Frontbook Credit Policy Tightening for a Regional Bank
Background: As part of an engagement with a Regional Bank, AQN evaluated and recommended changes to the credit card acquisitions policy to stem increasing losses and risk
Outcome: AQN's policy recommendations are expected to generate an additional $8.5M in incremental pre-tax income and reduce net losses by $60M over the next 5 years
AQN’s Approach:
AQN was asked to provide guidance on regrounding DM risk curves and developing additional segmentation levering a risk model
AQN assessed the value of a new risk model across all acquisitions policy and developed a policy recommendation across channels and risk segments
AQN leveraged decision tree statistical analysis to identify the highest risk nodes and the strong potential risk splitters across several data sources to identify potential policy recommendations
Key Results:
Recommended leveraging additional segmentation in DM valuation grounding to better differentiate risk with a risk band segment
Proposed additional policy cuts leveraging model scores and relationship data to stem risk
Combined they are expected reduce origination volume by 11% and reduce front book risk levels by 34%