Initial Credit Line Optimization for SB Lender
Background: AQN recommended increases to Initial Credit Limits (ICL’s) by identifying specific customer sub-segments that would generate higher Risk Adjusted Revenues (RAR) when offered larger credit lines
Outcome: AQN's recommendation to shift to higher ICLs in targeted segments will generate $1.32MM incremental NPV annually
AQN’s Approach:
AQN evaluated the client’s ICL assignment policy along current policy axes – an internal risk model score and estimated business revenue
Identified specific customer segments which were being offered very low lines inconsistent with their risk profile and were driving adverse usage
AQN then estimated the impacts to multiple expected customer performance assumptions including draw utilization and charge off rates
Leveraging a RAR model that AQN had previously built for the client, we identified specific sub-segments for which we believed increasing ICL exposure would generate incremental RAR
Recommended ICL increases for ~17% of booked accounts, with more drastic line increases in segments where low risk customers were receiving drastically undersized lines
Key Results:
