Early Warning Signals For Collections – Part 1

 In Early Warning Signals for Collections

Part 1: Ability to handle the unexpected

As the world goes digital, and so does business, everything that once happened face to face, now happens at the touch of a button. From the get-go of Digital Onboarding to disbursing loans, everything is online, which also mandates understanding the creditworthiness of the receiver, online. There are multiple tools and approaches available to understand the creditworthiness of a consumer or a corporate, or to estimate the financial impact of a crisis, once it ends. But given that it is 2020, this is no normal situation as the world faces a unique challenge for which we need to be prepared to work around a crisis, whose scale or intensity cannot be predicted.

Banks, NBFCs, Fintechs, all of these need to predict a person’s ability to repay in the midst of a crisis. This becomes more imperative now as moratoriums proposed by RBI end and more individuals/MSMEs turn towards the banking industry for access.

Here’s a 3 part series by Think Analytics, estimating the credit profile of a consumer and noting dramatic changes in the ‘middle’ of the pandemic.

Part 1:- Where there is data smoke, there is business fire.” — Thomas Redman

Financial stability: One in ten has had a drop of more than 50% in their income. Another two lost at least 25% of the income. Till 10% drop, consumers have already started to double.

A similar trend was noted in their saving account balance.

Change in Algo360 risk score: As Algo360’s ML based risk score has a decent weightage of recent activity of the user, the drop in risk score is a very strong indicator of change in user behaviour.

With Algo360, Think Analytics revolutionises digital lending using alternative data AI/ML. It helps build innovative financial products and furthers the cause of financial inclusion by bringing alternate data and machine learning together, which aid institutions to make informed decisions, as well as offer a simple and effective user experience.

 

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