Businesses seek to automate credit decisions: report

The Global Insights Report by Ireland-headquartered consumer credit reporting company Experian stated that 61 per cent of Australian companies said investing in analytics over the next year is a priority for them.

Close to a quarter – or 22 per cent – of businesses are also looking to implement cloud-based solutions that can assist them with automating decision making around customer credit risk and credit worthiness, which can assist lenders with deciding which candidates are suitable for their products, and which of them can be deemed too high risk.

The report was based on a survey of 90 Australian business leaders across retail banks, consumer technology, e-commerce and telecommunications.

Research by Experian last year found that 51 per cent of businesses in Australia had an automated credit decisioning process from start to finish.

Commenting on the findings of the report, Matthew Demetriou, general manager of decision analytics at Experian Australia and New Zealand, said: “Cloud-based solutions are becoming an increasingly useful tool for improving online experience, accelerating speed to market and contributing to the easing of operational cost pressures, all of which is business-critical right now.”

“Pressures such as bushfires, flooding and now COVID-19 have intensified consumer need for financial support.”

Mr Demetriou noted that lenders have had to manage ongoing loan payment deferrals amid the COVID-19 crisis manually onshore due to disruption of offshore call centre services.

“Lenders are facing significant disruption to their usual lending processes and are being challenged to remodel risk and creditworthiness in response to our changed circumstances. Automation will be a key asset for those looking to manage this impact quickly and efficiently.”

The research also revealed, however, that 86 per cent of the businesses surveyed believed that a lack of historical data could impact the effectiveness of analytics.

Others said they faced hurdles when using analytics to inform everything from recommending a product on offer (57 per cent) to approving an offer of credit (54 per cent) and declining an application for credit (47 per cent).

To solve this, 55 per cent are exploring alternative data sources, while 45 per cent intend on asking customers to contribute more data, while 55 per cent intend on investing in customer behavioural profiling techniques.

According to the research, some of the solutions businesses are using to assess and manage customer credit risk are decision management (32 per cent), business rules (32 per cent), artificial intelligence (31 per cent), policy rules (30 per cent) and machine learning (30 per cent).

A quarter of all businesses surveyed use credit reports and scores, while another quarter engage in behavioural profiling.

Only 24 per cent use automated decision management, the research found.

[Related: ASIC ‘excited’ by regtech solutions in responsible lending]

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.