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Decision Analytics for origination in SME lending
Origination for
SME lending
Lenders in the SME and small business market face
unique challenges, often needing to make lending
decisions with limited financial data and market
information.
Traditional manual SME credit
assessment processes are expensive
in time and resources, and with SME
customers demanding the speed of
service they receive as consumers,
lenders are turning to automation to
achieve a consistent lending policy,
reduce administration time and costs
and meet customer expectations.
However, automation has to be
a balance between the ability to
accurately assess an SME’s status
and potential and achieving financial
and customer service targets.
SME lenders are able
to deploy predictive
decision tools and
controlled automated
processes across
the SME origination
operation.
Experian has worked with SME
lending organisations worldwide
and uses this experience to deliver
a Decision Analytics proposition
specifically designed to address
the key business challenges of this
sector.
The integrated products and
services have been built to deliver
the functionality needed today and
meet the needs of the business
tomorrow, creating benefits to the
organisation at every stage of its
growth, from building the origination
infrastructure to optimising
performance.
The organisation can implement
high quality rapid decisions to
reduce operational costs, improve
customer service and enhance risk
management, leading to a reduction
in bad debt and increasing margins.
Basel II objectives are supported
with integrated modelling supporting
use test requirements, data
management and reporting.
The challenge
With substantial margins available,
the SME lending market attracts
both traditional and non-traditional
lenders, with new entrants
making this dynamic market more
competitive. As a result, lenders
have an increasing pressure on
returns and are focusing on reducing
operational costs to preserve
profitability.
The key challenge for SME lenders
is how to balance service, cost and
income when making origination
decisions. Often there is a lack of
traditional commercial data, giving
rise to the perception that controlling
bad debt is harder in a SME portfolio.
The lack of collateral and the higher
risk associated with unsecured
commercial lending has meant that
the traditional lending approach
requires hours of investigation and
a knowledgeable business manager.
The time taken for a decision can
be out of proportion to the potential
revenue that the lending would
generate.
SME lenders have learnt from
the advances in technology and
approaches used in the consumer
sector both for operational and
regulatory requirements, including
Basel II. Re-engineering processes
and the use of centralised decision
support solutions and scoring
enables automation of the majority
of credit risk decisions for SME
accounts.
SME lenders are seeing a significant
uplift in operational efficiency as
skilled business managers are freed
up to focus on high-risk, high value
cases and higher business volumes
can be dealt with using the same
headcount.
The answer
Experian offers a Decision Analytics
answer to meet these challenges.
It integrates robust application
processing, data connectivity,
decisioning technology and
predictive analytics with expert
consulting to create a complete
proposition for origination in SME
lending.
Integrating expertise and advanced
tools, it enables SME lenders to
automate the application process
and rapidly implement accurate
credit risk management.
Data capture screens allow the
accurate input and validation of
application data, which is then
enriched with additional data
from internal and external sources
including commercial and consumer
credit bureaux information, to give
the right level of data for decisioning.
Workflow functionality drives the
application automatically through
the process, with integral fraud
detection, checking the application
against known frauds, previous
applications and other data sources.
It applies tailored policy rules and
calculates multiple scores for
objectives including credit risk, riskbased pricing, affordability and Basel
II elements.
The scores can be calculated
at customer level, consolidating
commercial and personal data to
build a comprehensive picture of the
company, and the individual behind
the company.
Once a decision is made to accept,
segmentation enables appropriate
terms of business to be assigned
such as price, maximum loan
amount, duration and credit limits.
Final conditions can be set, such as
the need to request identification,
accounts or to carry out a face-toface meeting.
In the small number of cases where
a manual review is required, the
workflow routes the application to
the appropriate level of underwriter
with all the information presented for
rapid resolution.
Decision Analytics for origination in SME lending
Meeting the challenges of
taking on new customers
‘‘I need to meet customer
service expectations’’
‘‘I need to reduce and
control operational
costs’’
‘‘I need to consistently
apply lending policies and
best business practice’’
Delivering automated
decisioning
Systemise decision processes,
utilising all the relevant data faster
for accurate decisions made on
the same day.
Reducing manual processes
Automate the origination
process reducing the number and
complexity of manual tasks.
Enabling embedded policies and
knowledge
Policy rules and business
knowledge are built into the
solution, including risk based
pricing. Deviations from policy are
strictly controlled and monitored.
The benefits
• Improved customer service
• Promote loyalty
• Gain competitive advantage
with a reputation for service
The benefits
• Reduce operational staff costs
• More targeted use of
experienced lending staff
• Reduced time required to
analyse commercial lending
• Freed up time can be reinvested
in sales activity
The benefits
• Reduce bad debt and losses
with full risk control
• Price according to risk,
potential value and expected
loss to meet profit objectives
• Consistent enforcement of the
lending policy
• Skilled business managers
refocused on high value
activities
‘‘I need to understand
performance and satisfy
requirements of the New
Capital Accord’’
‘‘I need to reduce
and mitigate against
application fraud’’
‘‘I need to implement
automated origination
efficiently and
effectively’’
Achieving integrated
monitoring and compliance
Store data and monitor regulatory
compliance and operational
and strategic performance
with integrated monitoring and
compliance elements.
Detecting application fraud
Automatically verify application
details against multiple internal
and external data sources
to highlight and effectively
investigate potential fraud.
Deploying a value-added
proposition
Implement origination capabilities
specifically designed with built-in
intelligence for the SME market.
The benefits
• Accurate view of lending
performance of individual staff
and underwriters
• Achieve Basel II requirements
• Highlights staff training
needs and helps allocation of
resources to areas of demand
The benefits
• Detect application fraud
including data manipulation and
identity theft
• Maintain high quality service for
genuine customers
The benefits
• Realise business benefits
faster with a rapid solution
deployment
• Focus on value-added activities
• Reduce risk with proven
systems and practices
• Adopt effective practices from
leading organisations worldwide
Decision Analytics for origination in SME lending
Integrated products and services
Consulting
Consulting is at the heart of every
Decision Analytics delivery by
Experian. Consultants work with
clients at every stage of the project,
firstly to fully understand the
business and strategic direction, and
then to help design and implement
systems and processes that deliver
objectives.
Following implementation, Experian
consultants work with clients
through a structured and regular
review programme to continually
evolve and enhance strategies
so that organisations continue to
gain maximum value as their needs
change and the business grows.
Experian creates a partnership with
clients to deliver a solution that
addresses their business challenges
for today, and in the future. Bringing
a fresh approach and independent
viewpoint to every business, it
delivers practical solutions that
deliver measurable results.
Application processing and
decisioning technology with
Transact SM
Transact SM is the scalable and
robust system that receives,
validates and processes
applications from multiple
sources, with user controlled task
orchestration and workflow driving
operational and business procedures
for both automated and manual
decisioning.
Business users have operational
and strategic control with lending
strategies managed on the desktop.
They have complete control to
define, test and manage business
strategies without the need for
programming resource.
Through simulation in the analytical
environment and ChampionChallenger facilities in the
operational environment, strategies
can be evaluated, evolved and proved
for maximum performance and then
deployed across the organisation.
Application fraud detection with
Hunter
Seamlessly integrated with
application processing is Hunter,
the application fraud detection tool.
Using detection rules it screens for,
and highlights potentially fraudulent
applications, enabling fraudsters to
be stopped before the organisation
suffers losses. Maximising the value
of data from internal and external
sources, it uses this information
to screen and highlight suspicious
cases, which can then be quickly
investigated by the fraud team, and
action taken accordingly.
Analytics
Experian uses world-class
analytical capabilities to create
statistical models that turn data
into intelligence, helping to make
an informed decision on applicants.
Application scoring predicts how a
potential customer might behave in
the future, and whether this is the
type of customer the organisation
wants to take on. Risk is not the only
factor in this decision so scorecards
can also measure potential lifetime
value, profitability and objectives
such as propensity to drive cross-sell
strategies.
Generic and custom scorecards are
developed using pooled data for
robust and highly predictive models,
according to a client’s requirements,
data availability and timescales for
delivery.
Business intelligence with integrated
monitoring and reporting
The integrated tools enable
operational reporting and strategic
monitoring to support both dayto-day management control and
longer-term business improvement.
Business users can gain access to
monitoring and reporting at every
level of the organisation to create
valuable business intelligence.
Expert reports have been specifically
designed to meet the key business
requirements of monitoring new
business quality, strategy and
scorecard performance and Basel
II. Each report provides high-level
statistics, indices and alerts to
highlight divergence from business
goals.
Data connectivity with Connect+
The proven Connect+ service
offers links to credit and fraud
bureaux worldwide. Using an
established, ready-to-use and secure
environment, data is retrieved,
merged and standardised from
multiple sources for the most
comprehensive applicant overview.
The service supports a sophisticated
data enrichment strategy, so that
only the appropriate level of relevant
data is retrieved, thereby controlling
bureaux data costs.
Modular technology with flexible
delivery options
The system has been designed
and built for rapid implementation,
with all the elements required for
effective origination, along with the
ability to customise elements to suit
individual business requirements.
The functionality in the technology
has been designed to be modular
so it can deliver the functionality
needed today, and meet the needs of
the business tomorrow.
For many clients the systems are
integrated within their infrastructure.
Alternatively, as part of the flexible
approach to delivery, a hosted
application service provider (ASP)
option is offered. Integrating
seamlessly with the existing
infrastructure and systems, the
web-enabled tools enable distributed
working across the enterprise.
About Decision Analytics from Experian
Decision Analytics is the
international division of Experian
specialising in providing credit risk
and fraud management consulting
services and products.
For more than 30 years, it has
developed its best practice
analytical, consulting and product
capabilities to support organisations
to manage and optimise risk; prevent,
detect and reduce fraud; meet
regulatory obligations; and gain
operational efficiencies throughout
the customer relationship.
With clients in more than 60
countries and offices in more than
30, the Decision Analytics division
of Experian delivers experience and
expertise developed from working
with national and international
organisations around the world
across a wide range of industries and
business size.
www.experian-da.com
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