hat

Decision Management
in Financial Services

Presented by
Yhat
http://yhathq.com/
July 2015

2015 Yhat, Inc. | Made in New York City

Overview
Over the past few years, specialized peer-to-peer and direct lending platforms have been wildly
successful in both reaching qualified borrowers in overlooked market segments. By employing
a new generation of advanced risk modeling techniques, these lenders have been able to
predict risk, reduce losses, and originate loans faster and more effectively than their traditional
banking counterparts. Effective decision managementnamely, software systems and human
processes through which credit policies are conceived and implementedconstitutes an
essential competitive advantage for lenders seeking to streamline workflows and produce
optimal lending decisions.

Decision Management

behavior of decision makers and help them

Decision Management refers to a set of

For example, a business rule may call

business practices that help organizations

implement, use, and improve their
decision-making strategies and produce
consistent and optimal decisions within a
process or user-facing application. From
credit scoring to line assignment and
risked-based pricing, decision points in
lending are bountiful.

Decision Strategies,
Policies, and Business
Rules
A decision strategy is a set of programs and
policies that support higher-level business
objectives. Business rules, furthermore,
are tactical directives that influence the

2015 Yhat, Inc. | Made in New York City

carry out a decision strategy consistently.

for more substantial credit checks on
new credit applicants than for existing
customers.

Driving Business
Decisions Operationally
Business rules are the irreducible
components used to implement a decision
strategy and guide front line employees
day-to-day. Standardized decision-making
procedures ensure employees across an
organization conform to predetermined
operating protocols, giving businesses
increased visibility into the effectiveness
of strategies by virtue of increased
consistency and traceability in how
decisions are made.

Business rules are based on industry

experience and conceived using

BUSINESS RULES VS. ADVANCED ANALYTICS

commonsense. Often they take the shape

of simplistic if thisthen that rule criteria
which can be applied programmatically by
a CRM or website used by an employee or
directly by a customer. In lending, business
rules might be integrated into internal
software to help underwriters determine
which loan products are available to a
consumer with a 650 credit score or
dictate when credit analysts should request

BUSINESS RULES
PROS:

Easy to implement

Intuitive to non-experts

CONS:

Difficult to validate

Overly simplistic and lack precision

additional financial statements from a

customer before approving an increased
credit limit.

Advanced Analytics
What is advanced analytics?
How is it different from business
rules?

ADVANCED ANALYTICS
PROS:

Mathematically verifiable and precise

Can handle thousands of variables,

edge cases, and inputs

CONS:

Not as intuitive to non-experts

More difficult to implement

Business rules are fundamental to any

and can only handle the express number of

decision-making system but have several

cases prescribed by their author.

characteristic limitations, namely, the

degree of subjectivity involved in decision-

Advanced analytics, including predictive and

making strategies. Gut intuition business

prescriptive modeling, is a collection of data

rules, no matter how experienced

analysis techniques that estimate events

their author, are notoriously difficult to

in the future to help decision-makers take

validate, which makes it challenging or

desirable action. Unlike business rules,

impossible for a business to measure and

advanced analytics relies

improve an approach to decision-making.

Furthermore, business rules in the form of
if thisthen that are fundamentally limited

2015 Yhat, Inc. | Made in New York City

on mathematical descriptions of relevant

to approve to which offers should be

business phenomena instead of fixed rules

extended to your most loyal customers.

logic. Predictive models are capable of

At the same time, lenders are subject to

considering many factors simultaneously to

critical compliance regulations, 3rd party

identify relationships that would be difficult

credit bureaus, dynamic macroeconomic

or impossible for a human to notice when

trends, and a myriad of other features in

constructing business rules.

an ever-evolving marketplace. Similarly,

neither business rules nor analytical

How are business rules and advanced

models have a permanent shelf life and

analytics applied together?

both must be updated and enhanced

regularly in order for them to remain

Advanced analytics and business rules

relevant. As a consequence, risk and

are powerful compliments, and the most

analytics teams are constantly adapting to

effective decision-making strategies use

the moving landscape to ensure decision-

both. Analytical models are most effectively

strategies remain as effective as possible.

applied to decision-making problems

that call for a large number of data points

In lending, the immediacy with which a

to be evaluated at the same time. This

newly minted credit score or risk based

eliminates the need to author many tens

pricing strategy can be incorporated into

or hundreds of individual business rules

day-to-day operations is critical. Cutting-

and usually also improves the quality of

edge lenders are distinguishing themselves

the decisions that result. Business rules,

in part by adopting processes and software

on the other hand, are often used to digest

that eliminate friction involved in Decision

and synthesize the result of the analytical

Management.

model to deliver an easy-to-understand

and easy-to-use next step to whoever the
end-user may be.

Decision Management in
Lending
Lending requires a vast number of
operational decisions to be made every
day from deciding which loan applications

2015 Yhat, Inc. | Made in New York City

Next-Generation Decision
Management Platform
Yhat provides the leading data science and
decision management solution for credit
and lending. We help innovative lenders like
Ferratum Bank, the largest branchless web/
mobile bank in Europe, go beyond simple if

and measure business rules and analytical

models without impacting IT, ScienceOps
yields several important benefits to lenders
seeking to employ the highest quality
decision-making strategies, including

Shorter loan-processing cycle

Reduced cost per loan

Higher quality and more accurate credit

decisions

this...then that business logic to create the

worlds most intelligent credit decisioning

Wider customer box and increased

approval rate

systems.
Data scientists use Yhat ScienceOps to
design and implement credit scores,
policy rules, risk-based pricing algorithms,
fraud detection routines, and more
without involving IT or writing any custom
integration code. By empowering data
science teams to create, modify, manage

Reduced losses

Unprecedented ability to measure and

report on effectiveness of decisions

Auditability for all decisions

To learn more about Decision Management

or request information about ScienceOps,
please email us at info@yhathq.com.

Decision Management in Lending

CONSUMER CREDIT
APPLICANTS

2
LOAN ORIGINATION SYSTEM

COLLECT
3RD-PARTY DATA

GENERATE
CREDIT SCORE
APPLICANT
RECEIVES APPROVAL

2015 Yhat, Inc. | Made in New York City

FERRATUM DATA
SCIENCE TEAM

FERRATUMS CREDIT MODELS

Company

Yhat is a data science technology company that builds

tools and infrastructure that enable enterprises to
efficiently operationalize advanced analytical systems.
ScienceOps, Yhats flagship product, is a data science
operations platform that enables data science teams to
go from insight to data-driven application faster and more
efficiently than ever before.

Address
66 W. 39th St.
3rd Floor
New York, NY 10018

Email
info@yhathq.com
support@vhathq.com

www.yhathq.com

Phone
(646) 918-7342

2015 Yhat, Inc. | Made in New York City