Making the good great: optimising a single-scorecard approach

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Background
auxmoney is the largest credit marketplace in continental Europe. On auxmoney, private and institutional investors invest directly in pre-approved borrowers. In the first half of 2018 alone auxmoney had funded more than 33,000 new loans with a total volume of €255 million, representing an increase of about 90% over the previous year.

Challenge
Defaults that occur earlier on in the customer’s lifecycle are likely to be more costly to investors and in turn, reduce returns more drastically than slower defaults. The challenge was to maintain and possibly improve the current acceptance rate using a single-scorecard approach whilst demonstrating a reduction in losses.

Approach
Developing a multi-outcome optimisation of risk scores for a marketplace lender required understanding that often the most powerful indicators can be contradictory. For example, indicators of high risk may also correlate with a high probability of take-ups and the ability to deal with short-term credit commitments may not necessarily lead to a longer-term capability to manage finances.

“4most’s broad range of knowledge and experience made a meaningful contribution to reach our goal of extending credit access to more people.”
- Justin Silk, Head of Risk Management, auxmoney


Solution
This included the development of improved risk-based strategies:

  • auxmoney’s already progressive approach to lending compared to typical German banking practices, was advanced further with the conceptual ideas and support from 4most.

  • Generate additional volume to help auxmoney achieve its aim of extending credit to more borrowers.

  • Comparing different potential strategies to reach an optimal solution.

Impact
Through the teams’ knowledge and expertise, 4most created an enhanced risk-based strategy enabling auxmoney to optimise volumes of business and maintain returns, whilst driving appropriate re-finance levels.