Credit Policy evaluation for a subprime lender
Background: A subprime lender evaluating a new product hired AQN to assess its credit policy for opportunities for quick wins to drive higher profitability
Outcome: Existing credit policy was designed to reduce losses due to risk concerns, but limited the upside of higher value segments (based on historical performance); AQN's nuanced approach would improve an annual vintage’s NPV by ~$27 MM
AQN’s Approach:
Built a valuation framework to enable the client to better understand its account level economics
Segmented accounts by profitability via machine learning on >1500 internal/external data inputs
AQN’s segmentation demonstrated to the client where the majority of value was generated
Final proposal consisted of new approve/decline and line assignment policies rigorously grounded by AQN
Key Results:
