The same business intelligence that helps companies large and small manage everything from supply chains to revenue may soon help lenders judge credit risk, too. Check out this latest MarketWatch post about a new tool for lenders accessing Canada's largest commercial risk database.
Some of the obvious benefits, the tool provider says, include:
- allowing lenders access to a huge and trusted database with information on credit history and payment performance
- providing an easy-to-use tool good for identifying profitable customers and managing risk with data from credit groups, collection agencies, and bankruptcy courts
- conversely identifying potentially dangerous or risky accounts with comprehensive information from an estimated two million businesses
- creating easy-to-understand data and reports highlighting potential credit problems including bankruptcy alerts, inquiry totals, and bank reports.
You can easily see how important this technology can be, and not just in flush economic times. After all, bad credit decisions presumably in part led to the credit crunch of 2007 and 2008. Thus, instability in the credit system in the US and worldwide helped directly contribute to global economic slowdown.
Leaving aside the impact of "subprime" and other exotic lending instruments, bad credit risks stood at the heart of this debacle. I think we can safely assume that business intelligence aimed at helping lenders make better decisions will be a major asset not only in the ongoing economic recovery but also in staving off future credit difficulties.
Of course, in recent years, business intelligence has seen even more remarkable growth than the tech sector in general, according to data collected in financial circles. This, no doubt, is because of this technology's value in reducing costs and improving return on investment, especially in hard economic times.
But just think for a moment how valuable tools applying intelligent analysis to relevant credit records could be to the mainstream business community as well. Using this technology to access and compile data on financial histories would allow companies to:
- evaluate the payment history of potential clients and customers
- project the financial stability of future or existing suppliers and partners
- probe beneath simple credit information to observe patterns that might indicate future difficulties
- anticipate development difficulties with an existing customer or supplier that may indicate trouble ahead in terms of meeting future obligations.
Now, I already hear one question coming. "Hey, what is business intelligence going to really tell us that a simple credit check can't?"
The fact is that credit checks are only a snapshot in time reflecting a company's current financial situation. As anyone who has ever experienced those gradually later and later payments knows, a credit check isn't always the measure of overall financial competence.
So what do you think? Could your company or clients use the kind of business intelligence and analytics technologies now being introduced into the lending industry? Could you benefit from the kind of detailed financial history they can provide? Would it help you make more informed decisions about future or existing customers, clients, and suppliers? Let us know by commenting on the message board below.