Credit card issuer: Initial line assignment optimization

We developed a mathematical optimization routine for a leading domestic credit card issuer to maximize risk-weighted net income by assigning the ideal initial credit line to each account at booking. Deliverables included behavioral segmentation tied to credit risk, utilization, balance and limit, and development of predictive scorecards for likely net income and gross credit loss. The optimization routine accounted for policies on total credit exposure, total expected loss, active rate and utilization, in order to calibrate the optimized assignment to current portfolio performance. The best-performing optimization scenarios projected an incremental net income contribution between 200% and 400%, and a margin-to-revenue ratio increase between 60% and 240%, compared to the business-as-usual performance on the historical accounts.

 

This entry was posted in Acquisition, Credit, Optimization, Risk management, Scorecarding. Bookmark the permalink.

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