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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

Increase in bad loans
Changes in creditworthiness at sector and subsector levels
Elevated delinquencies and credit losses across lending portfolios
Hard to differentiate between borrowers in the same sector or subsector
Pertinent data on crisis conditions are scarce, lagging, and not fed automatically into decision making
Strained cash flow and liquidity constraints
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,

Flexible and configurable credit checklists, applications, scoring models, credit policies, and rule-based, manual or automatic recommendations
Visual dashboards to monitor loan portfolio
Digital channels for payment reminders
AI-embedded process automation solution to monitor internal and external data, and determine the possibility of any risk
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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Customer churn has a devastating effect on businesses. On the flip side, it is estimated that a 5% increase in customer retention can lead to a 25-95% increase in profits.

When a customer churns, it not only means a lost deal in the short term—it also means another competitor gains a long-term asset and can expend that asset improving their products. Every business loses customers. But it’s the quality and rate of your attrition that can kill your business growth. The higher the churn rate, the more money you lose every month.

The consumer lending business has one of the worst customer retention rates of any business. Borrowers are more likely to consider refinancing options whenever existing mortgage deals revert to a standard rate. So, lenders must be vigilant at the threat of losing their current borrowers.

Why is customer retention crucial to business?

Customer retention means that a single customer will continue to buy from you over several years – which is described as the Lifetime Value (LTV) of your customer. Customer retention measures not only how successful a company is at acquiring new customers, but also how successful they are at satisfying existing customers.

Customer churn is a crucial matrix for businesses that want to survive.”

There are a few reasons why customer churn is crucial to business:

1. Affordability: It’s 5-25X more expensive to acquire a new customer than to retain an existing customer.

2. ROI: A 5% increase in customer retention can increase company revenue by 25-95%.

3. Loyalty: Retained customers buy more often than newer customers.

Customer retention will not improve overnight. To increase retention, understand why you are losing the existing customer, and what stops them from returning. However, if you have a few solid strategies up your sleeve, you can coax repeated customers more.

Customer retention strategies

1. Get feedback from customers

2. Create personalized customer loyalty schemes

3. Predict customer churn rate from historical data

4. Improve customer experiences across channels

How Insight Consultants can help

The good news is that by leveraging the power of AI and Automation, Insight Consultants can help your businesses to retain a customer for life.

1. Create customer loyalty schemes through AI-powered segmentation

2. Add Intelligent automation to existing IT systems for a personalized customer journey

3. Identify and score churn indicators through Predictive Modelling

4. Share customer performance through reports and dashboards

We believe that with us, you can make great and useful changes to your customer retention. Take a small step and Talk to us and begin your retention journey now!

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The lending industry is data-intensive with massive graveyards of unused and unappreciated credit processing data. As lending firms and credit bureaus face increasing pressure to stay profitable, understanding customer needs and preferences becomes a critical success factor.

But businesses still struggle to make data-driven business decisions, relying instead on all classic strategies — experience, status quo, and “gut feeling” about the right way to do things.

So how Lenders can effectively gain insights from data to make better, data-driven decisions.

The solutions is Data Analytics.”

Data and analytics help firms maximize performance, reduce cost, and improve performance & overall profitability. Using analytics, you can reach out to the right customers and improve customer acquisition. It also assists in efficient delinquency management and comprehensive loan servicing. By increasing the loan life-cycle value, the lenders can retain their most profitable customers.

Being the best in an industry is no longer enough; companies must aspire to be at least at par across industries to compete effectively. So, firms should take the right tactic.

The approach to implementing analytics:

1. Align business goals with analytical outcomes

2. Identify the right analytical partner/tool

3. Identify the best data visualization tools

How can the data and analytics help Lenders?

The consumer lending business is based on the notion of managing the risk of borrower default. Credit scoring systems and predictive models identify the chances of uncertainty and guide in detecting risk. It gives the lenders a clear picture of defaulters. It can help lenders to make faster and more accurate credit decisions.

Key benefits:

1. Reach the right customers with the right products

2. Deliver a superior customer experience through faster on-boarding

3. Identify, target, and retain the most profitable customers

4. Drive-up recovery rates while driving down collection costs

Insight Consultants offer

1. Customized credit models to reduce lending risk

2. Delinquency prediction models to lower loan delinquency rates

3. Workflow automation via ML models which can substantially reduce costs and time associated with internal loan processing and turnaround.

4. Data-driven Customer Segmentation to maximize the value of each customer

5. Improved collection models which segregate risky customers

With several years of experience in the lending domain

Insight Consultants offer a powerful and user-friendly Lending solution that enables informed decision-making through accurate predictions and easy-to-build decision models. If you are looking for ways to harness the power of data analytics.

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Inefficient data management slowing down your Credit Union’s growth?

Most businesses agree that real-time data can help them make intelligent business decisions. When it comes to Credit Unions databases represent its most valuable assets. But several Credit Unions struggle to generate actionable insights, because of the overwhelming volume of data they must process daily. Without a holistic data management practice, credit union clients… Continue reading Inefficient data management slowing down your Credit Union’s growth?

Manual Underwriting Minimizing Your Credit Decisioning Accuracy?

Loan underwriting is tricky. Everyone has unique financial circumstances, and there’s no way you can be 100% certain that someone will pay back a loan. Today we are seeing a new generation of borrowers, customers with no credit history, and a large digital footprint. The traditional policy-driven rules-based manual underwriting that has worked so far… Continue reading Manual Underwriting Minimizing Your Credit Decisioning Accuracy?

Research by Thomson Reuters suggests that technological advances such as cloud computing and real-time data will have the biggest impact on the corporate finance and accounting function in the next ten years!

Fast growing Start-ups and mid-cap companies will be very familiar with this problem – at the initial stage, there is a lot of work done with spreadsheets. The main areas of interest are:

#Proformas – The business model is usually forecasted for a year on how it should perform by design. The idea is then to track the actual performance of each function in the business model against this design document and formulate early actions for corrections as necessary.

#Budgets – The more astute ones would budget on a quarterly basis to have a tight control on financial management. Sensitivity analysis on budgets are always yearned for when making decisions on staffing, IT spend etc.

#Accounting cycle closure – A monthly closure of the books after recording everything accurately is very important to ensure that financial data used is credible. While cloud-based accounting, applications provide the backbone for this, various reconciliations call for spreadsheets in active use.

#Management reports – Usually generated on demand and often someone in accounting is tasked with creating these on spreadsheets.

Very soon, the business leaders will realize that while spreadsheets are very versatile and often unavoidable, even within a robust technology infrastructure, getting insights through real time dashboards to drive the business in a competitive environment requires more than what they offer.

(A few illustrations of the dashboard visualization and data sources used are also provided if you are interested in a closer scrutiny. The specimens pertain to a business in is the alternative lending industry.)

3 Steps to a real time Dashboards

Based on our experience of enabling a fast-growing startup from inception to a mature phase, involving real-time dashboards, here are 3 steps to make the transition, for any business in a similar situation.

From management reports to dashboard visualization.

The corporate finance and accounting function need to work closely with the executive leadership to generate reports on demand. If you are struggling for resources or the right mix of talent, you must think of virtual teams that can engage remotely to boost your current capability. Across a few cycles of report generation and reviews, you will arrive at sufficient consolidation required for visualizing a dashboard. (Illustration: Consolidated graphics for the lending business that form a real-time dashboard)

Mapping information flows from the data sources.

A fast-growing business means a dynamic environment even for the technology infrastructure, with applications making their way in and out. Having a clear mapping of data sources and information flows towards useful reports is very important at this stage. (Illustration: Summarized data table)

Implementation of a BI tool.

With the first two steps in place, someone with skills on any BI tool, like PowerBI can build the necessary integrations into the data sources and apply the necessary transformations to realize the dashboard that has been already visualized.

If you are one of those businesses that find yourself in the place where you are ready to take the journey from spreadsheets to dynamic dashboards, by optimizing technology you might already have or can easily procure, feel free to Get in touch with us that will review more specifics that will help you get started.

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Mining better insights from data through analytics

IDC predicts that by 2025 world’s data will grow 61% to 175 zettabytes, with as much of the data residing in the cloud as in data centres. With such an explosion in data, analytics has rapidly changed from being a ‘nice-to-have’ to a ‘must-have’. In today’s complex business environment, the customer experience has taken… Continue reading Mining better insights from data through analytics

How data can be used effectively to reshape lending?

Lending is one area where data is providing the most revolutionary changes. Lenders are increasingly using data to aid the loan origination process, both for current customers and non-customer prospects. At most lending firms and credit unions, loan officers can electronically pull up customer information including any product history with the institution before approaching a… Continue reading How data can be used effectively to reshape lending?

Real-time Dashboards: Your key to making faster & better decisions

Data overload is a fact that many enterprises are currently struggling with. At times it can be difficult enough just trying to get the data you need from a variety of different platforms. A business dashboard tracks the data that is important to you from various sources and presents that information in an easy-to-understand dashboard.… Continue reading Real-time Dashboards: Your key to making faster & better decisions