analytic and decision services debt indexrhlf.co.za/.../07/...presentation-by-monica-eetves.pdf ·...

Friday, June 20, 2014

ANALYTIC AND DECISION SERVICES

Debt Index

Monica Esteves Product Manager: TransUnion Analytic & Decision Services

[email protected]

(011) 214-6413

mailto:[email protected]

Agenda

©COPYRIGHT 2008 ALL RIGHTS RESERVED | CONFIDENTIAL INFORMATION2

1• Definition

2• Product Overview

3• Product Output

4• Product Deployment

5• Sample Report


Definition…

DEBT INDEX

as the financial burden pressure mounts on everyday consumers...

and taking an individual’s past credit behaviour into account by identifying the slope of indebtedness for future

payment behaviour possibly resulting in non-payment

by calculating the debt to income ratio at point of acquisition or collections

utilising credit bureau data and creating sophisticated risk intelligence

an innovative tool to segment consumers within the South African Market,


What is it..?

DEBT INDEX is…


What is it..?

DebtThe sum of all CPA (Payment Profile) Commitments PLUS NLR

(Micro Lending Loans) Commitments

With regard to Debt Index, the below terms are defined as follows:

Index Another word for ratio or indicator

Gross

Monthly

Income

Total monthly salary BEFORE tax and other deductions are taken into account

(provided either by the client or Income Estimator)

CPA

Payments

CPA (Credit Providers Association) payments are all monthly account bills

across industries e.g. clothing, telephone etc as well as banking commitments

(utilise the latest month available – usually current minus 1 month)

NLR

Payments

NLR (National Loans Register) Payments comprise any monthly micro

lending loan installments a client may have


Jan 2007 Jun 2007 Dec 2007 Jun 2008

Silly SeasonNCA

Credit Crunch Experiences

Debt

Index

+/- 30%

Debt

Index

+/- 50%

Nov 2007

Pre-NCA

Emerging Middle Class – Living up to the Khumalo’s!

Rate

Hike:

Jun 07

Rate

Hike:

Aug 07

Rate

Hike:

Oct 07

Rate

Hike:

Dec 07

Rate

Hike:

Apr 08

Rate

Hike:

Jun 08

What is it..?


Product Overview…

DEBT INDEX


What it comprises of…

There are 2 parts to calculating the Debt

Index:

Represented as a %Represented as a positive or

negative slope in degrees

The Debt Index / ratio

1

AND The Debt Index Slope

2

Example

to follow

Example

to follow


The Debt Index / Ratio

Represented as a %

Calculation 1

Example:


Gives you a Debt Index of 60%

Gross Monthly Income 15 000

Less CPA Commitments e.g.: 8 000

- Home Loan 5 000

- Car Installment 2 000

- Clothing Accounts 1 000

Less NLR Commitments: 1 000

- Micro Lending Installments 1 000

Total Monthly Commitments 9 000

Therefore:

Total Monthly Commitments 9 000

Gross Monthly Income 15 000X 100


The Debt Index Slope

Represented as a positive or

negative slope in degrees

Calculation 2

Example:

Positive Slope = 0 Negative Slope = 1

DI =

30%

DI =

60%

Point of

Acquisition/

Collection

Point of

Acquisition/

Collection

DI =

60%

DI =

30%

12 instances back 12 instances back


Therefore, there was a POSITIVE growth in DI from 30% to 60%


But what does a positive or negative slope imply..?

DI =

30%

DI =

60%

Positive Slope = 0Point of

Acquisition/

Collection

12 instances back

DI =

30%

Negative Slope = 1Point of

Acquisition/

Collection

DI =

60%

12 instances back

Client A Client B

Client A Client B

12 months back, DI = 30%

At point of acquisition / collection, DI = 60%

This client is MORE indebted than in the past!

Therefore, there was a NEGATIVE growth in DI from 60% to 30%

12 months back, DI = 60%

At point of acquisition / collection, DI = 30%

This client is possibly LESS indebted than in the past!

What the slope looks like…


May 08Apr 08Mar 08Feb 08Jan 08Dec 07Nov 07Oct 07Sep 07Aug 07Jul 07Jun 07

12 Months

Jun 08

Point of

Acquisition

Point of

Collection

Linear Trend - Slope

Client A:

Debt Index

+/- 10%

Debt Index

+/- 60%

Client B:

Debt Index

+/- 40%

The steeper the

slope, the faster

the commitments

have increased…

The factors contributing to the increasing slope could be the macroeconomic

environment, additional debt burden etc…

What the slope looks like…


The Output

DEBT INDEX

DTI581872380 060 045-099 INSUFFICIENT DATA FOR 6 MONTH SLOPE CALCULATION


Debt Index Online Output…

Segment

Number

A3

Debt to

Income %

A4

DTI Slope

12 Months

A4

Consumer

Number

N9

DTI Slope 6

Months

A4

Reject Reason

A50

00000401340000002DTI581872380 050 -025 -099 INSUFFICIENT DATA - 6 MONTH SLOPE CALCULATION


Debt Index Batch Output…

Run Request

Number

A10

Segment

Number

A3

Debt to

Income %

A4

DTI Slope

12 Months

A4

Sequence

Number

N7

Consumer

Number

N9

DTI Slope 6

Months

A4

Reject Reason

A50

45

Paid up or closed accounts


Debt Index Output Examples…

0000040134 0000001DTI 581872340030-045-030

BATCH

ONLINE

Point of

Acquisition/

Collection

6 instances back

12 instances back

DI =

30%

Negative Slopes

30

Possible reasons being:

Negative slope = declining DI

Accounts written off

Restructured accounts etc

Macro economic trends


Debt Index Output Examples…

0000040134 0000001DTI 581872340 060 025 040

BATCH

ONLINE

Point of

Acquisition/

Collection

6 instances back

12 instances back

DI =

60%

Positive Slopes

30

Possible reasons being:

Positive slope = Increasing DI

Excessive credit take up

Utilising existing credit to max

25

40


Product Deployment

DEBT INDEX


Deployment

• Restructure

• Credit limit increase/decrease

• Identify positives

• Identify negatives

• Who to accelerate

• Online - Applications

Acquisition Account

ManagementCollections

Debt Index


Deployment cont…

Consultation with client Together with an ADS Analyst

Retrospective Analyses At least quarterly – revise strategies

DI =

30%

DI =

50%

Point of

Acquisition/

Collection

12 instances back Quarterly Retrospective Analyses

Decrease credit limit?

Increase credit limit?

Maintain strategy?

Account Management


Deployment cont…

Debt Index application:

AcquisitionAccount

ManagementCollections

Across all clients

And all Industries

Debt Index is to be integrated into existing

strategy tools and is compatible with all

existing Credit Bureau products.

Available via batch & CPU


Sample Report

DEBT INDEX


Sample Report

CLIENT

PORTFOLIO

DATE

NO OF RECORDS

DESCRIPTION

Debt to income (DTI): The total amount of monthly commitments as listed at the bureau divided by the gross income.

-99: When the DTI or slope cannot be calculated, a value of -99 is given

DEBT INDEX

Slope12: The angle of the linear trend at which the DTI is increasing or decreasing over the last 12 months. An average

increase of 1% per month in DTI gives a slope of 45 degrees.

Debt index: The combination of the DTI and slope in a dual matrix, which maximises the predictive power. The Debt index

measures the ability of an individual to pay his/her accounts.

Definitions

ABC Bank

Personal loans

25 May 2009

9999 was matched at the bureau from the 10 000 submitted

Effectiveness of the Debt index on the 2008 accounts


Sample Report cont…

PI Size

000 7983

01+ 538

02+ 268 Indeterminate

03+ 447

Bad 513 Bad

Classified 250

Grand Total 9999

Performance indicator and Good/Bad definition

Good

The tables below show the ranking of the DTI, Slope12 and Debt index matrix for the 2008 sample.

Bands Bad rate Size Bands Bad rate Size

-99 28.2% 0.4% -99 33.8% 2.0%

0 to 60 11.3% 60.0% -90 to -54 11.2% 11.6%

61 to 71 12.4% 9.8% -53 to -1 9.8% 12.7%

72 to 86 13.0% 9.3% 0 to 36 7.1% 15.1%

87 to 145 14.6% 14.1% 37 to 49 11.0% 7.7%

146 to 999 16.8% 6.4% 50 to 62 12.3% 11.2%

Total 12.4% 63 to 77 13.9% 22.1%

78 to 90 16.2% 17.6%

Grand Total 12.4%

Debt Index Results

DTI Slope12


Sample Report cont…Matrix DTI

Slope12 -99 0 to 60 61 to 71 72 to 86 87 to 145 146 to 999 Total

-99 28.2% 33.8% 57.1% 50.0% 25.0% 33.3% 33.8% Size Bad rate

-90 to -54 11.3% 12.1% 9.1% 11.1% 11.8% 11.2% 1 1,352 6.66%

-53 to -1 9.8% 7.9% 7.4% 11.4% 21.4% 9.8% 2 1,885 10.13%

0 to 36 6.9% 3.2% 10.9% 11.1% 18.2% 7.1% 3 2,165 11.36%

37 to 49 12.6% 6.8% 1.5% 8.9% 25.0% 11.0% 4 2,663 13.33%

50 to 62 11.6% 12.8% 18.3% 10.6% 0.0% 12.3% 5 428 16.12%

63 to 77 14.8% 14.4% 13.0% 12.9% 7.5% 13.9% 6 1,043 18.50%

78 to 90 8.0% 16.2% 16.4% 18.7% 18.2% 16.2% -99 195 33.85%

Total 28.2% 11.3% 12.4% 13.0% 14.6% 16.8% 12.4%


Sample Report cont…

Matrix DTI

Slope12 -99 0 to 60 61 to 71 72 to 86 87 to 145 146 to 999 Total

-99 79 267 2 2 2 352 Size Size%

-90 to -54 836 81 100 100 30 1,147 2,100 21%

-53 to -1 1,706 168 127 145 21 2,167 2,963 30%

0 to 36 1,903 197 129 125 19 2,373 2,618 26%

37 to 49 645 108 82 73 16 924 1,520 15%

50 to 62 746 140 129 141 15 1,171 223 2%

63 to 77 638 245 241 303 60 1,487 224 2%

78 to 90 42 56 57 143 81 379 352 4%

Total 79 6,783 997 867 1,032 242 10,000

Distribution of 2009 sample


Sample Report cont…Client Name: ABC Bank

Date:

No. of Records:

Filler CodePrimary

Sort Key

Client

Ref No

1

SurnameForename

1

Forename

2

Forename

3DOB RSA ID

Consumer

No

Debt To

IncomeSlope 6

Slope

12

Reject

Reason

Slope 6

Reject

Reason

Slope 12

Reject

Reason

Acc

Closed

Negative

Status 6

Acc

Closed

Positive

Status 6

Acc

Closed

Negative

Status 12

Acc

Closed

Positive

Status 12

00001768620000400 310227 310227 Surname Forename 1 Forename 2 Forename 3 19810625 ID Number Consumer # 6 0 -99 0 0 INSUFFICIENT DATA FOR 12 M ONTH SLOPE CALCULATION0 0 0 0

00001768620000747 315679 315679 Surname Forename 1 Forename 2 Forename 3 19711224 ID Number Consumer # 16 -12 7 0 0 0 0 0 0 0


00001768620000670 312712 312712 Surname Forename 1 Forename 2 Forename 3 19800917 ID Number Consumer # -99 -99 -99 NO INSTALLM ENTS SUPPLIED IN THE PAST 2 M ONTHS0 0 0 0 0 0

00001768620000109 307775 307775 Surname Forename 1 Forename 2 Forename 3 19771204 ID Number Consumer # 26 21 6 0 0 0 0 0 0 0




00001768620000284 310149 310149 Surname Forename 1 Forename 2 Forename 3 19840717 ID Number Consumer # 5 -99 -99 0 INSUFFICIENT DATA FOR 6 M ONTH SLOPE CALCULATION0 0 0 0 0

00001768620001005 321621 321621 Surname Forename 1 Forename 2 Forename 3 19701116 ID Number Consumer # 7 -55 -25 0 0 0 0 0 0 0

















00001768620000545 312840 312840 Surname Forename 1 Forename 2 Forename 3 19391223 ID Number Consumer # 6 51 -45 0 0 0 0 0 0 0









00001768620000555 311667 311667 Surname Forename 1 Forename 2 Forename 3 19680902 ID Number Consumer # 4 13 -4 0 0 0 0 0 0 0




2009/05/15

9999


Questions..?

“Achieve more when doing business.”

www.transunion.co.za

Thank You

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