The new normal

The pandemic has created uncertainty around credit risk models. Payment holidays and government assistance may be masking customers’ true financial circumstances. Understandably, lender confidence has dipped. To address this, one third of businesses are planning to rebuild their models from scratch to improve performance.

Technology, construction and software sectors are in the midst of a K-shaped recovery. With a K-shaped recovery, there is a split impact on businesses and consumers. Some industries have been shielded or face a fast recovery, where others will require further assistance in order to bounce back to pre-pandemic levels.

This has a knock-on affect on levels of turnover and profitability and as a result impacts the financial health of businesses and the consumers employed by those businesses. That outlook has different impacts on consumer and SME lending, as sector health impacts the small businesses and consumers who depend on it for employment.

Essentially two groups are created – the fast recovery industries and the individuals whose work held up over lockdown have prospered and sit on that upward slope of the K with pent up demand for credit. At the same time others – the disadvantaged, many small and medium-sized companies, those consumers working in stricken sectors such as hospitality – they have had it tough, sliding down the downward slope of the K.

Download our The New Normal Insight Report to understand why it may be time to; Re-evaluate your credit models; Why new data sources, such as transactional data from Open Banking, can improve model predictiveness and accuracy; and the role Machine Learning can play in testing model performance.

Download The New Normal Insight Report

Download The New Normal Insight Report