Question

2- Banks have all sorts of information about their customers and they also use credit history of those customers from external sources when they assess applications eligibility of extend a loan. Suggest how Data Analytics could be used by banks to get a clear view of their customers’ eligibility for a loan. Assume the bank has access to a customer’s loan history, credit card transactions, deposit history, and credit deposit registration. Given these sources of information, discuss how the bank can assesses that the customer could repay the loan.

Answer 1

Data analytics can help banks segregate the customers and identify customers that have a high potential to default, determine the profitable areas and fraud analysis. The analytics helps in the bank generating pre approved loans for customers that have high transactions, have a good repayment history and maintain healthy balances. Such customers usually have lesser probability of default and the bank can save resources and costs through pre sanctioning the loans. Also, it can use the analytics to cross sell its other offerings such as insurance, stocks to clients that conduct regular transactions. It aids in better servicing the high net worth individual clients and provide better offerings. Analytics also helps in incorporating the customer needs, market changes and technological improvements. The banks can assess a borrower's ability to repay through the average balance that is maintained, the number of cheque returns in banking, number of years of relationship with the bank.