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NEW PLATFORM USES BIG DATA TO HELP BANKS LEND INTELLIGENTLY

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NEW PLATFORM USES BIG DATA TO HELP BANKS LEND INTELLIGENTLY

A new cloud-based credit scoring service has launched in London to help consumer lenders improve loan quality and acceptance rates through the use of big data.

Erki Kert-BDS

Erki Kert-BDS

Founded three years ago, Big Data Scoring is a tool for use by banks and financial institutions to determine the creditworthiness of individuals based on data available online. It does this by tapping into the broadest sources of information from across the internet, analysing all publicly available information and online behaviour. This intelligent research aims to bring lending institutions into the digital information age, allowing lenders to make informed and more responsible credit decisions.

Credit scoring millennials and non-UK nationals has always been challenging for lenders: their lack of credit history means that lenders find it difficult to assess how they manage their finances. This means lenders often get it wrong, either offering too little or too much credit. The former means missed opportunities for institutions, while the latter can expose applicants to bad debt. Young people often find themselves stuck in this vicious cycle, with more than one million having been refused credit.

This lack of knowledge is reciprocated by the consumers themselves. A recent YouGov study, commissioned by Big Data Scoring, found that a third of people under 30 (33%) don’t know what a credit score is while almost half (47%) understood the concept of a credit score, but didn’t know their own. The poll revealed that this generation are more likely to have a cash ISA (34%) than a credit card (29%); a third have no debt at all (33%) and a quarter (25%) had been declined a financial product or loan. The problem of too much or too little credit causes stress for young people, with one in ten (11%) fearing they will never be able to pay their debt back.

Non-UK nationals also struggle to get credit when they move to the UK. There are over seven-and-a-half million foreign nationals living in Britain and that number is increasing. This is a sizeable market that financial institutions have difficulty accessing – despite the majority being in full-time work. Many other countries operate on a system where borrowers begin on the median (with an average credit score), however in the UK you begin with a poor score and have to build it up. For immigrants and the young this means you start off in a bad position.

Big Data Scoring proposes that the solution to this problem is intelligent research of a loan applicant online, to build a clearer profile which helps to assess their creditworthiness. There is a wealth of information about us online, from our social media profiles to our online behaviour – for example, how long we spend reading the terms and conditions on an application has some bearing on how cautious we may be with our finances. We can harness this data to get clearer insight into people’s financial lives. Used in conjunction with existing scoring methods, this results in more accurate scores – meaning greater opportunity to lend and a reduction in risk.

Erki Kert, CEO at Big Data Scoring, commented: “Young people have come into adulthood with an almost immediate online presence, unlike previous generations. We have seen that this can be as much, sometimes more, of a barometer of their creditworthiness as the traditional approach applied to older people.”

“Increasingly, banks are starting to use this alternative source of information to support their credit checking; it should eventually become an industry standard.”

“Banks and lenders in the UK have a duty to lend responsibly and sensibly, yet they can’t always do this because many are still relying on outdated systems of credit scoring. In essence this is luddite banking, despite financial institutions having more data at their fingertips than ever before.”

“Too much credit is a consequence of the current failings when it comes to credit scoring young people and highlights the need for action to ensure people are given what they need but also what they can afford.”

Banking

Why ID verification is no longer a barrier to global growth in banking

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Why ID verification is no longer a barrier to global growth in banking 1

By Barley Laing, UK Managing Director at Melissa

Issues related to effective identity (ID) verification have restricted the global growth of both large banks and smaller challenger fintechs. With its plethora of internationally recognised IDs and verifiable private addresses, the western world is far different from much of the rest of the world, where this type of information does not exist. For example, many people in Africa and Asia lack recognised addresses. This anomaly prevents financial institutions from carrying out vital ID checks as they normally would, meaning they risk missing out on possible expansion into new and often burgeoning markets.

Proliferation of mobile

Smartphone usage is increasing in all corners of the world. Africa is no exception as the continent is  set to see another 300 million new mobile internet subscribers in the next few years. This rise offers an opportunity to financial services organisations based in the west who have been concerned about the ID verification process in countries where ID, as they know it, can be hard to obtain.

While there’s no magic bullet approach to ID verification in these countries, it’s essential to use all the sources of information the mobile device provides to inform the identity of prospective and existing customers. For example, mobile telephone numbers offer a form of digital identity as people rarely change them. These numbers can be used for dual stage verification, such as an SMS sent to the registered user’s mobile number with a unique code to complete the login to a secure website or transfer funds.

Technology is driving secure customer onboarding and ID verification via mobile. Today, prospective customers can use a merchant’s app on their smartphone to scan their identity documents – such as a driver’s licence. The scan can extract the prospect’s data from the Machine Readable Zone (MRZ), saving time while securing the correct data electronically for the financial institution. Checks can then be carried out in real time to verify the document.

The IP address of the mobile device can play a vital role in fraud prevention. It’s possible to match the location of the phone’s IP address with that of the registered owner – where they are known to live or work. If this information matches up, it’s likely the registered user is using the phone. However, suppose the device’s registered owner is based in a country different from the information provided by the phone’s current IP address. In that case, there could be fraudulent activity taking place.

But it’s not just mobile; other new technologies play significant roles in the ID process.

  • Biometrics

Biometrics, which are human physical and behavioural characteristics that can be used to digitally identify a person, are becoming a vital part of the ID verification process. Once a customer has passed the ID checks at the onboarding stage, biometrics – which can operate across all devices – may help confirm the customer’s identity with facial comparison technology. However, basic biometric services can be hackable. For example, fraudsters could obtain the photo of a customer that might enable them to gain access to that person’s account. That is why it is crucial for organisations to use a biometric algorithm that checks for eye movement as part of their ID verification process. This ensures they engage with a real live person, not a static image or avatar, to prevent fraud. Just as important is how biometrics quickly and straightforwardly enable customers to access their account or service without responding to time-consuming security questions or remembering various passwords, thereby shaping a positive experience.

  • Real-time access powers real-time decision making

When onboarding a new customer anywhere in the world, be sure to source a global dataset of billions of records. For real-time ID verification, fraud prevention, and data accuracy purposes, it should allow you to perform sufficient cross checks of the contact information provided by the prospective customers – their name, telephone number, email address, or home address. This dataset must leverage government agency, credit agency, and utility records, where possible, and access politically exposed person (PEP) watch lists.

  • Social media tells a story

Don’t forget that social media such as Facebook and Instagram provide a wealth of knowledge on those who use them. Accessing this data within the parameters of best practice data protection for ID verification purposes helps organisations identify users’ location and transactional behaviour to support the ID verification process and prevent fraud.

Evolving technology – mainly related to mobile – makes fast, accurate, and secure ID verification anywhere in the world a reality. By combining this technology with access to accurate contact data from billions of global consumers in real time, the door is open for forward-thinking financial institutions to move into new global markets and drive strong growth securely.

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Banking

Bank of Idaho Selects Teslar Software to Enhance Customer Service

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Bank of Idaho Selects Teslar Software to Enhance Customer Service 2

Partnership enables bank to spend more time with borrowers, better meet their needs

Teslar Software, a provider of automated workflow and portfolio management tools designed to help community financial institutions thrive, announced today that Bank of Idaho selected its platform to improve productivity, freeing lenders to spend more time with their borrowers and improve service to the community.

Bank of Idaho is a business-focused bank that is one of the top SBA lenders in the state of Idaho. The bank first partnered with Teslar Software to leverage its automated workflow and portfolio management tools across its entire lending portfolio.  It selected Teslar’s portfolio management, loan review, construction management and exception tracking solutions.

During the implementation process, Teslar’s technology made an impression, specifically its automation capabilities, so the bank felt it would be beneficial to also leverage Teslar PPP Forgiveness to help its businesses more efficiently navigate the PPP forgiveness process.  Known as “the bank with a heart,” supporting community businesses with PPP loans has been a natural fit for the institution. And, Bank of Idaho hasn’t just helped its current customers; of the 1,200 applications processed, nearly 50% were new relationships.

“Teslar’s automated workflow and portfolio management tools are changing the trajectory of our organization,” said Jeff Newgard, CEO and president of Bank of Idaho. “The streamlined, modern processes are improving our customer experiences and allowing us to build stronger relationships. We’re building a frictionless banking experience that can help businesses in our community get through this difficult time and grow with our support and attention.”

Leveraging Teslar Software’s platform will enable the bank’s lenders to spend less time bogged down with traditional, manual processes and more time engaging with borrowers. They’ll also be able to increase visibility and communication across departments and can better serve customers and cross-sell.

“Bank of Idaho prides itself on taking a consultative approach to customer service,” said Joe Ehrhardt, CEO and founder of Teslar Software. “The bank truly cares about its customers and effectively helping them. Through partnering with us, they’ll be able operate more productively and empower their bankers to focus more on forming meaningful relationships with their customers, which is more important today than ever before.”

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Banking

Turkey’s Akbank Will Use FICO Optimization to Build Value in Credit Card Portfolio

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Turkey’s Akbank Will Use FICO Optimization to Build Value in Credit Card Portfolio 3

Akbank’s teams will also use FICO’s advanced decision optimization capabilities on a range of business problems

Highlights

  • After a competitive search, Akbank chose FICO to optimize its consumer credit card limit decisions for new and existing customers.
  • Akbank also plans to use the same optimization technologies in solving different problems such as setting loan amount and price, and customer credit limits
  • FICO is also working to futureproof the bank’s risk management growth by training in-house Akbank team on the optimization methodologies and action-effect modelling.
  • Akbank’s strategy is to establish an optimization centre of excellence.

Global analytics and decision management provider FICO is providing decision optimization software to manage the growing consumer credit card portfolio for one of the biggest Turkish retail banks, Akbank.

More information: https://www.fico.com/en/products/fico-decision-optimizer

FICO has a global pedigree in credit limit management optimization projects, and many of the world’s leading financial institutions use its optimization technology. Akbank will tap into this depth of experience to create an optimization centre of excellence. Akbank has tasked FICO to train an in-house team so they can build their own applications for other areas,  such as loan amount and pricing optimization, customer-based limit optimization and restructuring optimization.

FICO will configure and develop sophisticated “action-effect” models for Akbank’s retail lending team using FICO® Decision Optimizer to manage their initial credit limit assignment and the on-going limits for Akbank’s consumer credit card portfolio.  The action-effect models project customer responses to offers in order to determine the best offer for each customer.  These will be configured into the optimization framework, allowing the Akbank team to choose an operating point that meets their objectives and constraints.

Serhan Pak, Akbank’s senior vice president, Retail Lending, said: “We view optimization as a strategic tool for Akbank, as we build on excellence in credit analytics to reach our strategic goals. The robustness of FICO’s analytic technology and the fact that their optimization applications are in use worldwide made them a natural choice for us.”

Emre Unlusoy, regional director for Turkey & Balkans at FICO, said: “Akbank is aiming to improve profitability, market share and revenues while decreasing non-performing loans. This is an ideal use of optimization, which brings together analytics, decision logic, mathematical optimization and domain expertise.”

FICO® Decision Optimizer enables business analysts to develop, assess and improve the decisions that drive customer interactions and business results. Users can test decision strategies for the optimal results that balance trade-offs between cost, risk and reward, by factoring in dynamic economic and market conditions.

Akbank’s mission is to be the leading bank that drives Turkey into the future. The bank has grown to over 750 branches and employs more than 12,000 people.

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