Reference Cases

PayNet tracks the financial benefit we bring to our clients. We measure financial benefit in a number of different ways:

  • Increased approval rates while maintaining or improving credit quality.
  • Reduced or controlled credit losses at account origination.
  • Decreased turnaround time on applications through quick access to relevant information.
  • Better-streamlined originations process to create operational cost savings.
  • Improved performance as a result of comparing origination and operational performance with that of peer lenders.
  • Better risk-rating capabilities as a result of forecasting defaults and losses.

We include here several reference cases, that is, summary examples of benefits we have brought to clients. Please take a moment to review a few, as they offer a unique perspective on how our service may benefit your business.

Increased Approvals and Reduced Credit Losses:
Commercial Card Issuer
Situation
Vice president of risk management, commercial card issuer
Critical Issues
  • A 50 percent auto-decision rate results in a backlogged work queue.
  • Client must maintain a high approval rate to attract new business.
  • Given the emphasis on maintaining a high approval rate, credit quality is a concern.
Reasons
  • The manual credit process is expensive and inconsistent.
  • Manual processing costs exceed $50 per application.
  • Lender has aggressive growth plans and thus needs a scalable originations process.
Vision
  • Increase the auto-decision rate to reduce operating costs.
  • Deploy better tools for identifying the really good and really bad accounts quickly.
PayNet
  • We conducted a retro analysis, which validated that the score identified risk for the lender's portfolio.
  • We scored approvals and declines to determine opportunities to reject really bad deals and to offset those by increasing approvals of really good deals.
Result
  • Credit losses were reduced by $3.5 million per year.
  • Originations were increased by $2.5 million per year.
  • The auto-decision rate was increased by 10 percent.
  • Operating expenses were reduced by $1.5 million per year.
Increased Approval Rates and Reduced Credit Losses:
Transportation Equipment Lender
Situation
President of a transportation equipment lender seeks to improve loan-originations process.
Critical Issues
  • The originations process is highly manual.
  • The approval rate is low; some "good" applicants are declined.
Reasons
  • Manually processing each new application is costly.
  • There is a concern about inconsistent application of credit policy.
  • The lender's approval rate is far below the company goal.
PayNet
  • We retro-tested to find the transportation score for the lender's booked deals.
  • We analyzed decision-making practices to demonstrate the ability to approve high-quality applicants that were being declined.
  • We recommended a swap set to reject low-quality deals and approve high scores.
Result
  • Credit losses were reduced by 16 percent.
  • Originations were increased by 5 percent.
  • The overall value of this improvement was $2.7 million per year.
Increased Credit Approval Rate:
Small Business Bank
Situation
President, small business lending division of a major financial institution
Critical Issues
  • The credit approval rate on new small business loans is 46 percent.
  • The booking rate on approvals is 53 percent.
Reasons
  • President thinks the current process is not performing at the required level.
  • More efficient small business lenders are taking market share.
PayNet
  • We conducted retro and swap set analyses on the lender's portfolio and recent applicants using credit scores.
  • The approval rate was demonstrated by score quality, and approving all highest-scoring applicants was recommended.
  • Further review of the lowest-scoring applicants was recommended.
Result
  • Immediate benefit: increasing the approval rate by 1 percent provided $5.1 million more earning assets per year.
  • Long-term strategy: approving all high- and mid-scoring applicants will increase the approval rate by 6 percent and add $30 million per year in earning assets.
Increased Approval Rates and Reduced Credit Losses:
Bank Leasing Subsidiary
Situation
Risk manager for a copier, computer, and fax lender
Critical Issues
  • Client needs to maintain a high approval rate.
  • Credit losses are too high.
Reasons
  • Client is an office-equipment-specific lender and seeks tools tailored to its type of lending to provide process improvement.
PayNet
  • We conducted retro and swap set analyses on the lender's portfolio and applicant population using the office score.
  • The retro analysis showed the historical "bad" rates by score on booked deals, validating that the office score identifies risk for the client's portfolio.
  • We also looked at the number of approvals and declines by score to determine opportunities to reject the really bad deals and to offset those by increased approvals on the really good deals.
Result
  • Credit losses were reduced by $10.2 million per year.
  • Originations were increased by $5.1 million per year.
Reduced Turnaround Time and Increased Productivity:
Major Finance Company
Situation
Vice president of credit, major construction and transportation lender
Critical Issues
  • Lender desires to reduce turnaround time on 2,500 monthly applications.
  • Lender wants to maintain a high-quality portfolio.
  • Lender wishes to increase the productivity of the credit department.
Reasons
  • Lender has to check credit references via phone calls and fax requests.
  • Lender needs to respond quickly to dealers to maintain satisfaction and a high service level.
PayNet
  • We provided access to credit history reports via the Internet to eliminate the faxes and phone calls for credit references.
  • We provided training to the credit staff on use of the credit history reports.
Result
  • Lender realized a 40 percent decrease in turnaround time to dealer.
  • The faster response enabled the lender to capture more dealer originations, which resulted in $50 million additional loan volume.
  • Reducing the time spent processing credit applications by half saved $260,000 per year.
Default Forecast Report:
Bank Finance Subsidiary
Situation
Senior vice president, bank finance division
Critical Issues
  • Lender needs to develop a more granular and accurate risk-rating system.
  • Lender needs to prepare for Basel II compliance.
  • The high operating costs of rating small-ticket loans need to be reduced.
Reasons
  • Lender is the finance division of a major commercial bank.
  • Senior vice president needs to proactively improve the risk-rating system in reaction to parent and regulatory demands.
PayNet
  • We developed a default forecast report.
  • We segmented the risk-rating system by obligor and facility types.
  • We compared the lender's current risk-rating system with the new system.
Result
  • The division's cost of capital allocated by parent was lowered.
  • Productivity of the risk-rating function was improved by 75 percent per year.
  • The structured statistical process yields better results. See chart below.

Default Forecast Report
Bank Finance Subsidiary

Sample Bank SBU - Exposure by Bank's Risk Grade vs. PayNet Risk Grade
Exposure by Bank's Risk Grade vs. PayNet Risk Grade
Custom Portfolio Benchmark Report:
Independent Finance Lender
Situation
President, major office equipment finance company
Critical Issues
  • Lender's credit approval rate needs to be increased.
  • Credit losses need to be maintained within an acceptable range.
Reasons
  • Lender operates vendor financing programs.
  • The goal is to be the first-choice financing source among vendors.
PayNet
  • We developed a custom portfolio benchmark report showing marketing, credit, and collections performance versus that of comparable peers.
  • We demonstrated a flat market share within equipment segments over a three-year period.
  • We demonstrated that long-term delinquency trends were the lowest 10 percent among their peers.
Result
  • The approval rate was increased by 1 percent.
  • Origination volume was increased by $50 million.
  • There was no material change in credit quality.
Custom Portfolio Benchmark Report:
Major Captive Finance Lender
Situation
President, major captive office equipment finance company
Critical Issues
  • The source of a recent sharp delinquency increase for small-ticket leases needs to be determined.
  • Portfolio quality versus that of the comparable peer group needs to be determined.
Reasons
  • Lender needs to explain portfolio performance to parent.
  • Lender needs to know the source of problems to make organizational changes.
PayNet
  • We developed a custom portfolio benchmark report showing operational performance versus that of comparable peers.
  • We proved the source of delinquency to be misapplication of payments by identifying multiple contracts for same borrower and then looking at delinquency occurrence for each contract.
Result
  • Operating costs were reduced by improving the payment-processing function.
  • Collecting on past dues increased cash flow.
  • Results led to retraining of payment-processing staff.
Custom Portfolio Benchmark Report:
Small-Ticket Finance Lender
Situation
Senior vice president, captive construction equipment lender
Critical Issues
  • Operational processes in the credit department need improvement.
  • Risk level of the portfolio needs to be explained.
  • Performance compared with an objective source should be understood.
Reasons
  • Foreign parent is unfamiliar with the U.S. finance market.
  • Lender's risk level versus that of U.S. peers needs to be demonstrated to maintain parent funding.
PayNet
  • We developed a custom portfolio benchmark report.
  • We demonstrated the lender's credit delinquency versus that of an anonymous peer group of comparable construction lenders.
  • We compared the lender's market share and portfolio growth to those of peers.
Result
  • Heightened credit policy rules were imposed for high-risk borrower types.
  • A business model for a foreign funding source was validated.