Boost your credit rating with Straight-Through Processing

"Credit managers want to limit the financial risks in lending," Aart Deuning explains. "That's why you perform a risk assessment on every credit application. You want to be in control of which checks you run for this purpose and which ones you don't. But also of which customers you want to accept. Where you have room to accept more risk, that may turn out differently than in another action where the customer actually doesn't allow you that space."

Jeroen Slikker adds: "To serve customers quickly, you want to automate the credit assessment process as much as possible. The higher your so-called straight-through processing percentage, the fewer error-sensitive and costly human actions. In addition, the customer simply feels well served because he or she receives an answer quickly. Even if that answer is negative, there is at least a quick clarification."

Accurate risk assessment

To increase the STP score, the credit manager should take a close look at his process. Deuning: "Where are the gaps in customer acceptance and credit assessment? Where are the systems not yet connected? But also: if I automate the process of acceptance and assessment well, how do I set it up optimally? So that you know who you are doing business with. Whether it is mandatory under the Money Laundering and Terrorist Financing (Prevention) Act, or because you simply want to minimize the risk of fraud."

Thanks to the many data sources available, these risk assessments can now be made much more accurately. Deuning: "Think of bank data from PSD2 for which a customer can give permission to use. But also data from the Tax Office, DUO, UWV, BKR Foundation, the Chamber of Commerce, PEP lists, sanction lists, the insolvency register, guardianship register and credit information from Dun & Bradstreet." Slikker: "Before you enter into a customer relationship, you can use this to form a very good picture of the risk you are running. For example, with the answer to the question: has a customer always paid properly in the past, even if his borrowing capacity was limited?"

Companies are also increasingly engaging in due diligence

Not that all data sources necessarily need to be used. These are the data sources that credit managers can optionally connect to their existing ERP or financial systems via Centric's LogiLink. Slikker: "That is what customers like about our solution: they are in control. They decide which data sources to use and which customer acquisition campaign to accept more or less risk. And which checks they want in the process.”

"In consumer credit, these kinds of solutions are already commonplace," Deuning explains. "There, we are dealing with large numbers of applications that you absolutely cannot get through manually anymore. There they are already quite far along with STP. But the business-to-business market is also embracing this process. Companies also have to do more customer due diligence or comply with the anti-money laundering directive. In addition, companies also have to deal with sanctions lists and PEP lists. PEP stands for Politically Exposed Persons. Add to this the fact that the number of self-employed people in the Netherlands will have grown to 1.1 million by 2021. You want to be sure with whom you do business. In their case, private and business assets are often mixed up."

Amazing results

It is crystal clear: even in the business market, credit assessment is no longer possible without a comprehensive digital process for customer acceptance. But how can companies in this sector actually get started?

Slikker: "Map out the entire credit review and customer acceptance process from A to Z. How does it run now and how would you like it to run? How does tooling such as LogiLink fit into that process? We have mapped out the processes for customers, after which specialists have implemented improvements. Partly because of the implementation of these improvements in LogiLink, we have achieved amazing results. In one case, we were able to reduce the number of defaulters by as much as 50 percent."

"An additional benefit was that the company could segment in approach. Customers with a high Days Sales Outstanding - a measure of the average number of days it takes a company to collect payments - received an urgent e-mail reminder, while good payers received a friendly reminder. You can also apply that kind of segmentation to the audiences you will and will not target in a marketing campaign. You can even set up an A-B test to see which approach works best with which target group. In short, as a credit manager you are completely in control."

A version of this article previously appeared in 'Credit Manager' magazine.