Align automated decisions with your lending policy

NestEgg makes it easy to align automated decisions with your lending policy and risk appetite. As a result, automated decisions are not overturned. Consequently, time, effort and money is saved. Automation benefits are realised.

Getting automation right

Credit unions must maintain and implement an up-to-date lending policy appropriate to the scale and nature of the business. Because of this, NestEgg’s decision engine rules are sufficiently detailed to automate decisioning in accordance with lending policy. Therefore, flexible rules cover six areas:

1. Risk. Refer or decline loans based on credit score and presence on the electoral roll.

2. Indebtedness. Refer or decline loans based on debt ratios.

3. Missed payments. Refer or decline applications based on a history of defaults and missed payments.

4. Legal action. Refer or decline applications according to insolvency and County Court action.

5. Spending. Review income and expenditure using open banking. View red, amber and green spending patterns according to risk. For example, gambling, high cost credit.

6. Fraud. Identity scoring, peps, sanctions and designated national checks meet money laundering regulations. Bank Owner checks help prevent impersonation fraud. Deceased and under 18 warnings avert fraudulent applications. Additionally, the decision engine has rules for members of the Credit Industry Fraud Avoidance Scheme.

Importantly, different criteria can be applied to different value loans. For example, a lender is likely to deploy stricter rules for a £5,000 loan than an advance of £500.

Regular  review

Decision engine rules are carefully devised by working through a five step plan with Loans Officers and managers:

1. NestEgg provides a test environment. Previously accepted or declined can be assessed against a proposed set of rules. Then, adjustments are made to ensure that automated decisions reflect Loan Officer judgement and a borrower’s previous history.

2. Following this, a meeting reviews decisions and identifies discrepancies between automated and final (human) decisions. Adjustments to rules are made in minutes.

3. Subsequently, a report of anonymised decisions is provided to the lender after one month. Automated (recommended) decisions are compared to the final decision to identify any outstanding differences between the two. Importantly, the aim is to ensure that NO decisions are overruled and to move forward with greater automation (for example telling the applicant straight away about the outcome of their application).

4. After three months a report provides an overall view of portfolio risk. As a result, lenders can adjust accept, refer and decline rates to meet risk appetite and business objectives.

5. Of course, these steps may be repeated at any time. For example, when:

  • New products are launched.
  • The risk appetite changes.
  • Regulatory or market forces change significantly.

Next steps

Book a demo so we can show you how NestEgg makes it easy to align automated decisions with your lending policy and risk appetite.

About Adrian Davies

Adrian is a co-founder at NestEgg. He is an alternative finance and credit union expert with extensive experience of start-ups, business development, IT, Target Operating Models and regulatory compliance. Adrian has 20 years’ experience in the responsible lending sector, supporting credit unions with innovative ideas so they can grow and meet service user needs.