Top Lender in Canada Achieves Success with Inverite’s Risk Score Automation

INDUSTRY: ALTERNATIVE (SUB-PRIME) LENDING

ANNUAL APPLICATIONS: 180,000

(Including new and returning customers)

ANNUAL ORIGINATIONS: $30 MILLION

This case study highlights how Inverite’s advanced risk-scoring technology can help financial institutions scale responsibly, improve operational efficiency, and maintain profitability while reducing risk exposure.

The Challenge

A leading lender in Canada faced significant challenges in balancing business growth with effective risk management in a competitive and fast-evolving marketplace. The company was grappling with high default rates on loans, which not only impacted profitability but also posed a long-term threat to their reputation. Their existing solutions were inadequate: slow, inaccurate, and reliant on manual reviews for risk assessments, preventing them from approving loans quickly and responsibly. Although the company considered several alternatives, they found existing tools lacked the sophistication needed, particularly in actionable risk-scoring capabilities.

To maintain growth without compromising customer experience or financial security, the lender needed a solution that could automate risk management and streamline operations effectively.

The Validation & Testing

The lender ran an A/B test to compare the overall default rates and correlation with the defaults and risk score bin to determine whether or not the lender wanted to implement the risk score in their loan decisioning model. 

The Methodology for Testing & Validating:

• The lender ran a manual A/B test on new customer applications in Ontario, Alberta and British Columbia.
• The lender’s staff captured the risk score on every application it was available.
• The risk score values are 0 to 19, 19 being the worst, and 0 being the best, and the worse of the risk score, the less likely the borrower is to pay.
• The lender chose a risk cut off, whereas any number above the set cut off was declined when the risk score was being considered.
• The A/B test included loan applications that met the score eligibility with sufficient bank data, and excluded returning borrower applications and loans, and applications impacted by the lender’s operational errors.

The Solution

The lender chose to partner with Inverite and implement its advanced Risk Score technology in 2023, in addition to Bank Verify. Inverite was selected for its ability to provide precise risk scores tailored to the Canadian financial landscape. The platform seamlessly integrated with the lender’s existing systems, eliminating bottlenecks and enabling the business to scale operations more efficiently with reduced risk exposure.

Key Features of the Solution:

• Accurate Assessments: Minimal manual intervention, providing more reliable risk assessments.

   

• Streamlined Processes: Loan applications are processed more quickly while maintaining strong risk controls.

   

• Granular Insights: In-depth borrower behavior insights empower better decision-making.

This partnership empowered the lender to replace outdated and time-consuming processes with an AI Machine Learning driven system, improving accuracy and enhancing their ability to achieve growth goals.

The Results

The risk score results below assume the total loan amount is the written off amount, whereas there were no partial payback (in reality, it is possible to collect partial payment on written off loans).

The Risk Score versus manual review A/B testing results were as follows from March to June 2023:

Default Rates:

• By Count: Decreased by 41%, improving in absolute numbers from 29% to 17%, reducing financial exposure.

   

• By Amount: Decreased by 39%, improving in absolute numbers from 31% to 19%, protecting the lender’s bottom line.

Why the Lender Chose Inverite

After evaluating several vendors, including Flinks, the lender chose Inverite for its comprehensive, scalable solution and availability of the cash-flow based risk scoring models.

Reasons for Choosing Inverite:

• Industry Expertise: Inverite’s deep understanding of the Canadian lending market gave the lender confidence that their needs would be met.

   

• Superior Risk Scoring: The accuracy of Inverite’s Risk Score enabled more informed decisions and minimized defaults without sacrificing speed or customer satisfaction.

   

• Scalability: Inverite’s platform easily scaled to accommodate increasing application volumes without compromising performance.

A company representative shared their experience:

“What we liked most about Inverite’s solution is that ultimately, they gave us the ability to minimize risk but also confidently grow. Their deep expertise in the Canadian market, combined with industry-leading advanced capabilities in risk-scoring, set them apart from competitors such as Flinks.”

Looking Ahead

With Inverite’s Risk Score automation, the lender is well-positioned to tackle future challenges. The implementation of this solution has laid the groundwork for long-term, sustainable growth by leveraging advanced data insights and continuously improving their lending strategy while minimizing financial risk.

As the lender continues to grow, they will rely on Inverite’s innovative solutions to stay at the forefront of the industry, meeting the evolving needs of borrowers in Canada while maintaining responsible lending practices.

Disclaimer

The information contained in this case study is provided for general informational purposes only and is not intended to constitute financial, legal, or investment advice. Any references to Risk Score results are illustrative and do not represent a guarantee of outcomes. Risk Score is a tool designed to support decision-making; however, any reliance placed on the outputs or findings discussed herein is done strictly at your own risk.

The Company makes no representations or warranties, express or implied, as to the accuracy, completeness, or fitness for any particular purpose of the Risk Score results referenced in this document. Decisions regarding financial arrangements, creditworthiness, or risk assessment should be made independently and based on your own evaluation of all relevant factors, and not based solely on the Risk Score or this case study.

The Company disclaims all liability for any loss or damage arising directly or indirectly from the use of or reliance on any information or analysis presented herein, including but not limited to business or investment decisions, risk exposure, or anti-fraud measures. The RiskScore service is not designed to detect or prevent fraudulent or illegal activity.

Users using a non-personalized or default version of Risk Score should be aware that such usage may result in reduced performance, accuracy, or applicability to specific business circumstances.