Reduce Bad Debt with Data Driven Credit Risk Management

Credit Risk Management in Communication Service Providers

In the telecom industry, credit risk management plays a critical role as communication service providers frequently provide credit services to their customers, including postpaid plans, device financing, and equipment leasing. 

Credit risk management is essential in tackling revenue risks such as bad debts. According to Gartner, research showed that bad debt has increased by 26% in 2020 alone, showing the significance of securing revenue by implementing credit risk management in businesses and enterprises. 

Thus, communication service providers must prioritize credit risk management to evaluate and mitigate the risks associated with lending and ensure that their credit operations remain safe and sustainable. Effective credit risk management can assist communication service providers in minimizing credit losses, enhancing profitability, and maintaining financial stability.

With the emergence of big data and advanced analytics, credit risk management in the telecom industry has undergone a significant transformation. The availability of extensive customer data and sophisticated analytical tools has enabled communication service providers to develop more precise and efficient credit risk management processes. 

As a result, the industry has shifted towards data driven models and approaches , relying on data analytics and machine learning algorithms to evaluate credit risk. 

Data Driven Credit Risk Management Strategies

Assessing and managing credit risk in credit risk management depends significantly on data. Communication service providers can leverage data from various sources, including credit bureaus, payment history, and customer behavior, to evaluate the creditworthiness of their customers. 

With these data sources, communication service providers can develop a risk profile for each customer and gauge the likelihood of default and for setting of credit limits, determination of interest rates, and management of credit risk exposure.

In contrast to conventional credit risk management methods, which rely on manual processes and subjective assessments like credit scores and credit reports, data driven approaches use advanced analytics and machine learning algorithms to process vast amounts of data and make data driven decisions. 

A more precise and timely assessment of credit risk can be made with data driven credit risk models, while the trends and patterns that might be overlooked by traditional methods can be identified.

The Significance of Data Driven Credit Risk Management

#1 Reduce Time to Credit Decisions

Data driven credit risk management significantly reduces credit verification processing time by leveraging AI and machine learning technology to extract meaningful insights from multiple data sources to verify the authenticity of the information provided by applicants without the necessity for physical investigation.

#2 Enhance Bad Debt Recovery and Collection 

Real-time data analysis and monitoring of customer behavior and payment patterns can help communication service providers identify potential issues and take other corrective measures before they become significant problems.

For example, if a customer has reached his/her credit limit or has missed a payment, the communication service provider can receive a real-time alert and take immediate action to prevent further defaults.

Additionally, if a customer’s usage pattern suddenly changes, such as a large increase in spending or use of premium services, this could indicate potential financial distress or fraud, which requires further investigation and appropriate actions to mitigate the risk of bad debt.

#3 Credit Risk Assessment Accuracy and Customer Segmentation

Customer segmentation is the process of dividing a customer base into groups based on specific characteristics, behaviors, or attributes. In credit risk management, customer segmentation is used to identify and group customers based on their credit risk profiles, allowing companies to tailor their credit offers and pricing to each customer segment.

Customer segmentation in credit risk management can be done using a variety of factors such as income level, credit score, payment history, debt-to-income ratio, age, location, and other relevant information. These factors are used to create customer segments with distinct credit risk profiles, allowing companies to identify high-risk customers and manage their credit risk exposure. 

By segmenting customers based on their credit risk profiles, companies can manage their credit risk exposure more effectively, reduce the risk of bad debt, and improve profitability.

Neural Technologies’ Credit Risk Management Solution

Neural Technologies had worked together with communication service providers (CSPs) for decades, to provide with them data driven solutions in maintaining their daily operations. Unlike conventional credit risk management measures, our data driven solution offers more rapid and adaptive capabilities for communication service providers to predict credit risk and bad debt management.

Our Credit Risk Management solution helps out telecommunication service providers by leveraging AI and Machine Learning to optimize the process of mitigating credit risk and bad debts. 

The benefits of our Credit Risk Management Solution are as followed:

  • Creditworthiness Assessment
  • Reduce Bad Debt & Fast Recovery
  • Business Process Automation
  • Enhance Customer Experience
  • Dynamic Dashboard & Reporting
  • Configurable & In-House Control 

The features of our Credit Risk Management Solution including:

  • Credit Risk Prediction: Identify high-risk links to offenders and bad agents by comparing new subscribers against repeat offenders or individuals with notable risk profiles
  • Dashboards & Reporting: Clear and comprehensive audit trail, including data received, progress on cases and actions taken.
  • Dynamic Credit Profiling: Credit behavioral profiling, offering an instant view of a customer’s spending behavior, credit limits, exposures and tolerance over time.
  • Treatment Workflow Automation: Automated monitoring provides analysis of change and adapts to build understanding of high-risk customer behavior over time.
  • Credit Limit Manager: Flexible alternative to fixed credit limits that the customer cannot exceed with alerts for breaching limits.
  • Bill Shock Protection: Tracking usage and measuring against spending limits.
  • Case Management: Comprehensive oversight and case management tool, with KPI dashboards and data mining capabilities.
  • Bad Debt Exposure Reduction: Control and reduce overall exposure to bad debt. 

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