Metrics Monthly | July 2019 | AU Edition


M etrics M onthly

AU EDITION July 2019

In this issue Automation: the future of Australian credit decisioning

In this issue

Welcome Page 03

The votes are in! Page 04

New appointments Page 05

Case study Page 06

Why automate? Page 08

The elephant in the room Page 10

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July 2019 | AU Edition


Firstly, a huge welcome to the readers of the first edition of our company newsletter! July has been a busy month for us here at LendingMetrics and we’re looking forward to what lies ahead. Over the last few years our teams have been very hard at work making prod- ucts to give our clients the competitive edge they need, whilst also aiming to positively shake up the credit and loans market. Our Auto Decision Platform (ADP) is firmly cemented as one of the leading solutions in the UK and is quickly be- coming established here in Australia, a market where manual underwriting and more traditional businesses practices have kept companies from achieving their full lending and acceptance poten- tial. But Comprehensive Credit Report- ing is starting to level the playing field

across the 3 main CRAs and forward thinking lenders are set to benefit if they have the right technology. This month we’re not only celebrating 50 years since landing on the moon, but our UK-based OpenBankVision (OBV) being the first open banking platform to completely integrate with TSB Bank, making its percentage coverage of UK banks in the high 90s. July has been one of our most exciting months yet, with two new awards to add to our cabinet: Car Finance Awards’ ‘In- novation Award’ and Consumer Credit Awards’ ‘Innovation of the Year’ award, as well as three new appointments to our ever-growing team. We at LendingMetrics are continuing to aim high as we progress through the year and, with a similar growth forecast for the rest of 2019, we look forward to what the future holds!


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The votes are in!

Winner - Innovation of the Year (Partner) LendingMetrics is delighted to have won the Innovation of the Year award at the prestigious Consumer Credit Awards in London.

The finalists were announced back in May and LendingMetrics were named for their Auto Decision Platform (ADP) and Open Banking Vision (OBV) along- side Zoot Solutions, Credit Kudos, Flexys and Elanev. We would like to congratulate all of the other category finalists and are very proud and humbled by the recognition. The Consumer Credit Awards were formed in 2017 and put customers at the heart of the industry by helping them find the best credit providers in the UK. Their mission is to increase trust and transparency in the industry by deliver- ing the only credit awards voted for by consumers, and ‘not industry experts’.

Above: LendingMetrics founder David Wylie and Partnership Manager Claire Januszczak receiving the Innovation of the Year (Partner) award at the Consumer Credit Awards

Since the launch of ADP in 2017, Lend- ingMetrics has received widespread acclaim and has won multiple credit and technology awards including “Best Technology Supplier” at the 2018 Credit Awards, “Best Credit Information Pro-

vider” at the 2018 Lending Awards, “Innovation Award” at the 2019 Car Finance Awards and back-to-back wins as the “Best Credit Risk Solution” at the 2017 and 2018 Credit and Collections Technology Awards.

LendingMetrics founder David Wylie commented:

We have been seeking to positively disrupt the credit decisioning sector in Australia by delivering feature-rich, enterprise solutions at realistic price points, and this has resonated extremely well with the marketplace. This award, which is voted for by our customers, further illustrates the positive effect we are having and we would like to thank all those who supported us. With lots of major product enhancements on the horizon, we look forward to helping more lenders to achieve better outcomes for their customers in the years to come. The Australian credit market is an extremely exciting place to be right now with huge transformations in the credit data reporting market and now with Open Banking too. These changes represent a massive opportunity to forward thinking lenders who have the right decisioning technology and an experienced solutions partner to help them understand the potential and show them how to leverage the value from the massive increase in available data. Finally, we would like to congratulate Fair for You on their fantastic success at the same awards. As valued clients of LendingMetrics, we were delighted to see them pick up awards for Firm of the Year, Treating Customers Fairly Champion and Customer Service Champion, beating off stiff competition from some big industry names; well done!

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July 2019 | AU Edition

New appointments LendingMetrics strengthens team with three new appointments LendingMetrics has appointed Katey Watkins as Project Manager, Hamish MacCormick as BDM, and Georgia Pullen as Graphic Designer

Car Finance Awards

LendingMetrics didn’t walk away with just one new award this month - but two!

After a wonderful evening in Notting- ham, England, we are very proud to announce that LendingMetrics came away having won the “Innovation Award” at the prestigious Car Finance Awards.

Katey Watkins, our new Project Manager, has a background in tele- coms project management, and will help deliver LendingMetrics’ auto- mated underwriting products ADP and LMX to its growing customer base in the finance industry. Hamish MacCormick has been appointed Business Development Manager at the Fareham company. He has expertise in IT sales and SaaS platforms and has advised in the financial services sector. Hamish joins from Lead Forensics.

Georgia Pullen is the company’s new Graphic Designer. Georgia joins from an architectural business and brings with her design skills that will be used to support LendingMetrics’ marketing initiatives. Director of LendingMetrics David Wylie said: “demand for our award-winning Auto Decision prod- ucts has risen significantly since the beginning of the year, and we are constantly looking to grow the tal- ented team here at LendingMetrics. Katey, Hamish and Georgia will play their parts in our continued expan- sion.”

Project Manager Katey Watkins

Above: LendingMetrics Operations Manager Paul Brown at the 2019 Car Finance Awards

Business Development Manager Hamish MacCormack

Graphic Designer Georgia Pullen

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Case study

Evolution Money chooses LendingMetrics for its credit decisioning The client

The challenge Evolution Money appointed Lend- ingMetrics to support its continued growth by incorporating a much faster, flexible and openly connected deci- sioning platform that wasn’t available within their current Loan Management Systems. Evolution Money required a decisioning platform that could make immediate credit decisions within milliseconds, whilst allowing them the flexibility and functionality to build detailed and com- posite rules, scorecards and matrices, over a variety of data sources. Evolution Money also needed a plat- form with an extensive testing environ- ment to champion challenge and eval- uate new aspects of their decisioning, in order to finesse and improve their lending decisions over the coming years. As part of these credit risk plans, Evolu- tion Money needed a significantly more open and accessible platform to inte- grate with, for the retrieval and utilisa- tion of various additional data sources. Like many companies, Evolution Money had contemplated building its own au- tomated decisioning platform in-house, however, after consideration they felt they did not have the technical resource to deliver a platform as flexible and robust as an “out of the box solution” in the required timescales. In any case, they wanted to focus on their core strengths and drive forward their successful lending operation.

LendingMetrics’ ADP was chosen by Evolution Money due to its quick de- cision response times and ‘Passive Engines’ environment, which allows Evolution Money to test new decision engines against real application data without affecting live lending decisions. These features stood out in comparison to the other decisioning platforms in the market. Evolution Money was impressed by ADP’s flexibility to create and edit complex rules, formulae and variables all through its Graphical User Interface, which required little technical experi- ence or knowledge on the part of the user. ADP’s open APIs will allow Evolu- tion Money to utilise other data sources in the future due to its open connectivity (ADP is integrated with all major CRA’s as well as bespoke machine learning and fraud identification solutions). As part of the implementation process, LendingMetrics assisted Evolution Money with the design of a multi-func- tional decision engine to cover all areas of credit risk. This included a risk-based offer matrix and an automated rule set over various data components/sources, including an affordability check. Lend- ingMetrics are also assisting Evolution Money to implement a scorecard based decision engine. The LendingMetrics ADP implementa- tion team then took the lead, headed by a client-dedicated Project Manager and held several scoping and requirements sessions to provide a full project plan with timelines. Once all requirements were gathered LendingMetrics built the agreed decision engine and completed the additional third-party integrations required by Evolution Money.

Since it was founded in 2011, Evolution Money has been a leader in the unsecured and secured lending market.

Evolution Money have over 170 employees and have been named one of the fastest growing com- panies in 2016 and 2017 by The Sunday Times Fast Track 100. In 2017 Evolution Money also secured an additional £100 million in financing to help further grow the company and its loan book. At its core, EvolutionMoney believe that consumer access to finance shouldn’t be dictated solely by a credit score or an automated com- puter response alone. They pride themselves on review- ing each customer’s application on a case by case basis and being able to treat all customers as in- dividuals whilst providing flexible loans to those who may struggle to access finance from other lenders.

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The result Since the launch of ADP within Evolution Money, they have been able to utilise a decisioning platform which has pro- duced a scaleable model within their online customer journey to automate their credit risk policies. The solution was delivered within budget and on time, due entirely as a result of the collaborative and knowledgeable teams at Evolution Money and LendingMetrics. Following training, the Evolution Money team is now using the ADP in- terface to change their credit decisions in real time, “champi- on challenge” their rules and analyse the results within ADP. Steve Daly, Evolution Money’s Programme Manager said that “we have strong growth plans to expand the Evolution Money brand and further automate our current manual processes.

It was important for us to secure a technology partner who possessed the solutions to facilitate our plans, whilst provid- ing a fast and flexible platform”. With the success of ADP, Evolution Money now has plans to roll out the platform across all their business operations. This includes implementing ADP into their manual underwrit- er processes, as well as automatically decisioning against applications they receive from brokers. As part of using an automated platform, Evolution Money did not want to detract from their company ethos of viewing each application - case by case. However, due to ADP’s noteworthy task function- ality, Evolution Money will still have the ability to view each customer’s credit file allowing them to still review these on a case by case basis.

Summary The combination of highly automated decisioning and in- dustry experience has delivered a scaleable solution. The client has successfully migrated to ADP with minimal business disruption and is enjoying the benefits of being in

control of managing their credit risk decisions in real time. The companies worked well as a team, growing their com- bined knowledge and are looking forward to cementing the relationship with further projects.

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Why automate?

Find out how our ADP could rock your lending world

Apart from the fact that many of your competitors are already automating more of their processes, there are plenty of reasons to automate your decisioning.

Watch our video below simply by clicking on the box to see all of the ways that our revolutionary Auto Decision Platform will rock your lending world.

Frequently Asked Questions What if I want to retain that human touch to my underwriting? The degree of automation is totally within your control. You can provide fully binding decisions or simply an approval in principle. You can even give binding answers to people above a certain credit threshold and an AIP to others requir- ing more in-depth investigation. The choice is yours. Isn’t this type of software expensive? Generally yes! However, ADP by LendingMetrics is a posi- tively disruptive force in the market and prices are tailored to your business. Affordable entry level pricing right up to enterprise. Put it this way: we think you’ll be pleasantly sur- prised when we show you what you get for your money.

Why is ADP different to other credit decisioning products? Unlike nearly every other product out there, ADP puts you in total control of changes to your decisioning; how you want to change it and when you change it. No more lengthy IT delays and no more charges for technical changes. The simple UI enables your operational staff/credit-risk officers to make changes at a user level (subject to permissions). Can I use ADP for champion/ challenge and retro analysis? ADP has several novel and unique tools to enable real time “what-if” and “champion/challenge” of your clients. This enables your business to test several possible improve- ments to your credit policy all at once, without impacting on your live lending activities.

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Metrics Monthly | 09

The elephant in the room Lenders are often unaware of the scale of their fraud problem Comment by Andrew Tierney

about your suddenly rising bad debt ratio, but your business model could be in doubt. During a downturn, your 3% issue could morph into something alto- gether more unpleasant. To companies that fit this profile, I often suggest that, as a first step to ID the scale of their problem, they should

pull out all those cases that have never made a repayment. The chances are these are fraudulent, as there has obvi- ously been no intention to repay. Then I tell them to look for common de- nominators in the cases. This will give them an idea where they need to spend money to crackdown on the issue.

Many finance providers have very little idea what fraction of their bad debt is fraud. They will know the number of loans that have stopped making pay- ments and calculate what proportion of their overall book this bad debt amounts to, but, unbelievably, they will not know what proportion of this total is fraud. If the bad debt ratio hovers between 3-5% they’ll often consider that this is within their risk appetite, so why drill down any further into the data? The CEO will sit down at boardroom meet- ings and report this figure and everyone will be happy. Fraud could account for the bulk of this total, but the board will not know. As a credit risk professional I find it amazing the number of companies that broadly fit this rough characterisation. Many will not even bother to do the most elementary of checks to deter- mine the scale of their fraud problem. To me this is crazy because fraud is not going away, if anything it is a fast growing problem and becoming ever more sophisticated. There are literally tens of thousands of individuals whose full-time job is to scam finance provid- ers with false loan applications. There are even localities in China, eastern Europe and parts of Africa whose main industry is this sort of fraud. The danger for companies that are not looking into their ‘bad debt’ figure is that their systems could have flaws that fraudsters are exploiting, but which they know nothing of. This is a recipe for disaster. Allow the criminals to leverage a flaw on a larger scale - over a period of as little as a few days - and your 3% could sud- denly become 5%. Over a longer time- frame, it could even become 10%. Suddenly not only is the board unhappy

Fraud is not going away, if anything it is a fast growing problem and becoming ever more sophisticated. “ ”

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July 2019 | AU Edition

But this is fairly basic stuff. Ideally, lenders in this day and age should be using more advanced technology to find and then eliminate fraud. There is a massive array of tools out there that are really effective at tack- ling the issue. We haven’t got the space here to go into any great detail, so let’s just look at one area: Device intelligence. Often the same ‘phone will be used to make multiple loan applications with a range of lenders. But the ‘phone will have a unique ID in cyberspace that can be identified with the right software. So, despite a fraudster phoning from China and cloaking to appear local, the device can be red flagged and the loan applica- tion turned down. Such tech can detect a range of suspi- cious features, for example whether an English-language device suddenly has a lot of traffic in a different language. A device may always have been linked to Commonwealth Bank, but then a range of different banks are using it, suggest- ing that it is compromised. Beyond specific tools, Open Banking in general is itself opening up a new frontier in fraud detection for lenders wanting to reduce their losses to crim- inal activity. It allows algorithms to fine-tune lenders’ systems so they can better detect anomalies.

If a consumer is using Open Banking, a comprehensive profile will be built up of their real-time activity over a period of months. Anything unusual will be noticed immediately. Over time, this profile will become more nuanced and better able to ID illegal transactions. For example, if someone tries to buy 10 TVs on finance (with the intention of selling them online for cash), Open Banking would be able to stop the process by preventing the second TV purchase from going through. There is a wide array of tools out there for lenders to use that is really effective at driving down their fraud bill. However, the issue with all technology is that it usually comes with a cost, and if you don’t think you have a fraud problem in the first place, then you can’t really build a case for spending money on reducing it. This head-in-the-sand approach is ob- viously short sighted. The only way to approach such spending is to work out what proportion of your bad debt is fraud, and then do the maths. If some software can get rid of 80% of your fraud and thereby save say $0.5m (which feeds back to the bottom line), there is a convincing case for spending say $20,000. I have enough experience of the in- dustry to know that you can never do

enough. The problem is much bigger than it used to be and you have always got to try and stay one step ahead of the game. I remember banks saying 20 years’ ago that the new chips then appearing on debit and credit cards were going to stop card fraud in its tracks, but within months of the new cards’ introduction they began experiencing card ‘skim- ming’ for the first time. You really should never underestimate the issue. Presenting an intelligent analysis and costing of your fraud problem to the board is the least you should be doing.

Andrew Tierney is a credit risk professional based in Queensland.

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