Case Studies

Consumer Online Credit

February 15, 2017

Results

  • 53% increase in acceptances
  • 72% reduction in default rate
  • 97% reduction in manual effort
  • 82% reduction in fraud rate

Client

A major, UK, consumer finance company, focused on sub-prime, on-line lending. The client was an early, fintech innovator experiencing problems in handling its rate of growth.

The client’s existing systems were constructed using mainly traditional banking components, e.g. decision engine, range of credit/default scorecards, loan management system, CRM and general ledger system etc. The client was collecting a limited range of predictive data.

Whilst the client was using well proven banking modules, in the context of on-line lending they lacked functionality and imposed a number of restrictions. The main issues were,

As a result, portfolio performance was sub-optimal and operating costs per loan were high. Plus, whilst market response was good, the system was unable to cost effectively cope with portfolio growth.

Zoral software used

Zoral decision engineZDE
Zoral model libraryZML
Zoral analytical data workbenchADW
Zoral behavioral data warehouseBDW
Zoral dynamic customer journeyZDJ

Problem

The subprime lending portfolio base KPIs required improvement. ZDE and ZML were used to rapidly construct a parallel decisioning system to baseline the client’s current KPI’s. These were,

Solution

After the baseline KPIs were calculated, an enhanced customer journey was constructed using ZDJ, BDW and ZDE intelligent workflows. This captured additional, predictive data and significantly improved data collection and quality. A further range of additional predictive data was captured over a two month period. This included behavioral, social, device, and bureau data.

ZML default, fraud, retention, limit management models were tuned on an enhanced range of predictive portfolio data. This was done using Zoral ADW, advanced feature engineering techniques, and robo-underwriter. The following were automated, using ZDE intelligent workflows, and ZML,

Initial results

After three months, the client’s subprime lending portfolio KPIs improved as follows,

The client’s profitability and scalability rapidly improved. However further optimization was required for new customer acquisition costs, defaults, limit management, acceptance rates.

Plus manual processing needed to be further reduced.

Subsequent results

Zoral: consumer online credit scoring, UKZML models and workflows were further tuned after four months’ data collection and a number of A/B testing initiatives,. A number of additional models and intelligent workflows were introduced, including,

These supported automated, optimized customer lifecycle management.

Also, using ZML and ZDE, intelligent automation was applied to,

Subsequent results

The results of implementing Zoral Platform components are summarized below:

KPIPrior to using Zoral platform toolsAfter 5 monthsAfter 12 months
Average loan size£260.00£310.00£540.00
Number of online / mobile applications processed & approved per day7050010K+ per day (subsequently daily volumes peaked at over 100K per day worldwide)
% of manual processing76%15%< 2% (some manual intervention retained due to regulatory requirements)
Operating costs per new loan£8.30£2.80£1.30 (primarily data acquisition costs)
Operating costs to provide another loan for an existing customer£2.50£0.60£0.40
New customer average acquisition cost£42 (non-scalable)£126 (scalable, but expensive)< 12% of loan face amount, across all digital channels
Retention marketing cost for each portfolio customer identified for retention£2.20£0.34£0.21
Portfolio default rate28%18%Sub 8%
Acceptance rate new customersEstimated at 19%25%29%
Customer Retention Rate51%78%87%
Fraud rate6%2%< 0.1%
SummarySmall innovative finance company, sub-optimal KPI’s. platform not scalable, high operating costs per loanImplemented Zoral platform robo underwriter and intelligent STP. Increased profitability, significantly improved scalability and core KPI’sOne of the most successful financial (Fintech) startups in Europe. Low operating costs, intelligent robo underwriter, effective digital targeted marketing, optimized customer lifecycle management £400+ mil online revenue

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© Zoral Limited 2017