Alternative Data Source Assessment for Point of Sale Lender
Background: A point of sale finance company engaged AQN to advise them on the incorporation of alternative data sources into credit policy
Outcome: AQN Identified that Vendor B allows an 11% reduction in losses versus Vendor A and an 27% reduction versus just FICO at the same approval rate
AQN’s Approach:
Identified the need for using alternative data in underwriting specific market segments
Engaged in talks with 8 different alternative data providers, evaluating product offerings for fit based on portfolio makeup
Scoped out contract details and acquired retro scored datasets from three vendors, appended with portfolio performance data
Leveraged machine learning techniques to identify key data elements, and assess their value for credit policy segmentation
Provided strategic recommendations based on the relative effectiveness and cost of the two vendors
Key Results:
Both data sources slope FICO, but one is much more powerful than the other
