial organizations enhance customer experience with personalized collection and communication strategies. The growing use of AI and Machine Learning is ushering in a new era in debt collection, one that includes an early warning for delinquency, refined methods of categorizing borrowers and optimized strategies for customer engagement to reduce defaults.

 

AI and ML can transform the debt collection practice in two ways:

 

(a) Embedding intelligence into their collection strategies

 

(b) Enhancing contact strategies through intelligence

 

AI-driven collection strategies

 

Early warning system: Advanced AI/ML analytics will translate some insights into actions such as identifying early potential defaulters using predictive modeling, notifying collectors to check on at-risk debtors proactively and provide credit counseling support, and restructuring payment plans.

 

Categorizing borrowers: Debt collection strategies can be modified using insights based on customer’s demographic and socio-economic data, salary, occupation, and historical interactions. This will ensure the right channel and follow-up actions where you will probably get a positive response.

 

Optimized customer engagement: Artificial intelligence solutions with automation bots can carry out smart dialogues between businesses and customers via email, SMS, or any social media platform. This will enable collectors to reach exactly where the customer logs in several times a day and can pay the outstanding debt online, resulting in faster delivery of receivables

 

Being risk positive with Insight Consultants 

 

Insight Consultants solution can help you accurately identify customers in different risk categories early in the cycle and follow up by creating personalized resolution strategies, considering the financial disposition and behavioral aspects of the borrower. This will help in striking an early deal, thereby reducing the inconvenience and hassle the customer go through.

 

Key benefits of our digital debt collection solution

 

Reduced delinquency rates and charge offs – Through early delinquency prediction models clients can create proactive plans and prevent delinquencies

 

Enhance Customer Experience – Personalized recommendations for time, channel and tone of communication with the borrowers along with recommendations into right resolution strategy ensure most desired outcomes for both borrower and the lender

 

Improves Operational Efficiencies– Improve process efficiencies, productivity and compliance, based on intelligent prioritization of accounts along with prime time recommendations

 

Intuitive Experience – Visualize key insights with the help of configurable dashboards

 

Hyper personalization– Understand personality traits, negotiate and connect well with customers, based on analysis of e-mails, texts, public posts, blogs and tweets

 

Efficient recovery strategy – ML-based prioritizations help focus on accounts with higher likelihood of recovery and suggest appropriate channels and time for contact

With a looming risk of financial meltdown of the economy, the financial institutions will soon find themselves in the dilemma of having to choose between managing the risk and minimizing losses vs customer experience.

 

Insight Consultants can help achieve the balance between alleviating risks and elevating customer experience and create an edge over the competition using digital debt collection strategies.

Contact Us

 

COVID-19 pandemic continues to affect the global financial sector and the damage to businesses and economies is becoming more visible every day. Countermeasures taken to contain the virus and save lives stopped the economy from functioning. With business slowly restarting, lending institutions are faced with a new and unfamiliar environment, in which they must evaluate and monitor credit risk management with limited visibility and access to reliable data. 

 

Lenders and SMEs need to empower their staff with contemporary tools and process frameworks and offer superior digital services to address customers’ on-demand and customized credit needs and mitigate business risks. Customers demand immediate and customized credit solutions. On the other hand, lenders need to minimize losses and business risks.

 

Since vulnerability to credit continues to be the prime risk factor for the financial industry worldwide, lenders should take special initiatives in strategizing comprehensive measures to identify, monitor, and control the inherent risks in lending as best as they can. Firms should be geared to address two facets of credit management – customers unique financing needs and business profitability risks.

 

Changes in the Credit Risk environment triggered by COVID-19

 
  1. Increase in bad loans
  2. Changes in creditworthiness at sector and subsector levels
  3. Elevated delinquencies and credit losses across lending portfolios
  4. Hard to differentiate between borrowers in the same sector or subsector 
  5. Pertinent data on crisis conditions are scarce, lagging, and not fed automatically into decision making
  6. Strained cash flow and liquidity constraints
  7. Increase in call volumes and customer complaints

 

Adjusting to new dynamics in Credit Risk Management

 

From the perspective of financial institutions, the conditions that the COVID-19 crisis triggered have specific implications for managing and mitigating credit risk.

 

Data and analytics capabilities are proving essential to the solution. Accelerate digital transformation to enable real-time monitoring and effective mining of transaction data, while automating the feeding of results into decision-making.

 

The current crisis calls for a review of the existing acquisition policies, strategies, and cutoffs to manage emerging risks and provide ongoing credit to customers. The actions by businesses during these times will inspire future customer loyalties, help gain market share, and mitigate reputational risk.

 

Proactive credit risk management improves an organization’s ability in effective decision-making. It helps to build an understanding required to measure and manage emerging risks which gives organizations a better view of tomorrow’s risk and how it impacts their business.

 

 Reassess collection strategies with a focus on enhanced monitoring and updated segmentation. Data analytics, including monitoring, strategy, and model enhancements can drive informed collection actions during these times.

 

Towards digitization of business process

 

The ever-changing, heavily regulated, and competitive landscape of the lending sector demands solutions that are highly flexible and will provide organizations with the kind of operational agility required to not only achieve business objectives but also ensure regulatory compliance. The digital transformation of existing credit risk tools, processes, and systems can address rising costs, regulatory complexity, and new customer preferences. The unique features of the pandemic-triggered recession have led SMEs to move more quickly to build real-time data and analytics into their credit-decision engines. The digital enablement of credit risk management means the automation of processes, a better customer experience, sounder decision-making, and rapid delivery. 

 

Insight Consultants approach

 

At Insight, we provided end-to-end support for the COVID-19-related impact and ensure smooth credit management. This includes, 

 

  1. Flexible and configurable credit checklists, applications, scoring models, credit policies, and rule-based, manual or automatic recommendations
  2. Visual dashboards to monitor loan portfolio
  3. Digital channels for payment reminders
  4. AI-embedded process automation solution to monitor internal and external data, and determine the possibility of any risk
  5. Granular segmentation, and personalized dynamic treatment optimization

 

Act now

 

The COVID-19 pandemic has created great uncertainty regarding the future of the economy. Financial firms need to rise to the occasion and proactively implement best practices in credit risk management to navigate through these times. 

 

Lenders who respond to today’s challenges with speed and flexibility, while keeping in mind customers’ needs during these unforeseen times, are the ones who would be top-of-mind customers as they think of their credit needs in the future. Keeping an eye on the medium-and-long term capability enhancements necessary to best serve customers in the post-pandemic world is imperative.

Contact Us

Monthly Newsletter | Jan 2022 | Issue 116

 

Featuring 

  • Digital Debt Collection for Mitigating Risk and Improving Customer Experience
  • Optimize credit management to enhance business performance
  • In the News
  • Major Events

Focus On

digital debt collection

 

Alleviating collection risk and elevating customer experience: Tips to Lenders

While financial enterprises have been in the digital race lately, the industry hasn’t been able to efficiently leverage technologies in default management and subsequently improve efficiency and customer experience. In the post COVID-19 world, loan delinquency has increased at an alarming rate. Here we’ll discuss how lenders can bridge this gap by effectively mapping customer segments, helping collection agencies and lenders gain some traction on data and get insight as to what motivates individuals to pay or default their outstanding debt. the concept of using digital debt collection methods to effectively manage and reduce collection risk while simultaneously improving the overall customer experience.

Traditional debt collection challenges

Traditional debt collection is driven by focus on delinquent accounts. Led by aggressive targets, the priority is to ensure the repayment of as much of the outstanding debt as possible. Traditional debt collection methods may be putting the relationship with the entire portfolio of delinquent accounts at risk due to lack of understanding of customer behavior and inaccurate risk segmentation.

In most cases, the intensive collection strategies are just measures to overcompensate for unknown and perceived risks posed by the ever-increasing delinquent portfolio. At the core of this problem is the inability to identify risk accurately. This is a big gap and the reason for the phenomenon, primarily, lies the inhibitive cost of conventional methods of risk modeling that a lot of times overweighs the returns. Additionally, there are costs associated with model governance and maintenance of the model.

Top challenges: 

1. Lack of customer data

2. Increased burden of regulations

3. Failure to track and reconcile accounts

4. Inability to execute

So, how lenders can focus on reducing delinquencies and loss due to charge offs but without compromising customer experience.

Solution : Digital Debt Collection

 

AI revolution in debt collection

Accurate customer risk segmentation achieved with the help of AI helps financial organizations enhance customer experience with personalized collection and communication strategies. The growing use of AI and Machine Learning is ushering in a new era in debt collection, one that includes an early warning for delinquency, refined methods of categorizing borrowers and optimized strategies for customer engagement to reduce defaults.

AI and ML can transform the debt collection practice in two ways:

(a) Embedding intelligence into their collection strategies

(b) Enhancing contact strategies through intelligence

 

Digital debt collection strategies

Early warning system: Advanced AI/ML analytics will translate some insights into actions such as identifying early potential defaulters using predictive modeling, notifying collectors to check on at-risk debtors proactively and provide credit counseling support, and restructuring payment plans.

Categorizing borrowers: Debt collection strategies can be modified using insights based on customer’s demographic and socio-economic data, salary, occupation, and historical interactions. This will ensure the right channel and follow-up actions where you will probably get a positive response.

Optimized customer engagement: Artificial intelligence solutions with automation bots can carry out smart dialogues between businesses and customers via email, SMS, or any social media platform. This will enable collectors to reach exactly where the customer logs in several times a day and can pay the outstanding debt online, resulting in faster delivery of receivables

Being risk positive with Insight Consultants 

Insight Consultants solution can help you accurately identify customers in different risk categories early in the cycle and follow up by creating personalized resolution strategies, considering the financial disposition and behavioral aspects of the borrower. This will help in striking an early deal, thereby reducing the inconvenience and hassle the customer go through.

Key benefits of our solution

Reduced delinquency rates and charge offs: Through early delinquency prediction models clients can create proactive plans and prevent delinquencies

Enhance Customer Experience – Personalized recommendations for time, channel and tone of communication with the borrowers along with recommendations into right resolution strategy ensure most desired outcomes for both borrower and the lender

Improves Operational Efficiencies– Improve process efficiencies, productivity and compliance, based on intelligent prioritization of accounts along with prime time recommendations

Intuitive Experience – Visualize key insights with the help of configurable dashboards

Hyper personalization– Understand personality traits, negotiate and connect well with customers, based on analysis of e-mails, texts, public posts, blogs and tweets

Efficient recovery strategy – ML-based prioritizations help focus on accounts with higher likelihood of recovery and suggest appropriate channels and time for contact

With a looming risk of financial meltdown of the economy, the financial institutions will soon find themselves in the dilemma of having to choose between managing the risk and minimizing losses vs customer experience.

Insight Consultants can help achieve the balance between alleviating risks and elevating customer experience and create an edge over the competition.

 

Keep Reading 

 

 

Optimize Credit Management to enhance Business Performance

COVID-19 pandemic continues to affect the global financial sector and the damage to businesses and economies is becoming more visible every day. Countermeasures taken to contain the virus and save lives stopped the economy from functioning. With business slowly restarting, lending institutions are faced with a new and unfamiliar environment, in which they must evaluate and monitor credit risk with limited visibility and access to reliable data. 

Lenders and SMEs need to empower their staff with contemporary tools and process frameworks and offer superior digital services to address customers’ on-demand and customized credit needs and mitigate business risks. Customers demand immediate  and customized credit solutions. On the other hand, lenders need to minimize losses and business risks.

Since vulnerability to credit continues to be the prime risk factor for the financial industry worldwide, lenders should take special initiatives in strategizing comprehensive measures to identify, monitor, and control the inherent risks in lending as best as they can. Firms should be geared to address two facets of credit management-customers unique financing needs and business profitability risks.

Changes in the Credit Risk environment triggered by COVID-19

1. Increase in bad loans

2. Changes in creditworthiness at sector and subsector levels

3. Elevated delinquencies and credit losses across lending portfolios

4. Hard to differentiate between borrowers in the same sector or subsector 

5. Pertinent data on crisis conditions are scarce, lagging, and not fed automatically into decision making

6. Strained cash flow and liquidity constraints

7. Increase in call volumes and customer complaints

 

Adjusting to new dynamics in Credit Risk Management

From the perspective of financial institutions, the conditions that the COVID-19 crisis triggered have specific implications for managing and mitigating credit risk.

Data and analytics capabilities are proving essential to the solution. Accelerate digital transformation to enable real-time monitoring and effective mining of transaction data, while automating the feeding of results into decision making.

The current crisis calls for a review of the existing acquisition policies, strategies, and cutoffs to manage emerging risks and provide ongoing credit to customers. The actions by businesses during these times will inspire future customer loyalties, help gain market share, and mitigate reputational risk.

Proactive credit risk management improves an organization’s ability in effective decision-making. It helps to build an understanding required to measure and manage emerging risks which gives organizations a better view of tomorrow’s risk and how it impacts their business.

Reassess collection strategies with a focus on enhanced monitoring and updated segmentation. Data analytics, including monitoring, strategy, and model enhancements can drive informed collection actions during these times.

Towards digitization of business process

The ever-changing, heavily regulated, and competitive landscape of the lending sector demands solutions that are highly flexible and will provide organizations with the kind of operational agility required to not only achieve business objectives but also ensure regulatory compliance. The digital transformation of existing credit risk tools, processes, and systems can address rising costs, regulatory complexity, and new customer preferences. The unique features of the pandemic-triggered recession have led SMEs to move more quickly to build real-time data and analytics into their credit-decision engines. The digital enablement of credit risk management means the automation of processes, a better customer experience, sounder decision making, and rapid delivery. 

Insight Consultants approach

At Insight, we provided end-to-end support for the COVID-19-related impact and ensure smooth credit management. This includes, 

1.Flexible and configurable credit checklists, applications, scoring models, credit policies, and rule-based, manual or automatic recommendations

2.Visual dashboards to monitor loan portfolio

3.Digital channels for payment reminders

4. AI embedded process automation solution to monitor internal and external data, and determine the possibility of any risk

5. Granular segmentation, and personalized dynamic treatment optimization

 

Act now

The COVID-19 pandemic has created great uncertainty regarding the future of the economy. Financial firms need to rise to the occasion and proactively implement best practices in credit risk management to navigate through these times. 

Lenders who respond to today’s challenges with speed and flexibility, while keeping in mind customers’ needs during these unforeseen times, are the ones who would be top-of-mind customers as they think of their credit needs in the future. Keeping an eye on the medium-and-long term capability enhancements necessary to best serve customers in the post-pandemic world is imperative. 

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In the News

Investree collaborates with Netbank to stimulate Filipino SME recovery

Investree’s SME clients are set to benefit from additional funding as a direct result of the B2B lending marketplace’s recent collaboration with the Filipino BaaS platform Netbank.

Investree has reinforced its commitment to supporting the development of Filipino SMEs through its collaboration with Netbank; which operates in the Philippines.

Through the collaboration, Netbank will allocate funds for Investree clients to support the initiatives that will be carried out in 2022, further contributing to the economic growth of the Philippines. These additional funds will be utilised to create new jobs and expand business growth, which Investree will continue to connect SMEs to institutional investors.

Although it already serves the SMEs on the Filipino island of Luzon, reports state that Investree is awaiting an SEC permit to extend the reach of its operations to the regions of Visayas and Mindanao, which will take the service to nationwide status.

Co-Founder and CEO of Investree Philippines, Kok Chuan Lim, comments: “Investree Philippines is very excited to have onboarded Netbank as one of our first institutional investors in the Philippines. We have been working with the team at Netbank since we obtained our license earlier this year to jointly develop services that will improve ease of use for our SME issuers and reduce credit risks for our note investors. I am confident that our partnership will further enhance the adoption of crowdfunding as a viable working capital source for our SME clients.”

SMEs form the economic backbone of the Philippines, and account for 99 per cent of registered businesses whilst providing about 60 per cent of jobs across the country. The Covid-19 crisis has taken a huge toll on these vital small companies, and many businesses had been affected by lower sales and difficulty accessing inputs to reduced logistics services and clients not paying bills.

To help SMEs recover, Investree and Netbank are collaborating to expand the loans to this critical sector. Providing account opening services and investing in crowdfunding services will allow Investree clients to finance their trade receivables, giving SMEs cash to accelerate their growth. This partnership also allows Investree to accelerate its growth and ultimately serve the underserved SME market.

Furthermore, SME lending is very underserved in the Philippines. SME loans as a percentage of GDP is approximately 3 per cent, compared to 37 per cent in Thailand and other countries in the region.

As a result, SMEs struggle to grow, slowing job creation and economic development. Through collaboration and digitalisation in unlocking the potential of SMEs would allow them to rapidly expand their impact. In addition, the collaboration between Investree and Netbank can also contribute to accelerating financial inclusion within the country.

Netbank Co-Founder and Head of Operations, Jaymar G. Mendoza, comments: “Together with Investree, we hope to support the efforts in increasing financial inclusion within the country which is aligned with our aim which seals our partnership as well. We aim to combine both expertise and flexibility that banking and fintech has to offer to create more impact for the market. The partnership between a regulated bank and an alternative lender is very powerful wherein the Banks bring balance sheet management experience and processes and the alternative lenders bring a deep understanding of their clients.”

Kok Chuan Lim added: “With the support from Netbank, Investree Philippines will be harnessing the expertise and power of technology to give SMEs vital cash to accelerate their growth to increase financial inclusion and ultimately help the Philippines’ economy. Also, we would like to equally serve all the SMEs in the nation, therefore, inquiring about the permit to operate Visayas and Mindanao will allow us to do that. We would like to keep innovating and include more businesses in the Philippines.”

Physical fake is prevalent across Fintech: says Sumsub 2022 predictions

Sumsub, the tech company that fights money laundering and online fraud, has released the results of its identity fraud study while making predictions for the upcoming year.

Analysing 6,000 document types from 220+ countries and territories, the research was conducted between 2020 and 2021 and addressed the prevalence of identity fraud within various industries, including banking, crypto, trading, and gambling.

The study revealed that over 65 percent of identity fraud occurs during ID checks. Other fraud-prone verification stages include biometric checks (seven percent of fraud), proof of address checks (five percent), and selfie checks (one percent).

Over 60 percent of fraudsters use physical fakes to trick the verification system, while digital forgeries are used by less than 15 percent. In a third of cases, fraudsters forge physical documents from scratch; whereas in 22 per cent of cases, they tamper with a valid document.

“Fraud rates aren’t going to decline. This is an eternal game of cat-and-mouse: criminals come up with new fraud techniques, and we learn to catch them. The biggest danger is deepfakes. At present, it’s difficult for an ordinary person to make a high-quality deepfake—but soon, I’m afraid, technologies will reach the point where everyone can make a realistic deepfake on their phone in two seconds. We must not lose our vigilance and work ahead of fraudsters,” says Vyacheslav Zholudev, Sumsub’s co-founder and Chief Technical Officer.

The report also highlights the prevalence of fraud in the banking, crypto, trading, and gambling sectors. In the banking sector, more fraud was committed during the winter holidays. The crypto fraud rate spiked in November 2020 and then gradually decreased, while the trading sector saw a double peak in late 2020/early 2021. In the gambling sector, the fraud rate remained stable overall.

It also turns out that fraudsters are becoming more skilled. Sumsub’s data suggests that 35 per cent of all fraud attempts are initiated by fraudsters using advanced forgery techniques, and the company expects this figure to rise in the future.

Sumsub concludes with several recommendations to help companies avoid identity fraud. Accordingly, the most effective way for businesses to stay safe is to screen for complex fraud schemes at different onboarding stages. It’s also essential to consider specific red flags, including suspicious email domains and IP addresses.

Kabbage® from American Express launches Kabbage funding to help small business

Kabbage from American express launched Kabbage Funding™ offering eligible small businesses flexible lines of credit between $1,000 and $150,000-now with the powerful backing of American Express. With Kabbage Funding, small businesses can apply in minutes to access working capital 24/7 to help manage their company’s cash flow.

Most small business owners start a company to pursue a passion, not to spend time managing their cash flow and balancing their books, said Kabbage Co-founder and Senior Vice President at American Express, Rob Frohwein.

The launch of Kabbage Funding builds on American Express’s momentum to go beyond the Card and become an essential partner to small busineeses through a broad range of cash flow management tools. Kabbage Funding is a business line of credit offered by American Express that approves customers by analyzing their business data in real-time, and adds to its new suite of products, including Kabbage Checking™ launched in June 2021. Building on its efforts, American Express has also begun offering Kabbage payments ™ to eligible customers, which will be more broadly available in 2022, and makes it simple for small businesses to accept card payments and get paid quickly. American Express’s products from Kabbage are designed to work together. When connected to its digital cash flow platform, the tools are built to help small businesses borrow funds, make deposits, earn 1.1% APY1 on checking balances up to $100,000 pay vendors, and streamline cash-flow management-all at their fingertips from a single provider.

Now available to eligible US small businesses to apply online, Kabbage Funding helps simplify the process of seeking working capital and has: No application fees, No origination fee, No annual fees, No monthly maintenance fee.

US small businesses can apply in minutes for Kabbage Funding by connecting their business accounts online to analyze their business information real time. Persistent data connectivity helps Kabbage continuously review a customer’s eligibility and ensure they have the right amount of funding available to them at the right time, based on their latest business performance.

Once approves, small businesses do not need to reapply to access their line of credit, not asl for approval to draw funds. Eligible customers may have the option to choose between a 6.12, and 18-month loan term, can take out more than one loan at a time, and do this as often as they need up to their approved amount. The result is a funding solution designed to let small businesses quickly access the exact amount of funding they need it, 24/7, and only pay for the funds they borrow with no pre-payment penalties if they choose to pay back the loan early.

To be eligible to apply, US small business must be in business for at least one year.Small businesses may learn more about Kabbage Funding and apply either at www.kabbage.com/funding or via the Kabbage mobile app available in the App Store® and Google Play™. All Kabbage Funding loans are issued by American Express National Bank.

EU Banking profitability above pre-COVID levels: says Watchdog

Banks in the European Union became more profitable in the third quarter of 2021, with government support during the pandemic helping to push down the number of loans that turn sour, the EU’s banking watchdog said.

“Asset quality has further improved, but there are concerns for loans that have benefited from moratoria and public guarantee schemes not least due to general uncertainty due to Covid-19 variant, Omicron,” the European Banking Authority said in its latest quarterly “risk dashboard”.

“Profitability has stabilised at levels above those seen before the pandemic. The majority of banks expect a rise in operational risks mainly due to elevated cyber risks.”

The non-performing loan (NPL) ratio of loans that turn sour, fell 20 basis points quarter-on-quarter to 2.1%, while return on equity, a key measure of profitability, was 7.7%, up from 2.5% in the same quarter in 2020, and 5.7% in the third quarter of 2019.

The core ratio of capital to risk-weighted assets in the third quarter of last year was 15.4%, down 10 basis points on the prior quarter but still well above regulatory requirements, EBA said.

The EBA findings are based on a sample of 131 banks covering more than 80% of the EU’s banking sector assets.

 

Events

 

Nexus Fintech 

7-8 Feb 2022, Loews Miami Beach Hotel, 1601, Collins Ave, Miami Beach, USA.

Insight Consultants are focused on making level the rough roads that exist in the lending industry. We serve customers globally from our offices in the US and India.

Contact Us

Monthly Newsletter | July 2021 | Issue 113

Featuring

  • How Data Models can improve your business profit
  • Managing COvid-19 impact on Credit Risk Modelling
  • In the News
  • Major Events
  • Key Stats

 

Focus On

 

Improve your Data Models to increase your Business Profit!

There are 2.5 quintillion bytes of data created each day at our current pace: not only is there more data, but there are more scattered data sources. But to make data usable, we need to consider how the data are presented to end-users and how quickly users can answer their questions. The value of understanding data is critical for businesses to make data-driven decisions and better business performance (in terms of profitability, productivity, efficiency, customer satisfaction). Here effective data models can help businesses quickly get answers to very difficult questions.

What is Data Modeling?

Data modelling is nothing but a process of discovering, analyzing, representing, and communicating data requirements in a precise form. Data models depict and enable an organization to understand its data assets. 

Improved data modeling leads to greater business benefits. Key success factors for this include linking to organizational needs and objectives, using tools to speed up the steps in readying data for answers to all queries, while prioritizing simplicity and common sense. Once these conditions are met, every business, whether small, medium, or big, can expect data modeling to bring significant business value.

The data modeling workflow progresses from business requirements to the physical implementation of the database. From a high level, data modeling is a process that:

a) Gather business requirements (analyze the data, identify data relationships)

b) Create various data models (conceptual, logical, physical)

c) Supports application development (create application specifications, develop, or integrate applications, deploy applications)

There are challenges, however, beginning with ensuring data quality.

Top data modelling challenges

1) Eliminate data silos.

2) Clean and organize data sets to remove duplicate information and correct inaccuracies.

3) Integration data into a single hub for comprehensive analysis

4) Traditional IT infrastructure and processes

To make correct decisions, businesses need to make the data work for them. Taking the time to more effectively use the data to make decisions is not just a nice-to-have; it’s a must-have.

To-do’s

a) Know your mission: Determine what the most important metrics are to your business (identify the right KPIs for your business)

b) Identify data sources: Establish ways to accurately track that information.

c) Clean and organize data: Integrate all your data into a centralized dashboard for increased visibility.

d) Perform statistical analysis: Run actionable reports based on your data analysis.

e) Conclude: Implement operational and tactical changes based on your data reports.

Getting real-time insights into driving the business in a competitive environment requires the right tools and processes in place.

Data Modeling for better Business Intelligence

Today businesses are looking at data models as the foundation, to solve their business challenges, bolstering a need for BI and analytics within the organization. At the foundation of every BI & Analytics team, building business-driven data models are at their core. These models help create key database frameworks for business and technical team collaboration, which in turn help build effective reporting & meaningful analytical insights to drive better decision making.

The proper utilization of data should not be, nor is it, exclusive to the top players. Business intelligence (BI) tools have given companies of all sizes access to powerful data modelling capabilities.  Businesses can transform data into actionable insights with BI tools like:

  • Excel Dashboards
  • Tableau
  • Power BI

However, the entire process of data modeling is not as easy as it seems. A data model for one line of business is hardly appropriate for another line of business. Using data models to drive your key business decisions efficiently, you must have a clear understanding of your organization’s requirements and organize your data properly using individual tables for facts and dimensions to enable quick analysis and keep the models updated overtime.

Benefits of Data Modeling

1) A data model ensures that all data objects required by the database are accurately represented

2) It provides a clear picture of the base data and can be used by database developers to create a physical database

3) A data model helps design the database at the conceptual, physical and logical levels

4) Identifies missing and redundant data

5) In the long-run data modelling makes IT infrastructure upgrade and maintenance faster cheaper

Data models in business are never carved in stone because data sources and business priorities change continually. Therefore, businesses must plan on updating or changing them over time.

Insight Consultants Offer 

At Insight, we can help you to analyze your data efficiently to gain real-time insights with  advanced technology and financial management services. We offer, fully automated data processing system, effective scoring models to make sound decisions, customized dashboards to track matrix, Power BI to make powerful decisions, data analytics techniques to extract valuable insights ,etc. The biggest companies benefit from big data and data analytics. If the most successful entrepreneurs are using techniques such as data modeling, why shouldn’t you?

Contact our experienced consultants if you need powerful Big Data solutions.

Keep Reading 

 

 

Managing Covid-19 impact on Credit Risk Modeling

The COVID-19 pandemic has created uncertainty regarding the future of the economy, and its scale of impact will depend on the intensity and duration of the underlying public health crisis. Pandemic has triggered an extraordinary challenge across all sectors of the economy, impacting banking functions ─ particularly credit risk management. To address this, financial institutions need to have a specific risk management strategy.  

From the perspective of financial institutions, the conditions that the COVID-19 crisis triggered have specific implications for managing and mitigating credit risk. In the past year, banks and other financial institutions have been adjusting to the new dynamics and exploring potential new approaches to overcome the challenges.

Covid-19 has created several challenges to credit risk environment

1.Changes in creditworthiness at sector and sub-sector levels

2.Retail and commercial borrowers are facing significant reductions in their monthly incomes

3.Pertinent data in crisis conditions are scare, lagging, and not fed automatically into decision making

4.Socially responsible collections needed to meet changing customer preferences

5.A large wave of non-performing exposures is beginning and must be addressed in new ways.

Faced with the unprecedented pace and magnitude of economic disruption from the COVID-19 pandemic, credit modeling teams will need to re-think how forecasted economic shocks and respective probability weights can be incorporated into existing impairment models. Most of the models were built on historical data from the last decade, which is not representative of the current environment. Also, credit models generally presume a gradual impact of the environment on losses, with lags ranging from one to six months.

Limitation of Existing Models: Existing risk models exacerbated prediction due to various shortcomings

a) The historical scenarios used in various credit risk models did not hold well. Any kind of stress scenario (historical/ artificial) is generally related to stressing either demand or supply-side factor, but not at the same time. However, the onset of Covid-19 drastically impacted both the demand and supply side, resulting in the faulty prediction of existing models.

b) Most of the models are better in predicting outcomes, where macro-economic/ market condition deteriorates gradually, rather than drastically.

Hence, companies need to have more forward-looking models to better tackle the situation. Since the typical data used in existing credit risk were distorted due to various unique scenarios, firms need to focus on other data sources like:

  • Transactional data of the customer/client
  • Alternative data

It is important to consider the substantial correlation of various other risks, including but not limited to credit risk, market risk, operational risk, liquidity risk, cyber security risk etc. Linkages between different categories of risk are likely to emerge in times like this and should be fully understood and prepared for. Most firms will be under scrutiny during this period and will be closely watched on how the internal risk systems and models cope with the current turbulent environment.

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Mortgage servicers brace for fallouts as Covid bail comes to an end

The nation’s mortgage servicers are gearing up for the biggest wave of delinquent loans since the subprime mortgage crisis, but this time they say they are ready.

The first wave of borrowers to enter the government’s coronavirus mortgage bailout program are entering their last possible quarter for relief, which means that come September they will either have to start paying, sell their homes or go into foreclosure.

An estimated 7.25 million borrowers have participated in forbearance programs at one point or another throughout the pandemic, representing 14% of all homeowners with mortgages, according to Black Knight. About 72% of all participants have since left their plans, while 28%, or just more than 2 million, remain in active forbearance.

This week and next, a total of more than 350,000 borrowers will be reviewed for extension or removal from forbearance, according to Black Knight. Of the 146,000 plans reviewed this week, 44,000 homeowners left forbearance, while the plans of 102,000 were extended. With roughly two-thirds of borrowers remaining in forbearance, Black Knight estimates that 575,000 plans will expire in September and the beginning of October, meaning mortgage servicers will be facing the daunting task of dealing with about 15,000 troubled loans per day.

Mortgage servicers in general want to keep as many borrowers in their homes as possible, since the foreclosure process is very expensive. They can perform loan modifications, lowering the interest rate, and can also tack on all the missed payments to the end of the loan. While there is a so-called waterfall of options, the final one is selling the home, which in today’s very pricey housing market, could even net some borrowers a small profit.

The CFPB also just changed its guidance for how servicers should handle borrowers when mortgage forbearance programs expire. Part of that is improving outreach from servicers as well as helping servicers process loan modifications and not pushing for a foreclosure moratorium.

 

Greensill given access to Covid loans without detailed checks

The collapsed finance firm Greensill Capital was given access to a government-backed loan scheme without being subjected to detailed checks, leaving UK taxpayers facing a £335m loss, Whitehall’s spending watchdog has found.

The National Audit Office said the government-owned British Business Bank [BBB] carried out limited due diligence on the firm’s application before giving permission to access the Corona Virus Large Business Interruption Loans Scheme (CLBILS).

In a report released recently, bank officials said they were also subjected to “unusual” levels of interest from the Department for Business, Energy & Industrial Strategy [BEIS] during the accreditation process, as ministers hoped that Greensill’s loans could halt the collapse of Sanjeev Gupta’s steel empire.

The bank stopped Greensill’s access to the loan scheme after discovering that six of the seven loans handed out by Greensill Capital went to Gupta’s firms on the same day, the report revealed.

Greensill Capital collapsed into administration in March, putting thousands of jobs at risk and triggering an international political and financial scandal.

The supply chain finance firm is the focus of a Whitehall inquiry after it emerged that its adviser and shareholder, the former prime minister David Cameron, lobbied current ministers including the chancellor, Rishi Sunak, for access to another government-backed loan scheme.

Auditors examined the bank’s decision to allow Greensill to access business support schemes, which were set up to give struggling firms swift access to financial assistance during the Covid-19 crisis.

 

Chime, the most downloaded banking digital app in the US

Chime was the most downloaded digital banking app in the U.S. during the first half of 2021, with 6.4 million installs, according to data collected by Apptopia.

The Corona Virus pandemic has been a boon to digital banking, as more users turned to digital-only challenger banks — and the digital services available at traditional institutions — to conduct their financial transactions amid lockdowns. Neobanks like Chime and Current managed to fund their customers’ accounts with the government-backed stimulus checks days ahead of traditional banks, garnering praise and positive media attention. Apptopia’s report, however, shows that European digital banks are lagging behind their U.S.-based competitors in gaining market share in the U.S.

According to Apptopia, the top 10 digital-first banking apps in the U.S. recorded 16.33 million installs during the first half of 2021.

The firm’s data shows that despite the entrance of several overseas-based neobanks, some of which are dominating the European market, foreign challengers still have much ground to cover to catch up with U.S.-based digital banks. N26, which launched in the U.S. in 2019, came in 10th in the number of downloads for the first half of 2021 with 170,000, according to Apptopia. The Berlin-based digital bank has invested $29.9 million toward its U.S. expansion efforts, and said it plans to reach break-even status by the end of the year.

In addition to its expansion in the U.S., the company is also aggressively eyeing the Brazilian market, and recently obtained a banking license in the South American country.

Amid its international growth efforts, the company has also reversed some of those expansion plans. The neobank shuttered its U.K. operations in April 2020, citing challenges associated with Brexit and reports of low user engagement. Revolut, which launched in the U.S. last year, didn’t make the top 10 list, coming in 11th in downloads for 2021’s first half, according to Apptopia.

The London-based bank, which claims to have 15 million customers worldwide, appears to be bullish on the U.S. market. The company applied for a banking license through the California Department of Financial Protection and Innovation, and launched Revolut Business across all 50 states in March.  As it looks to grab its share of the U.S.’s digital banking market, Revolut’s small-business offering could help it differentiate itself from Chime and Current, which are vying for consumer accounts.

Revolut has said its business banking service has amassed over 500,000 sign-ups in Europe. Meanwhile, it is reportedly chasing $1 billion in funding. The neobank’s advisers are in talks with tech investors, including Japan-based SoftBank’s Vision Fund 2, for an investment between $750 million and $1 billion, according to Sky News.

 

Bank of America places first in the US customer satisfaction for financial advice

Bank of America ranked first in J.D. Power’s 2021 US Retail Banking Advice Satisfaction Study. In the firm’s fourth annual survey, the banking giant scored 673 on a 1,000-point scale, topping second-place Citibank, which scored 640.

BofA excels in providing a service that’s highly utilized and appreciated by the few customers who take advantage of it. Yet there is limited demand for financial advice across the industry.

Conflictingly, usage is high: J.D. Power found that 69% of respondents who got financial advice acted on it. Personalized advice also represented a key driver of overall satisfaction—the approach is linked to a boost of 229 points.

Despite banks’ success with customers that they advise, consumer interest in the service is weak. J.D. Power found that only 19% of respondents said they were “very interested” in receiving financial advice, with an additional 33% replying they were not interested in getting advice at all.

The gap between demand and utilization suggests that BofA and its peers have room to grow as providers of financial advice—especially since J.D. Power’s findings suggest that lots of customers could benefit from it. The survey showed that only 49% of respondents are considered to be financially healthy, with only 38% passing a basic financial literacy test.

Aside from representing a market opportunity, financial advice offers a way for incumbents like BofA to maintain their branch networks. People prefer to conduct complex services in person. For example, a 2020 Deloitte survey found that respondents were more likely to prefer branches for services such as wealth management (62%) and mortgages (69%)—as opposed to routine offerings like credit cards (44%) and managing their checking accounts (54%). 

These insights on channel preferences and the market potential for financial advice can help incumbent banks as they review their branch networks and assess how they can contribute toward their customer value proposition. Both could provide a competitive advantage over digital-only banks.

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Central Bank Interest Rates and Current Libor Rates

GBP Libor (overnight)

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(07-07-2021)

Central BanksInterest Rates
Euro Libor-0.58929%American Interest rate (FED)0.25%
USD Libor0.08513%Australian Interest rate (RBA)0.10%
CHF Libor-0.79360%British Interest Rate (BoE)0.10%
JPY Libor-0.10417%Canadian Interest Rate (BOC)0.25%
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