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How a credit company from France increased its profit by 7% a year

Verification of potential borrowers is a critical step for a lender. The more applications a financial company processes in less time, the more it will earn. The more accurate and complete the obtained data is, the lower the risk of cooperation with the borrower because there is always a chance of non-repayment.

In this case, we will tell you how a French credit company from Normandy was able to increase its net income by 7% through optimizing the incoming application and scoring processing.

Initial data

Company information: Financial Company А provides loans to legal entities, helps companies expand production and product bases, introduces innovative technologies, and adds new jobs. It also provides loans to purchase commercial property.

Problem 1: The company processes around 200 applications a day (taking into account 8 branches in one region). Compared with last year, this indicator fell by almost half (on average, there were 378 applications). Top managers of the bank considered two possible reasons for such changes:

  1. Low qualification of employees. Over the course of a year, a third of the company’s staff had changed, so this loss was thought to have a big influence. In order to remedy the situation, bank managers organized career development courses, conducted additional employee trainings, and worked on increasing employee motivation. Having done all that, this couldn't be the reason anymore.
  2. Poor quality of the company’s scoring software. Top managers considered this factor as the main reason for the slow processing speed of applications because the influence from the previous situation was eliminated or minimized.

Problem 2: The company has faced an increased percentage of bad loans compared to last year. While previously it was at 5-6%, the figure has grown to 7-9%. We can assume that this problem appeared due to the poor assessment quality of potential borrowers.

Objective: To improve the quality of borrower verification, reduce risks for the lender, and increase the speed of application processing.

Tasks: Minimize the percentage of bad loans, optimize the assessment of potential borrowers.

What did we do?

  1. Added several additional filters to verify potential borrowers. Along with SAS Credit Scoring we added Datapo API. The integration process did not take much time and allowed a great deal more data about the potential borrower to be verified:
    • Constitutional documents. Members of the board, information about the CEO, chief accountant, other company members, memorandum of association. The decision to use the API simplified the life of the bank security service and made it possible to verify a legal entity for having, court, tax, arbitration cases, and other cases much faster.
    • Accounting and financial reporting. Information on cash flows, profit and loss before tax. Additionally, information on the total number of assets, and shareholders' funds
    • Information about loans and lenders. Information on received loans and their lenders.
    • Information on liquidation, sanctions, bankruptcy.
  2. Speed up the borrower verification process. All the fields with information about borrowers from now on are filled in automatically. This ensured high data reliability and increased the application processing speed. Now, instead of several services, the company’s employees used one tool, in which Datapo integrated all its data.

Conclusion

By adding additional verification points, it was possible to improve the quality of scoring. As a result, the number of band loans reduced threefold, from 7-9% to 2-3%.

Optimization of potential customer verification accelerated processing of loan applications, so the number of processed applications increased from 207 to 296 per day. Due to the introduction of Datapo, the bank increased its annual profit and ultimately reached net income of €2.852 million.

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