Using Machine Learning and Advanced Analytics to improve the loan origination process in Banking and Leasing

Our customer is a financial services institution, part of a large banking group in Romania.

Here are the main business challenges we addressed in our Solution:

• The customer needed to increase the percentage of automatically approved applications in the context where 80% of current loan applications are being processed through a manual approval workflow, and most of them are approved at the top management level;
• Besides, the organisation needed to mitigate customer satisfaction, thus minimizing the churn rate;
• Time To Yes (TTY) / Time To Cash (TTC) metrics needed to be improved;
• Maintain other portfolio performance indicators at their current level at the desired levels or improve them e.g. NPL (Non-Performing Loans) / Default Rate; Debt to Income (DTI); Rating distribution.

Solution

We helped our customer to optimize the loan origination process by increasing the number of offers which are approved on the fast track flow using a Machine Learning and Advanced Analytics pilot project for 6 months.

To decide whether an application needs a middle or top management review we used new optimized criteria and we tracked the portfolio in a streamlined way using interactive dashboards to better understand the impact of the new criteria real-time.

We trained a Machine Learning model and used it to assist the human decision-maker in order to understand when the AI thinks the company is better off approving a new application right away, instead of going to middle or top management review.

Ultimately, we proposed an alternative financing structure for a loan application.

Customer Benefits

Customers receive a faster approval of the application, therefore, they can receive loans in a faster and easier manner;
Low-risk applications may be approved earlier in the process, thus freeing up the workload of top management and other employees (e.g. risk analysts, middle-office) of reviewing such cases;

Our customer was able to increase its reputation in the financial services and leasing industry, with highlights in terms of the time needed to approve an application and dynamically distinguish the medium to high-risk ones for a more detailed investigation;

Employing Advanced Analytics & Machine Learning techniques aligns with the digitalization strategy in play at company level.