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| The rise of risk management in Russia | |||||
The following is a summary of an article originally published in Russia's Popular Finance Magazine, featuring an interview with Daniel Zelenski, Head of Experian Decision Analytics in Russia and CIS. Summary translation: Russians have got a taste of life on credit. So there is little wonder that scoring systems and solutions from Experian Decision Analytics, the global decision analytics business of Experian, are in high demand among domestic banks. Daniel Zelenski, head of Experian Decision Analytics in Russia, in his interview with Popular Finance, said that it was his grandmother, a bank cashier, who first showed him a bank from inside, and that he got his first credit card when he was eighteen… Answering a question on growing bad loans in Russia, and on the opportunity for scoring systems to prevent this problem, Daniel Zelenski said: “Let’s start with the fact that growth in credit portfolios of banks, and market growth in general are good things. A growing market is a very attractive market, and it is not surprising that all major Western banks are coming to Russia. As for the growing number of so-called 'bad' loans, meaning unpaid loans, this is really an important issue at present, and all professionals in the market are aware of it. Credit scoring is not simply a magic wand, but the start of a solution that lies within the creation of a risk management system. Retail risk management in Russia is just now coming to the fore. Whereas in the west it has long been present in the banking business, in Russia, not even the major banks have a system for managing retail loans yet, not least because of the lack of specialists in the country. The immaturity of credit bureaux is also a contributing factor to the situation. In a number of Western countries, 95-100% of the lending decision depends on information from a credit history bureau, which provide information on a customer a bank can rely on. When you analyse potential customers using a scorecard, you simply range them by social and demographic characteristics, but a credit history is a different matter entirely. This is real information about whether a person has paid his or her loans in the past or not. Credit history bureaux take a long time to mature, and, of course, we would like to see this process develop faster. Another problem that prevents banks from adjusting and using scorecards is down to the integrity and usability of the information itself. Basically, in the few years that the consumer finance market has been present, enough information has been accumulated, but the quality of this information leaves much to be desired. I mean, first of all, that information is not stored in a way that enables its quick retrieval. Secondly, it requires standardisation. For example, a database for car loan customers can have the brand and model that identify the car written in several different ways; the same fields of information are entered in differing formats. As a result, analytical processing of this data is only possible after a very thorough manual check, and standarisation is But all of these problems are natural because the Russian market, as I said, is only several years old…” View the original article here Contact us for further discussions about this article |
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often not possible at all. Finally, we have the issue of fraud. 
