March, 2018

Archive

Behavioral Analytics 3

There is a range of future applications of behavioral analysis in banking risk management, said Clifford Rossi, Professor of Finance at University of Maryland. Its true potential has yet to be tapped. As an example, he described how hehavioral analysis can be deployed in credit risk assessment of non-traditional borrowers. The borrower willingness-to-repay preference used to always prioritize the family home. Since the 2007 financial crisis, there’s been a shift in mortgage borrower attitudes. In some areas, borrowers prioritize their car. The change in this sentiment can be detected using behavioral analysis. “It was virtually impossible using the proxy variable […]

Behavioral Analytics 2

Industry leaders in the field of behavioral analysis (Facebook, Apple, Microsoft, Google, and Amazon – FAMGA, as some call them) are “decision architects,” said Joe Mattey, Vice President of Enterprise Risk Analytics, and Chief Risk Officer at USAA. Typically a FAMGA product designer will put together a solution, such as a screen dialog, and fine-tune it over the course of many randomized, controlled trials, to see if the proposed solution gets the desired result—or whether some components need to be changed. In this way, behavioral analysis is looking not just at a decision outcome, it is looking at how that […]

Behavioral Analytics 1

The application of behavioral analysis to banking will touch nearly every corner of the financial sector. Is the financial institution you work for ready? Are you ready? Traditional economic analysis assumes that individuals and groups rationally maximize their outcomes, and that consumer consumption is defined by utility maximization. In contrast, behavioral analysis does not assume rationality. It seeks to understand individual or group behavior, which is often not rule-based, said Joe Mattey, Vice President of Enterprise Risk Analytics, and Chief Risk Officer at USAA. He was one of two panellists on March 13, 2018, speaking about how banks can leverage […]