Credit scoring with an eye to the future

Much has been written about the death of the FICO credit score.  See Wall Street Journal’s “Silicon Valley: We Don’t Trust FICO Scores” and American Banker’s “Will Fintechs Kill the FICO Score?” for recent (Summer 2016) articles.  The narrative invariably revolves around how the score is backward looking…considers limited individual past behavior…and can occasionally misfire …

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A map for very small business lenders

Spread across states and active in all industry sectors, over 5 million businesses in the US employ fewer than 20.  Their total sales of over $4 trillion and total employment of over 20 million is roughly comparable to the entire Canadian economy!

Localizing Risk

A firm’s financial health determines its ability to repay debts.  The promise of big data is to incorporate an ever increasing pool of information about a firm’s financial behavior to make better predictions.  And by blending in qualitative factors such as social media chatter, big data seeks to make a quantum leap in assessing business credit …

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It’s Better in the South

The South is now the country’s most populous region and its largest economic area.  Nearly two out of five Americans live in the South and the region accounts for 51 percent of the nation’s population growth since 2010.

Business Default Volatility

Default rates vary for a myriad of reasons.  They vary over time.  They vary across geographies and industry sectors.  And they vary across business size.  Understanding this variation is important for constructing and managing credit portfolios.

Industry Default Correlations

One of the biggest challenges confronting small business lenders is the absence of data.  And ultimately that hurts small businesses via higher interest rates.  This is acutely evident in the burgeoning online lending industry.  At WAIN Street, we want to change that.