We recently spoke with Oksana Staroselskaya, head of Credit Risk Methodology at VTB24, to learn more about the challenges of lending in a developing economy, and the bank’s use of predictive analytics and origination management.
Q: What are some of the challenges you encounter operating as a financial institution in Russia?
We face a couple of big hurdles. First, there’s not a lot of credit history available on which to base our lending decisions. Second, the Russian market is growing so quickly that we have to expand our sales every year just to maintain the same market share. For example, to increase our market share by 1% next year, we have to increase sales by more than 15%.
Q: Why did you decide to switch to FICO® Origination Manager as part of your technology infrastructure?
Our aging system couldn’t process data quickly enough, which was especially problematic because we needed to accelerate our pace of business. Also, we couldn’t modify its models, and that hampered our ability to adapt to market and business changes. We evaluated many systems to improve our performance and decided on Origination Manager based on price, functionality, productivity, longevity and reputation.
Q: Tell me a little about the implementation process.
We have been so happy with the FICO implementation team and its awareness of the market and of our specific situation. We even changed our requirements during the implementation phase, and the team successfully created workarounds to meet those new requirements. Plus, it’s now quick and easy to modify our credit risk procedures and decision models, which is hugely important to us, and our analysts can do it themselves, with no help needed from IT.
Q: What sort of performance improvement have you seen?
It used to take us 20 minutes to process the data to make lending decisions—and we could see that our system was slowing down to the point where it would need up to 40 minutes in the future. By using Origination Manager, we get decisions in less than five minutes, and we’re processing up to 3,500 applications per hour.
Q: What’s next for VTB24?
We plan to move to value-based pricing, rather than risk-based pricing, and we will grant loans online, with no branch visit required. We’re also planning to incorporate credit card approvals into the system in the coming year, which should be relatively easy because our credit card rules are similar to our rules for cash loans. In the next two years, we also expect to add loans for small and medium-sized businesses.
To learn more about how VTB24 is overcoming the challenges of lending in a developing market, watch this video Q&A with Oksana Staroselskaya.