Financial institutions continue to be exposed to risks in form of bad debts, poor investments, poorly assessed clientele, and marketing the wrong product in their portfolio.
These institutions have a rich endowment of their customer data but underutilise it. They only concentrate on the financial metrics and a few other financial indicators rather than the qualitative behaviour this data unearths that is crucial in predicting likelihood of default.
The location, marital status and employment status are some of those essential metrics that can be utilised in stress testing chances of default. These qualitative metrics tell a lot about a person’s lifestyle and what potential barriers they have to clearing their arrears.
With the massive amounts of data banks collect when you’re registering for a bank account, this shouldn’t be a problem. Yet the percentage of Non-Performing Loans (NPLs) keeps accruing year on year.