Accelerating Digital Risk For The New Normal

June 23, 2020

With many customers finding themselves in a financial emergency, banks and lenders are receiving loan applications 10 times the usual annual volume. How banks respond to this situation could impair or enhance their business. Some are capitalizing on this opportunity and arriving at innovative ways to further customers’ financial well-being. However, most have tightened their credit policies and have gone in a state of 'hibernation'. With the struggle to process higher amounts of (arguably riskier) loan applications, the need for the adoption of technology that provides speed and accuracy to legacy processes has never been more crucial.

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With many customers finding themselves in a financial emergency, banks and lenders are receiving loan applications 10 times the usual annual volume. How banks respond to this situation could impair or enhance their business. Some are capitalizing on this opportunity and arriving at innovative ways to further customers’ financial well-being.  For example, digital banks like Monzo in the UK have proactively reached out to show awareness of customer vulnerability and provide support and reassurance.  However, most have tightened their credit policies and have gone in a state of 'hibernation'. 


With the struggle to process higher amounts of (arguably riskier) loan applications, the need for the adoption of technology that provides speed and accuracy to legacy processes has never been more crucial. Investing in AI and automated underwriting processes, for instance, can provide accurate insights to support risk decisions in minutes instead of the typical average of 14 days. Only those capable of quickly responding to dynamically changing customer behaviour and economic conditions with the right kind of financial services and products will thrive.  


Converting Digital Footprints into Digital Scores


When speaking of digital banking, more often than not the first thing that pops to mind is mobile. With social distancing in place, more and more customers are depending on smartphones and desktops to run their errands. 


For example, China and Italy saw 30% and 34% increase respectively in the daily time spent on mobile devices. The average weekly hours spent on financial apps across markets also saw an increase of 20%. At a time like this, digital scorecards that use the customers’ smartphone metadata to score them is the best option to help underwriters score applicants efficiently, speedily, and accurately. There has never been a better time to use the customers’ digital footprints to score them.


Artificial Intelligence-driven Digital Scorecards


Thanks to some of the first movers in the world of Fintech, the power of AI-backed alternative data-based scoring is now available on mobile and desktop alike. With scoring technologies that use a combination of web or smartphone-based behavioural analysis along with device anti-fraud checks to assess the creditworthiness, you can now verify any customer no matter what their preferred channel - web or mobile - from the comforts of their home. 


CredoLab’s Chief Product Officer,  Michele Tucci in a joint webinar with Adept “Smartphone Metadata in Action: Intelligent Decision Making in the Post COVID 19 Era”, showed how banks and lenders of any kind can translate the digital footprints of the customers into more than just credit scores. He also highlighted that the current consumer’s financial behavior shift has no significant impact on the effectiveness and predictability of the digital scorecards that smartphone data-based AI-powered algorithms generate. 


A deeper understanding of your options and the tools you have at hand may be that window of hope for your business in these tough times. Digital driven businesses have more opportunities to look for now. Focussing on them and using technology at every stage of banking will be the way to coming out of this pandemic a great winner. 


Get in touch with us to know more on how our alternative credit scoring solution can help strengthen your risk underwriting processes and prepare them beyond the pandemic.

Sources:

https://www.ey.com/en_gl/banking-capital-markets/how-banks-can-help-covid-19-resilience-and-recovery

https://go.forrester.com/blogs/many-digital-banks-will-struggle-amid-the-covid-19-induced-slowdown-but-a-handful-will-innovate-and-thrive/

The impact of Coronavirus on the mobile economy, AppAnnie, March 2020