hat
Decision Management
in Financial Services
Presented by
Yhat
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July 2015
2015 Yhat, Inc. | Made in New York City
Overview
Over the past few years, specialized peer-to-peer and direct lending platforms have been wildly
successful in both reaching qualified borrowers in overlooked market segments. By employing
a new generation of advanced risk modeling techniques, these lenders have been able to
predict risk, reduce losses, and originate loans faster and more effectively than their traditional
banking counterparts. Effective decision managementnamely, software systems and human
processes through which credit policies are conceived and implementedconstitutes an
essential competitive advantage for lenders seeking to streamline workflows and produce
optimal lending decisions.
Decision Management
behavior of decision makers and help them
Decision Management refers to a set of
For example, a business rule may call
business practices that help organizations
implement, use, and improve their
decision-making strategies and produce
consistent and optimal decisions within a
process or user-facing application. From
credit scoring to line assignment and
risked-based pricing, decision points in
lending are bountiful.
Decision Strategies,
Policies, and Business
Rules
A decision strategy is a set of programs and
policies that support higher-level business
objectives. Business rules, furthermore,
are tactical directives that influence the
2015 Yhat, Inc. | Made in New York City
carry out a decision strategy consistently.
for more substantial credit checks on
new credit applicants than for existing
customers.
Driving Business
Decisions Operationally
Business rules are the irreducible
components used to implement a decision
strategy and guide front line employees
day-to-day. Standardized decision-making
procedures ensure employees across an
organization conform to predetermined
operating protocols, giving businesses
increased visibility into the effectiveness
of strategies by virtue of increased
consistency and traceability in how
decisions are made.
Business rules are based on industry
experience and conceived using
BUSINESS RULES VS. ADVANCED ANALYTICS
commonsense. Often they take the shape
of simplistic if thisthen that rule criteria
which can be applied programmatically by
a CRM or website used by an employee or
directly by a customer. In lending, business
rules might be integrated into internal
software to help underwriters determine
which loan products are available to a
consumer with a 650 credit score or
dictate when credit analysts should request
BUSINESS RULES
PROS:
Easy to implement
Intuitive to non-experts
CONS:
Difficult to validate
Overly simplistic and lack precision
additional financial statements from a
customer before approving an increased
credit limit.
Advanced Analytics
What is advanced analytics?
How is it different from business
rules?
ADVANCED ANALYTICS
PROS:
Mathematically verifiable and precise
Can handle thousands of variables,
edge cases, and inputs
CONS:
Not as intuitive to non-experts
More difficult to implement
Business rules are fundamental to any
and can only handle the express number of
decision-making system but have several
cases prescribed by their author.
characteristic limitations, namely, the
degree of subjectivity involved in decision-
Advanced analytics, including predictive and
making strategies. Gut intuition business
prescriptive modeling, is a collection of data
rules, no matter how experienced
analysis techniques that estimate events
their author, are notoriously difficult to
in the future to help decision-makers take
validate, which makes it challenging or
desirable action. Unlike business rules,
impossible for a business to measure and
advanced analytics relies
improve an approach to decision-making.
Furthermore, business rules in the form of
if thisthen that are fundamentally limited
2015 Yhat, Inc. | Made in New York City
on mathematical descriptions of relevant
to approve to which offers should be
business phenomena instead of fixed rules
extended to your most loyal customers.
logic. Predictive models are capable of
At the same time, lenders are subject to
considering many factors simultaneously to
critical compliance regulations, 3rd party
identify relationships that would be difficult
credit bureaus, dynamic macroeconomic
or impossible for a human to notice when
trends, and a myriad of other features in
constructing business rules.
an ever-evolving marketplace. Similarly,
neither business rules nor analytical
How are business rules and advanced
models have a permanent shelf life and
analytics applied together?
both must be updated and enhanced
regularly in order for them to remain
Advanced analytics and business rules
relevant. As a consequence, risk and
are powerful compliments, and the most
analytics teams are constantly adapting to
effective decision-making strategies use
the moving landscape to ensure decision-
both. Analytical models are most effectively
strategies remain as effective as possible.
applied to decision-making problems
that call for a large number of data points
In lending, the immediacy with which a
to be evaluated at the same time. This
newly minted credit score or risk based
eliminates the need to author many tens
pricing strategy can be incorporated into
or hundreds of individual business rules
day-to-day operations is critical. Cutting-
and usually also improves the quality of
edge lenders are distinguishing themselves
the decisions that result. Business rules,
in part by adopting processes and software
on the other hand, are often used to digest
that eliminate friction involved in Decision
and synthesize the result of the analytical
Management.
model to deliver an easy-to-understand
and easy-to-use next step to whoever the
end-user may be.
Decision Management in
Lending
Lending requires a vast number of
operational decisions to be made every
day from deciding which loan applications
2015 Yhat, Inc. | Made in New York City
Next-Generation Decision
Management Platform
Yhat provides the leading data science and
decision management solution for credit
and lending. We help innovative lenders like
Ferratum Bank, the largest branchless web/
mobile bank in Europe, go beyond simple if
and measure business rules and analytical
models without impacting IT, ScienceOps
yields several important benefits to lenders
seeking to employ the highest quality
decision-making strategies, including
Shorter loan-processing cycle
Reduced cost per loan
Higher quality and more accurate credit
decisions
this...then that business logic to create the
worlds most intelligent credit decisioning
Wider customer box and increased
approval rate
systems.
Data scientists use Yhat ScienceOps to
design and implement credit scores,
policy rules, risk-based pricing algorithms,
fraud detection routines, and more
without involving IT or writing any custom
integration code. By empowering data
science teams to create, modify, manage
Reduced losses
Unprecedented ability to measure and
report on effectiveness of decisions
Auditability for all decisions
To learn more about Decision Management
or request information about ScienceOps,
please email us at
[email protected].
Decision Management in Lending
CONSUMER CREDIT
APPLICANTS
2
LOAN ORIGINATION SYSTEM
COLLECT
3RD-PARTY DATA
GENERATE
CREDIT SCORE
APPLICANT
RECEIVES APPROVAL
2015 Yhat, Inc. | Made in New York City
FERRATUM DATA
SCIENCE TEAM
FERRATUMS CREDIT MODELS
Company
Yhat is a data science technology company that builds
tools and infrastructure that enable enterprises to
efficiently operationalize advanced analytical systems.
ScienceOps, Yhats flagship product, is a data science
operations platform that enables data science teams to
go from insight to data-driven application faster and more
efficiently than ever before.
Address
66 W. 39th St.
3rd Floor
New York, NY 10018
Email
[email protected]
[email protected]
www.yhathq.com
Phone
(646) 918-7342
2015 Yhat, Inc. | Made in New York City
