Lender Reduces Charge Off Losses By 38%, Saving Them $1 Million a Year Using AI and Machine Learning

Now more than ever, lenders must have the capacity to rapidly adapt to new situations. PricewaterhouseCoopers recently highlighted the need for lenders to mobilise their teams to quickly collect and act on information that will allow them to remain competitive.

But when financial experts are not evaluating data and analytics on an ongoing basis, their ability to be agile and make better, faster commitments in the face of change diminishes. Continuous analysis of both traditional and novel data is the key to enhancing lending decision-making, and in turn, profitability. However, implementing the tools necessary for this level of scrutiny and automation can be difficult and costly for an institution to do on its own. That’s where GDS Link comes in.

GDS Link’s ModellicaPro Analytical Services provide the expertise, comprehensive insights around various data sources and advanced software for our clients through three steps: develop, deploy, protect, and experiment. 

1. Develop

During the first step in the process, our Machine Learning Model Maker is utilised for development. GDS Link houses a proprietary library of algorithms to create a complete analytical profile of your customer. Whenever the model needs to be re-tuned, these resources are readily available to help.

2. Deploy

Time is one of your most important resources, and GDS Link works to deploy an accurate model quickly. Your custom model will be uploaded directly to the GDS AI platform where it can be scaled as needed. Quick turnaround times ensure you won’t experience response delays in this crucial step.

3. Protect

With your model up and running, you can gain peace of mind from the knowledge that the system is working to protect it. ModellicaPro will alert you as soon as deviations occur in your model so you’re never caught off guard. Either GDS Link or a
self-service model monitoring solution will oversee this protection.

4. Experiment

You want your models to adapt and change with market conditions and your needs. ModellicaPro is flexible enough that you can re-develop your models to accommodate your newest performance data or simply experiment to see how they can be improved.

GDS Link’s ModellicaPro in Action

Continuously evaluating new data sources is key to a steady improvement over time. A US-based non-prime to sub-prime lender offering 6-24 month installment loans with an APR up to 100% needed to create a risky customer profile to augment internal scores and identify and reduce potential FPDs.

The solution was able to track transactional data over time and identify patterns, including increases in obligations and decreasing average daily balances. Information on overdrafts, increasing transaction counts, and the number of small outgoings were utilised to analyze customer cash flow and their ability to repay. Over time, a 40-60% reduction in potential FPDs was achieved.

Another lender faced issues with accurately identifying the best candidates for specialized Tribal Lenders. They needed a solution customised to the situation, extending loans to as many people as possible without incurring undue risk.

By implementing a solution that could accept, verify, and evaluate non-credentialed data, the lender was able to double approval rates while eliminating 20% of high risk applications. This resulted in the reduction of charge off losses by 38%, saving them $1 million a year. The same approach can be applied to other high-risk lending transactions, such as cash advance and lease to own.

It’s never too late to begin harnessing the power of advanced analytics for your decision making. With ModellicaPro Analytical Services, GDS Link is with you every step of the way as you develop, deploy, and enhance models. Read more in our latest whitepaper “Leveraging Advanced Analytics and Modeling Service to Optimise Decisioning and Manage Credit Risk.”

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From loan originations and decisioning, to customer management and beyond, GDS Link helps thousands of clients manage risk while driving growth.

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