Two key behavioral trends beyond balance test

As the Australian economy move forward in 2018, consumers are becoming more responsible with their credit card usage.  Average balances per card have increased,  while delinquency has remained stable.

Risk score alone doesn’t provide the most accurate insight into consumer accounts. You need to dig deeper into individual accounts to uncover behavioral trends over time to obtain better information to differentiate cardholders.  In particular:

Balance and utilisation changes. By looking at balance and payment history, you can determine which direction the cardholder is heading.  Are they increasing their debt or are they paying down their debt?

Is the balance of the card close to or at the card limit?   These differences reveal their riskiness and current credit needs. Therefore, with payment history added to the mix, you can more accurately allocate credit lines between available cardholders while simultaneously reducing portfolio risk.

Spend is another important metric. Knowing a cardholder’s monthly spend allows lenders to provide necessary high lines to the limited population of very high spenders, while reducing overall exposure by providing lower lines to low spenders. Spend data also reveals wallet share—knowing the total spend of your cardholder allows you to calculate their external spend (as identified in their application). With wallet share data, you can capture more spend by adjusting credit lines or rewards that will entice the better consumers to spend more using your card rather than a competitor’s product.