Targeting and Pricing for Collateral Free Term Loans
We participated in this engagement during the lead up to the launch of a new lending product for a major credit card issuer. The objective was to improve the launch of the product by initially targeting a select group of clients that would have high likelihood to enroll, and to define a risk-based pricing scheme that was optimized for profitable growth. DIA approached the problem with client financials as a key data source. Rich data was available that described terms presently available with existing payments between clients and vendors, and the team used this to identify clients that would most benefit from the new product. A pricing scheme was then developed by considering clients that would take the product at different APR and the corresponding return after risk of default and cost of funds.