Leveraging Portfolio Health Reviews for Business Growth

Data-Driven Growth: The Business Benefits of a Portfolio Health Review

As the Philippine economy bounces back from the pandemic, demonstrating increased resilience in the face of global economic headwinds, lenders must focus on maximizing opportunities while minimizing risk. As shared at a recent TransUnion Coffee Club TUesdays event, one effective way to achieve this is through regular portfolio health reviews powered by rigorous, automated processes built on trended credit data and enhanced analytics.

Regularity is key to profitability

Frequent assessments can equip lenders with a holistic yet nuanced view of their customers to inform better decisioning. This is much more difficult with annual or quarterly snapshot analyses which lack trended credit data and predictive power. Furthermore, combining conventional credit information with alternative data helps identify potential vulnerabilities and opportunities based on past and current behaviors. 

Demand outstripping supply

According to our recent industry report, the 2022 inquiry volume almost doubled year over year (YOY), indicating a healthy resurgence in credit applications. However, many remain cautious post-pandemic, mostly approving prime and above prime applicants. The resulting demand-supply gap presents an opportunity to tap into low-hanging fruit — otherwise known as new-to-credit (NTC) applicants.

Around 25% of new loan originations are either NTC or those with less than 12 months' credit experience[AA1] . Lenders regularly reviewing their portfolios can develop this previously underserved market by balancing conventional caution with newly informed confidence.

Reassessing NTC risk and opportunity

Segment profiling can be enhanced with updated behavioral factors to identify and address critical risk factors. For instance, NTC card activation rates are on par with those of low-risk profile consumers, while their utilization ratio is lower than below prime across all annual income bands.

To further mitigate risks for every segment, lenders must constantly monitor and assess impact events, such as new inquiries and changes in leverage, credit quality and contractability.

Comparing such static information at initial underwriting with developments over the past 4, 7 and 10 months provides a more insightful understanding of a consumer's trending behavior, which supports more proactive decisions.

Maximizing growth within an ecosystem

Banks can optimize their marketing and service opportunities — even regarding customers with savings accounts but no loans, credit cards or investments — by analyzing customer data to gain a better understanding of their needs and delivering more personalized marketing messages. With specifically designed, tailored services, banks can more efficiently increase targeted conversions, upsell and cross-sell, build loyalty, and ultimately, boost revenue and profitability.

New perspectives on those new to credit

Financial inclusion is a priority in the Philippines with various stakeholders invested in helping more people access formal banking and lending products. Whereas much progress has been made, outmoded preconceptions are hindering future headway. Maximizing the opportunity for consumer, community and commercial development requires adjusting and optimizing portfolio decisioning.

Leveraging alternative data can reinforce NTC decisions, unlock long-term loyalty, increase product uptake and drive growth. Bridging the gap between NTC and existing-to-credit (ETC) prospects calls for informed risk strategies and precision-targeted sales campaign tactics.

Tap current technologies to leverage emerging opportunities

In conclusion, our research revealed consumer credit dynamics correlate to profiles at origination, and the impact of those changes differs accordingly.

A more inclusive understanding is critical for driving financial inclusion and more productive engagements. Trended insights on NTC and ETC consumers from robust reviews — conducted at timely intervals — can translate into profitable outcomes.

The required automated software, machine learning and AI-powered solutions exist today. A structured approach to more predictive and productive portfolio management can help maximize next-normal growth while minimizing emerging risks.

Learn more by downloading our infographic.