The webinar, held in collaboration with FinTech Istanbul and Provenir, was moderated by Corinne Lleti from Provenir. “Winning in Difficult Economic Conditions” with our guests Cenker Özhelvacı and Hakan Yılmaz:
They had an inspiring conversation around the topic “How Can You Stay Profitable in a Rapidly Changing Environment?”
FinTech İstanbul ile Provenir İşbirliğinde gerçekleştirilen webinar Provenir’den Corinne Lleti tarafından yönetildi. Konuklarımız Cenker Özhelvacı ve Hakan Yılmaz ile beraber “Zor Ekonomik Koşullarda Kazanmak:
Hızla Değişen Bir Ortamda Kârlı Kalmanızı Nasıl Sağlayabilirsiniz?” konusu etrafında ilham verici bir sohbet gerçekleştirdiler.
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Thanks a lot for joining us and I wish you a good day good morning good afternoon wherever you’re whatever time it is where you’re watching us today and I want to welcome you to our webinar which is entitled winning in difficult economic conditions how to ensure you stay profitable in a rapidly changing
Environment and this webinar is been run today in partnership with provenire who I work for and provenir provide um platforms to give you the ability to protect uh bad credit or fraud issues across the whole customer life cycle and our other partner is fintech Istanbul
And I’d like to thank them for um their help in arranging this webinar I have the great pleasure to be joined by um two fantastic guests who I know personally um so Chena and hakan a real pleasure to spend this next hour with you guys um I’ll give you a couple of
Minutes to introduce yourself so um we’re going after B so Jena over to you first thank you Corin uh and thanks for the invitation uh so my background lies in Talco and credit risk uh I spent some time uh working for uh a Telco operator a mobile operator in Turkey uh then I
Joined Experian back in 2006 I was initially tasked with um setting up the Turkish office uh which led to uh expanding our footprint in the Middle East uh through opening an office in Dubai and hiring a team uh um I I spent 10 years working for Experian uh managing in my last couple
Of years Eastern Europe turkey and the Middle East then I moved on to uh working for uh the credit bureau in Dubai uh L hot credit bureau and later joined Iron Mountain uh offering solu solutions to Banks and financial institutions also managing uh Eastern Europe turkey Middle East North Africa
Uh so I spent a great deal of time in this part of the world uh offering solutions to the financial institutions over to you hakah thank you very much hi um thanks Ken for having us here um so I started working in financial services in the
Year 2000 so it’s been more than 23 20 23 years um work for um started with HSBC and uni cre for the first five years and then moved to Experian turkey just just like Jen care but one year before him um it was a time when everything was picking up um we like
Three or four people um we built the first ever used uh credit risk models in Turkish banking sector and then implemented all the um decision engine software to to majority of the um Banks which um still use um um plenty of them and and five years later I moved to Bar
Bank in the UAE um where I was held responsible um of retail risk management activities for 13 countries um that bar was operating um of 10 of which in sub Saharan Africa plus India U and Egypt and I moved back to Turkey then um
And for for for 10 years I worked for um three biggest retail um banks in Turkey guarante Bank a bank and yep um in order and in these places I worked on um infusing the analytics culture the um the data driven decisioning culture into day-to-day operations of the banks um
How can we um make the most out of data how can we use it in our day-to-day operations um and how can we improve the credit um decision quality in every in every decision we take so I worked um as Chief analytics officer Chief data officer and Retail of retail landing and
Credit analytics and roles like that and last year I U me and my um two partners we found mberg AI um in decision science and technology company and where we still continue um to to tackle with business problems of um of companies not only from financial sector but also from
Different sectors which have enormous data and and trying to improve their decisioning with this data um to to give an example the maritime Logistics um companies or um textile industry Machinery companies we we currently work with um yeah this is it from my side thank you very much so uh
Like I said two fantastic guests uh with a good uh good track record and uh lots to tell us about today so um as we said the title is about winning in difficult economic conditions um I I spend most of my time working um in sort of Mainland
Europe so um very different conditions from what you guys are seeing in Turkey um so I think you know when I’m thinking about sort of the trends that are impacting lenders and financial services um in the countries that I work um I I I think we’re seeing things which are seen
As very difficult in our area but I think compared to what um uh you guys are seeing some of the areas you’re working in you know the banks and financial institutions are having it quite easy um but I think from from my side the sort of trends that uh
Companies are seeing that financial institutions are saying is that um you know we’ve been in a situation of reasonable stability for literally hundreds of years where banks have had major monopolies um you know they haven’t really had any competition it’s been very difficult to move from one
Bank to another um and then the EU came along and um created some nice legislation um so we we’ve seen uh PSD psd2 and now we’re starting to see a psd3 um which have really revolutionized um you know the hold that banks have on their data um which has you know changed
This from sort of very closed ecosystem to an ecosystem which is really expanding and exploding um which has meant you know significant competition coming into the market for these very very established traditional Banks um that have you know seen not an awful lot of waves of competition over a very long
Period of time um lots of new products opening up because suddenly there’s new data available new ways into the market which just didn’t exist before um lots of new technology coming into the space so so you know we’re able to do a lot more around personalization um and you know making
Um offers much more tailored um much more relevant for people rather than you know this is it take it or leave it because you have no option apart from going with us um you know that those days are over um and also you know we’re seeing a lot more players coming into
The finance space who aren’t really a finance um area um I know chenko we were talking just before this um you know and some of the people you’re working with now you know good examples of this um so I mean chka you know from your background um I know in the Turkish
Market um you know probably what I’ve just talked about sounds very easy to manage um because I know you know some of the trends you’re seeing in in that market and wider go a lot go a lot more difficult a lot harder to manage thank you Corin I think challenge
Is the n name of the game in this part of the world and you mentioned you know what I will summarize as as open Banking and uh back a decade ago uh open banking allowed third party providers have access to financial data and the consumers had the opportunity to uh to
Use uh customized products more affordable products so thanks to open banking today uh Banks and financial services uh institutions are building sophistic ated products um obviously a more recent Trend these days is based around artificial intelligence and machine learning uh although relatively new uh these Technologies are
Already being used by the lenders and other financial institutions to like automate tasks such as underwriting loans and detecting fraud but Ai and ml are also helping personalize Financial products and services for consumers which is getting more and more traction as consumers are preferring to work with institutions that offer them
Personalized products and services yeah I think this this is the thing isn’t it when you live in a world where you know I can switch on you know I use my telephone and my telephone tracks what I’m doing and then as a result of that offers me things that are specifically
Angled towards me that expectation transfers into other areas of our life doesn’t it so yeah which is a great segue to my next Point embedded Finance right so as the name implies uh this is integrating Financial Services into non-financial platforms such as e-commerce sites or social media apps so
It allows the consumers to access financial services without leaving the platform the existing platform they use uh some and I think that that’s that’s a really great way isn’t it because um you know those embedded where you’ve already got the trust of the customer on that platform um and the platform provider
Can add a finance part um you know I as a customer for very at ease doing a financial transaction because I already trust the platform so yeah absolutely and it’s it’s great for consumers because because they now can have uh products or services like buy now pay later and even offers through Challenger
Banks uh which are like mobile First Banks uh that offer various Financial Services through the app uh which is not a good uh good news for you know traditional Banks but there there is competition uh there is a benefit for consumers right yeah and and and my last
Point will be around you know in terms of Trends we we are witnessing will be around Financial inclusion yeah um so this is about making Financial Services accessible to everyone regardless of their income or background it is important because you know as economic headwinds uh create additional challenges for economies and cons
Consumers yeah uh it is important to help uh consumers to improve their lives and reach their full potential and and coupled with the increasing rates of immigration especially in or around Europe I think this is going to be uh even more important in the next couple
Of years yeah and and I think there’s two really important points there isn’t it because like you say the the financial inclusion and I think you know we’ll talk about that in a bit more detail later but it is a really important animportant Point um and you
Know the the the change in the ecosystem that we’re seeing is really enabling that to happen a lot more um and I think you know that point about um migration especially you know within Europe um because you know one of the one of the ideas of you know Europe was freedom of
Movement freedom of Labor and all the rest of it and it is very difficult when you know you have a very good solid credit record in one country and then you move to another country and suddenly you can’t do anything and you know you’re there you know you need to get a
New mobile phone you can’t get a mile phone you know you need to buy a house or rent a house and you know all these really basic things become very difficult so yeah I think it’s a new challenge for the lenders but also an opportunity right totally an opportunity
Yeah yeah totally totally hacken from your perspective well um I think we’re in the middle of a a paradigm shift in in banking just like in many other sectors um the shift is from the banks Centric services to customer Centric Services right you know the bank’s approach was
Okay we have 10 million customers we have a thousand branches um and three other channels as well so this is number of products and services that we should be selling this year to have a successful year and these are the targets accordingly see you in three
Months and we will check yeah go get it yeah but for the last six eight years um they’re working on their transformation to execute as as a customer Centric service uh providers yeah and of course which they’ve had to do because of the competition coming in who you know
Forcing them to like you say losing that power base and forcing them to focus more on the customer exactly I mean the Digital customer experience is at the the art of it at the art of the customer service and all the footprints and and traces that your customer leaves we we call
Them data so the banks have to be data companies what I call uh them uh the new thing is the data companies specialized in financial services just like Netflix being a data company specialized in movies and series and documentaries um yeah or you know Spotify being a data company specialized
In music and podcast streaming yeah the banks should be something similar to that so yeah I think that’s very with the fex um this where the advantage comes for the fex they don’t have to transform or move a huge ship from one way to other as fast as possible because
They don’t have their historical debt on their shoulders they don’t have a thousand branches to operate yeah but but they have to get organized in the right way which is which is um not easy as well yeah so yeah as Jane car said this uh the experience motive takes us
To embedded Finance for sure because the consumer’s Financial need should be resolved within the same Journey wherever they are at that moment you know maybe they’re on Amazon or maybe they’re physically at the Apple Store yeah um you know but all those things are um they’re always easier said than
Done for for all the companies for the modern new ones the fex for the traditional Banks is hard for all of them yeah it’s very hard for traditional ones to unlearn some of the things that they’ve been doing for 200 years yeah also it’s hard for finex to start from
Somewhere to for example to to um start building a customer base or start creating as many different products as the banks have so I very little infrastructure very little you know with like you said a support base which is so much smaller so um yeah but um what I
See is this this brings us to a point where we see U many collaborations and and Partnerships between traditional and non non-traditional companies yeah which totally makes sense right you know the tradition Finance players have the required Capital first of all and usually it makes more sense for them to
Invest in a um company which is good at embedded Finance for example rather than going into this area and trying to compete with them without the muscles that they they they need without the muscles build for this yeah so um that’s what I seen in Trends yeah no definitely
And and it’s quite interesting because I think the the other sort of trend that I don’t think we’ve talked about which is obviously quite a big well talked about Trend at the moment is sort of ESG the sort of environmental um social type Trends um and you know har and you were
Talking about you know becoming data companies and we you know and everything’s driven off the back of data and you know we’re creating I know the stats about how much data we create every year are just amazing you know it’s exponential but obviously all of that comes with an economic
Ecological background to to it you know because all of that sits on a computer somewhere that you know creates heat creates CO2 and all the rest of it so it’s it’s a difficult it’s going to be an interesting challenge isn’t it you know with people looking to try and
Create lighter footprints on the Earth but like you say needing all this data yeah I mean um it’s very difficult to you know to step on the first stage which is I think awareness where we are struggling still struggling now and we will be I guess struggling for the next
One or two decades the awareness of the the ASG pieces yeah um and then but um you know the the banking sector has already internalized it and um thanks to um thanks to the big funders they they started to um divert the capital um to be used in in the right direction for
The banks this is which is a which is very good yeah and this is about just very small part of the the awareness that we should be should be having in the next next following years I guess that I’m sure is another Trend that you
Know we will see uh augmenting as as the months go by so um Chena from your perspective be interesting to get your point of view on this so um I’ve been at two conferences recently uh one in Germany and one in France where for both conferences they had Representatives government Representatives who were
Giving stats on um the rate of lending in difficult economic conditions and in both countries um the sort of formal official view was that lending has not slowed down um there is no shortage of credit availability credit has not shrunk um but it was very interesting to actually see the point of
View and the feeling maybe it’s a difference between feeling and facts but the feeling from um companies asking for credit um who really had this feeling that um uh criteria had tightened up um that maybe there were more hurdles to jump over um you know things like this
So you know from from your perspective you know do you see the economic climate affecting the way that lenders are making those credit decisions and other risk decisions absolutely and and I couldn’t agree more with you there are more hurdles to to jump year on year so
It’s been a challenging year so far right 2023 and since covid every other year is becoming more and more challenging um so the economic climate of 2023 can be I guess characterized by high inflation Rising interest rates and slowing economic growth coupled with geopolitical challenges again especially
In or around Europe yes uh so these factors are making it more difficult for borrowers to qualify for loans and increase the risk of loan defaults hence the hurdles yeah um so let’s go into more detail right um to start with the high inflation roads the purchasing power of consumers individuals and makes
It more expensive for them to repay their debts and this makes lenders uh more cautious about issuing loans leading to more strict credit standards and it’s trick the people who took out those loans sort of two years ago had no problem paying them but like you say the
Things that have changed since that point means that you know somebody who was a good risk at the time now is not the case so yeah and and a continued investment in new technology and credit risk related Solutions and products uh for the lenders obviously um then the
Rising interest rates are making it more expensive for borrowers uh to borrow money yeah uh and this is making it more difficult for consumers to afford new loans and increasing the debt burden on existing borrowers um and last but not least the slowing economic growth increases the risk of
Unemployment and uh makes it more difficult for borrowers to repay their debts obviously this makes lenders more reluctant to issue loans leading to higher default rates yeah so as a result uh the current economic climate makes it more challenging for lenders to make credit decisions therefore they are taking a more
Cautious approach and are tightening the credit standards uh which also is increasing the cost of borrowing right yeah um well clearly the economic climate is a challenge uh a challenging time for borrowers and yet it is also an opportunity we just talked about it right the opportunity
For lenders to be more selective and make sure they are lending to borrowers who are most likely to repay their debts uh I think it’s also important for the lenders to work with the right technology Partners such as yourselves and and make sure they utilize the state-of-the-art technology in
Orderorder not to face consequences unwanted consequences of the challenges I just mentioned yeah no exactly and I think you know what you said you know is 100% accurate and you know if we add on to that um you know the complexities of the sort of business Market um and like
You say traditional institutions who would say you know give me three years of accounts um three years of accounts over covid it’s like does the last three years really represent what the potential of my business is you know so like you say it becomes very very complicated doesn’t it um abely and I
Guess you know how can you know you can probably reflect a little bit you know so you know it’s all very well talking about you know the importance of um that that point in time decision do I give somebody credit or not but you know you
Need to go beyond that don’t you and it’s that sort of customer management ongoing monitoring that also becomes you know very very important doesn’t it in this climate I mean um what I’ve been observing lately is that the rest of the world uh in the Europe Zone Euro zone
For example is getting more similar to what we have always experienced in Turkey Turkey credit market right for ages we we had in terms of the financial system we were more fragile than the rest and we had always have bigger fluctuations in micro parameters yeah more frequent economic downturns because
We had some some our internal ones too yeah so never inflation problem but but also as Jen car said it’s we always had more opportunities uh a bigger spread in what we do in terms of business in general but right now um it doesn’t matter which part of the world we’re
Talking about we can definitely see U some stricter Landing uh policies in place um the worldwide fight against inflation um of course is not as big as ours but yeah worsening affordability as Jare mentioned as well um affordable levels are deteriorating amongst consumers and at the same time increasing regulatory interventions um
To to the credit various credit related issues so yeah the lending is um The Lending is based on the lender’s good expectations you know you lend your capital and ideally expect each and every borrower to pay you back in in in the expected timeline so but unfortunately life
Happens happens yeah yeah it’s getting harder to to make predictions even for the near future and manage a landing portfolio accordingly I I guess yeah so this of course um pushes both the lenders and the regulatory um authorities to be more cautious yeah and as a result credit becomes less
Accessible in my opinion yeah um a bit contrary to what you said earlier yeah but I I believe it will be um changing in um a a better position in 2024 and 25 um because Euro zon has taking so many so many actions and they I think they will see the um results
And I I think the credit Market will be growing led by consumer and business loans as the as the economic conditions improve together and and I think it’s um you know is a real challenge isn’t it for the regulatory bodies because you know banks have been you know classified
Most of them you know especially your top four in most countries is too big to fail you know if one of your top top four banks in a country goes down you know that’s a serious problem that most countries do not want to manage so you
Know yeah it’s it’s very hard for the regulatory perspect from the regulatory perspective I mean I remember the the discussions about procyclicality versus countercyclicality of Basil um you know the Basel standards like 10 years ago 12 years ago we were talking about when when the economic downturn is um at at the
Um the regulatory body was expecting the Banks Banks to have tighter policies which which will which was making things worse so U it’s not always easy to the learning it’s all about timing you know you you you give some decisions and you you wait for the wait for the outcomes
So you have to be um prepared for the for the Unseen for the no it it’s hard yeah no definitely which is why I guess you’re in a job so that’s the challenge isn’t it never a dull day yeah never a dull day that’s true and um Chen you
Were sort of referring to you know some of the ways that um you know credit providers can stay ahead of the competition and you know see these challenges as an opportunity um I wondered whether you want to sort of expand a little bit on on that for
Us yes thank you Corin I think it’s important to innovate and adapt for the FSI sector uh and fostering a culture of innovation and experimentation to develop like new products new Services uh and approaches to address evolving customer needs and market dynamics will be quite influential um I always emphasize to
Embrace a datadriven decision making but everyone has access to data right and everyone is investing in you know Analytics ICS Ai and ml Technologies uh but I guess this is like the true not going forward for the FSI sector but it’s also important to prioritize the customer experience
Across the customer life cycle yeah uh I think creating a seamless and frictionless customer experience across all touch points is really important and it’s very convenient for consumers to have access to mobile platforms rather than you know brick and martar uh branches yeah uh obviously since everyone has access to data
Exploring alternative data sources is going to be super critical in terms of you know creating this uh difference between yourself and the the competition I think that is really key isn’t it because again you know it’s one of these things that for the last 20 30 years hasn’t really moved so much and
You know in most countries you know there’s been a credit bureau and that’s been the source of Truth in most markets and you know it creates this very um binary type credit population doesn’t it either you are you do have a credit profile or you don’t and if you don’t
Like you were saying earlier it’s very very difficult to get onto that ladder and like you say the new data source that are just starting to come out in the next you know in the last couple of years are really again changing that sort of almost Monopoly situation that’s
Existed in so many markets um and opening up like you say so many opportunities for lenders to go for New niches um and you know like as you were saying haran to actually go with some sort of confidence because you have some data to base it on so yeah really
Important yeah great Point kin and obviously investing in digital transformation will also create that edge so paper has literally disappeared uh during almost every interaction a consumer can have uh with a bank or a financial institution but including Ai and ml in automating all the manual processes adopting you know cloudbased
Infrastructure uh and also you know using AI ml in automated decision making is going to be really important in terms of how you position your yourself against the the competitors we talked about you know collaborating with fintechs right partnering with startups and fintech companies and to tap into their Innovative Technologies data
Capabilities or Agile development processes also going to create that Competitive Edge uh I I I think my last point is uh the most important uh element which is to personalize credit offerings this is what the consumer expects and will going to and will expect going forward tailoring your
Products and services to meet the individual borrowers specific needs and preferences um you cannot invest uh more U you know every dollar spent on creating that individual experience is going to help you beat your competitors yeah no totally and you know what you’re talking about there and and I think this
Is like you say the challenge for a lot of Institutions because it is a massive program isn’t it you know all of these new data sources it’s okay to say that but you know you need to bring them into your process somehow you need to um include them in the decision process
Work out what the weight of that is you know how do you make that as a streamlined nonfiction part of your process um you know how do you give the customer back what they what they’re looking for yeah so you know it’s one of these things it’s like five seconds to
Say but uh you know millions of dollars and a lot of time and effort to make it actually happen in reality isn’t it so um so yeah definitely yeah and how come from your side um any sort of how can have you seen the clever clever financial institutions staying ahead of
The competition um well in my my own experience um there are two key things um that we have to be U when I say we as lenders to be very good at as a um as a lender in order to say stay ahead of competition um apart from the obvious
Things which is making the most out of data and using the technology at its best Etc but one is to have a good understanding about the behavioral characteristics of your customers yeah um and and the second is I’ll elaborate on that and the second is surely um how
And when you will react to economic changes both in positive and negative changes in the in the micro economy I think these are really um important things to to to watch out I mean in terms of the behavioral side you know your credit portfolio is made of made up
Of your customers and your customers payment behavior um don’t really change believe it or not not talking about the affordability levels or liit utilization levels and based on economic conditions these are affected by the uh microeconomic factors the interest rates um and the affordability deterioration Etc but um one’s payment behavior is uh
More like hardcoded in their personality so some people tend to be on the sa side of the money management balance and some people tend to be on the borrower side so these two types show different reactions um to economic changes yeah for example uh some we’ve just seen recently in our country
In our our own Entourage some borrow more in the inflationary economy um thinking that the the paying back will be easier and easier day by day yeah and and some some heavily decreases spending and anticipating worse to come after the after the inflation game so um our current capabilities as as lenders in
Turning data into insights can can show us which type of customer customers we have in different credit product groups in in different segments like Consumer loans business loans so being aware of this lets you differentiate your lending strategies among these groups and I I think this gives you a competitive
Advantage in terms of better pricing in in micro groups or in terms of collection strategies and so on so so rather than um drawing thick lines of you know autoject all all these um all these people with this PD and things like that yeah you can you can get into
Details and give much more personalized credit decisions as as J mentioned so this way you can even Market your credit products in a credit turmoil to a selected group of customers who are going to be receptive exactly and so that you can prevent your portfolio quality from deteriorating not maybe the
Quantity not not maybe volume but the quality you will need that quality once you once you come back from this uh credit turmoil so yeah um and the second thing what I what I was mentioning is knowing how and when to react the upcoming microeconomic uh microeconomic
Changes um well what I’ve seen is um when you start realizing the changes happening in the economic climate it’s usually a little late to take action regarding your credit portfolio as a ler yeah so but if you’re able to predict what awaits you in the next four to six
Months at least chance are you will welcome welcome the change in the in the economic CL more prepared so yeah I’m not saying deterioration only I’m saying change because you have way better microeconomic future as well I mean we’ve seen so many times while getting out of the economic turmoil um in Turkey
Some banks started pushing the throttle much more earlier than the competition and they gained serious market share at those times so um you know we know the results the credit strategies they they come in a lagged way but we should also make sure that we take action early
Based on our forecast and our predictions if we want to differentiate ourselves from the competitors otherwise we just follow the crowd and and nothing happens whatever data you have some new data if you do the same things at the same time with the others um it there
Won’t be a competitive Advantage I can say yeah so the importance of having those forward-looking indicators um as as well as the the indicators that are telling you of what’s going on now and having the technology that enables you to um capitalize on that to get the most head
Start on what’s going on and what you think is going to happen before everybody else Cates up yeah I had this I had these um debates discussions or arguments let’s say l i word for I mean let’s give an example so say that we’re in a very good Market Landing is booming
Yeah portfolio is growing and and collection is the least of our wores right now let’s say but if you don’t touch your collection strategies at this stage so if you don’t renew your collection models for example um you know um change them with some um better machine learning models or find in your
Collection segments have a second look at your self cures and Etc some micro micro segments yeah you will be late to do all of those when you need it economic downturn is your monitoring dashboard yeah that happen so many times in my career so some of your competitors
Will be more ready for for and they will collect before you do yeah yeah yeah no exactly yeah yeah exactly um and just one example that you know I’d like to share that um you coming back to what you were talking about how can being able to you know mine your customer data
Um and you know Chen you were you talking about you know using AIML to get the most value out of that data so you know me as a as a bank um I might know that I’m moving from one part of Istanbul to another part of Istanbul because I’ve made a mortgage application
You as a bank know you know this is my new address um you know you as a bank already have customers in the where I’m going to move to you can use the data um like you say h you know you know what I spend you know where I spend it so you
Can use a to profile and say okay so Corin fits into profile XYZ profile XYZ generally um go to this restaurant um get their haircut in this place go to this gym um take their dogs to Dog Daycare here or whatever else whatever Services you know this type of portfolio
Need and you know that is brilliant you know because if I move to a completely new area of the city I might not have that I don’t know you know where’s a good electrician you know where’s a good plumber you know all of this sort of
Basic stuff that you as a bank probably have that information among your data and yeah you can find it you know but but this is where you know Ai and ml helps to get you because you know there’s a big sort of debate about you know where can we use these Technologies
At the moment um because people very reluctant maybe to use it in a scoring mode because it’s not as open although we can make it open you know and all this but you know in that sort of segmentation area there’s no limit to how we can use it
Um and these are sort of all the value added Services you know Chena you were talking about the importance of personalization you know that’s a personalization service that would really set you know your mortgage product apart from any other mortgage that I went to um and it’s you know
Starting to rather than just see this as a mortgage application but see this as you know my whole life has been picked up and moved to another place where I don’t have the contacts that I have currently um but you can help me with that information um and it’s that sort
Of looking at things in a more customer focused um area that exactly that you were talking about that I think will make the difference you know with the new technologies that we currently have available to us um you know when we can get all the bits knitted together and
Make them happen so um so yeah yeah please come back to that um later the use of technology and AI but I think um the way we look at the journey is all I think it’s more critical than using the advanced analytics or the um complex algorithms to mind data I mean
It’s very obvious that when you get get I mean pretty much obvious U that you’re you’re changing something big in your life by by getting a mortgage so your your customer your main Journey as a customer is is about the change so yeah you can start from there without
Anything rockus science and then um do anything you can using your data make the most out of it yeah yeah yeah yeah no exactly so um probably can talk a little bit more about data now so um how can you know when it comes to sort of
Data what do you think are sort of the main considerations when you’re looking at sort of um integrating non-traditional data um alternative open banking data um and things like this to actually make sure that you know it it helps the process and I think you know
Maybe we can talk about a little bit what chenko was talking about earlier um about the sort of inclusion um agenda that can come into that as well uh sure uh that’s one of the favorite topics of mine so let’s I want to start by Framing the answer a little
Bit in terms of um which land is we’re talking about so yeah because there’s always a in terms of the traditional lenders the big Banks there’s always a distance between these lenders and the subprime applicants yeah so in good economic conditions Banks don’t have the motivation to extend their lending services to those
Groups because they they’re doing enough business with their existing portfolio uh and they don’t want to take take additional risk um so but in economic downturns downturns this these subprime groups seem more dangerous than ever to have an exposure it’s always risky for a big
Bank to in one way or another to include a subprime segment in A bank’s portfolio so uh I think this is why um the finex or um smaller smaller um Landing companies are are working on these these subgroups U more than more than the others so um you you could be willing to
Take risk in those segments uh for a reason for instance you can be a tier two or tier three Bank um trying to deal with such segments to gain some market share because you don’t have really place on on the um clearer um piece of portfolio
Or you can be a fintech that needs to start from somewhere to create a credit portfolio or and you see the segment more approachable because they are more in need of more in need of credit yeah yeah and companies starting up generally are looking for market share and don’t
Really care about collections we’ll deal with that later exactly so integrating non-traditional or alternative data such as open banking data let’s say it sounds great but currently um at least in in in our um environment in Turkey there are some setbacks to tackle before you benefit
From such data types in your uh credit decisions I mean first of all since sub crime groups don’t easily have access to credit they they they’re usually non- banked or thin file customers from from the bureau Bureau jargon you know yeah so you don’t know the payment behavior
Of those which is the most and most critical information that you you need to have about your borrowing customer and this is like the vicious circle of subprime isn’t it it’s like are these people really subprime or are they just excluded so we’ve never known whether they can handle credit or not exactly
Exactly and and the open banking data it so far usually doesn’t include the information that will serve as a payment Behavior either so you have to you have to work on that to see some some of the parts as as a payment Behavior you need to create create it uh out from from
Data so uh in my my opinion the lender will need some time and money to spend to turn the non-traditional data into a into a precious data which will include insight about the consumer along along with the payment history so yeah um and how can you do that of course first you
Invest on uh such data do a partnership with an open Banking Company which has the data or has the skills to integrate those data yeah without expecting any benefit in my opinion for the first almost year um and that’s one of the things that you will spend your money on
And and second you can start a low and growth strategy for those customers you you can you can give them a um very limited um credit exposure via a credit card um an overdraft or a very small cash loan just to understand the the the payment Behavior with a with a limited
End calculated cost of risk and this cost of risk is the I think it’s the other other piece where you you will spend your money as the as the lender really interesting for me um when I looked at sort of um buy our pay later portfolios because it was exactly that
That they had a much higher proportion of subprime in the portfolio but they didn’t have the bad debt that you would expect with that percentage of subprime and I think you know that point of giving people a bit of credit to prove whether you know they’re just supre
Excluded or are they supre who can’t manage and that that’s what you need to do isn’t it it’s making that differentiation definitely definitely and some of the bmpl portfolios um you you know you you make them spend um to buy Goods um you you’re utilizing bmpl to buy Goods so it means
That they’re not they’re not the in need customers first of all so it’s quite a bit different from the uh from subprime lenders so you can see a better portfolio surprisingly yeah but I mean in in in my experience in my example by the end of year one you can have a
Portfolio of 5,000 customers with um with with some payment Behavior yeah along with an additional non-traditional data non-traditional information and insights that you have from the open banking data and and you can link the payment Behavior with that data so I’m not talking about something very easy
But um I see that’s that’s one of the one of the good ways to to start with as a as as a fintech or as a small lender yeah do you think you can accelerate that process if you work with um an open banking provider who already gives you
The categorization on the data or is in that sort of onee runway for you including sort of creating your own internal categorization anything that will serve within the data as a as a payment Behavior will accelerate the process but if if you’re going to start with um bmpl
Or some um shorter term credit yeah you can see the results um easier than as out is a shorter yeah it’s a shorter term so you can uh you can burn less money in less less amount of time and then you can you can tailor it to
Results on your investment yeah oh yeah yeah yeah yeah that’s good um chka anything you want to add to um sort of dat and sort of how we can use it to um you to improve or the inclusion element that you were talking about well I think I’m
Going to refer to hakan’s Les last sentence uh about burning less cash you can use that uh budget to acquire startups or invest in fex as a bank right and this is happening uh recently uh it’s another way of being able to tap into additional resources additional
Data sets uh and the culture sort of uh infuses right actually both ways uh for the fintech and the uh Legacy institutions uh uh we work with um um therefore I think you know uh by utilizing data by utilizing technology uh and investing in uh the fintech sector uh the financial services
Institutions will be able to sort of uh offer finally offer personalized products and services yeah yeah so and you know I think if we’re looking at sort of the Pyramid of financial needs you know data comes at the bottom doesn’t it and then ha can do you want
To sort of talk to us about the next levels up so you know if we’ve got our data and you know we’ve explored traditional data you know alternative data um and then you know how do we go up the level sort of um you know to to
Use of the advanced analytics um you know and doing that across the whole customer life cycle oh yeah um that’s a good question but the answer could be a master thesis so is this art or science H but as I said earlier in banking um as
Far as I see in the last 24 years I mean your your aspirations your business targets or the of the products none of them are rocket science but yeah we able to see it as simple as it is I I think this is the hard part so um I’ll give
You an example I’m an entrepreneur now for the last one and a half years and naturally one one simple customer of those banks that I worked for earlier so yeah you say I don’t believe the experience I have with them so um I’ll give you an
Example I’m a lazy payer as a as a micro State man okay so I usually pay my credit card in the last day or more frequently the day after the last day yeah when I paay the day after let’s say 10 in the morning um I’m checking my
Emails and I looking for something else and I see the statement from 11 days ago yeah I say oops I missed it again and then go and pay it um at 10: am. in the morning yeah so later that day towards the evening I still uh get a text
Message yeah after that an email with a very Frank language saying that we’re so sorry to see that you missed your payment please do it as ASAP um we don’t want you to you know um your credit bureau score to deteriorate and things like that yeah and and an unhappy Emoji
At the end of the sentence and things like that you know it looks very modern but you know at the end it takes just one intraday filter to to see who made their payments send text and emails and everything yeah it just takes a filter yeah so um you
Need to take a phase approach to to use what sort of information about your customers and what type of analytic analytical capabilities you will need T each customer Journey so I’m I’m coming back to this journey thing because yeah be a created application looking for something in the mobile app or trying to
Increase your um overdraft limit through the mobile app and things like that you know Advanced anal is the um capability set that you have it’s not the target it should be seen as the vehicle that will take you to your target yeah so it we we
Mix we mix this uh most of the time so but when you come up with the journeys correctly like like we mentioned your M Mortgage for example yeah you will see easily where you will need the advanced analytics piece for example credit risk modeling um it has gone a long way from
Using simpler algorithms like linear regression where you have maximum of 15 to 20 characteristics about the customer and they come up with the probability of default two using explainable machine learning algorithms where you can use 300 500 characteristic insights about the customer and still have a stable
Model in in in today’s um the advanced technology so this is one of the places that you always search for improvement um am I using the best model I can how can I how frequently can I retrain it and do not get criticized by the local Authority and and things like that are
The places that you should go with the um Advanced anel things and things like that yeah and you know getting back to your question the um to find um more Niche uh customer segments within the data for example finding the fragile customers um who will Who will
Get hurt before the rest of the portfolio yeah I I think it’s more about how you frame the business problem if you uh how you frame the target definition of the uh of the predictive model I mean targeting any consumer that will go default in the next 12 months is
Something but it targeting the The Fragile customers that will defold in the next 12 months is is kind of different so there could be a couple of things that you can do you can do separate modeling for different um niche subgroups like fragile customers in in
That in that case or uh you can do a one um machine learning model which will um take all the data in contrary to what we were doing in linear regression or logistic regression um you need much more um variable um different variables of data all together and come up with a
Model and see if it works for your fragile customers if it works for your new new customers and older ones and all the sub Subs segments and then you act upon it but of course it doesn’t end there um on once you are able to thanks to Advanced analytics once you’re able
To pick up the fragile customers let’s say you you will need to address what to do with them in in your decisioning process for sure yeah so um yeah identification is only the first part of the process exactly exactly so to summarize you will have the the the main
Strategies of about your portfolio on the on the roof right as as a lender your guidelines about the portfolio so yeah um your expected return and Equity your forecast regarding the NPS non-performing loans and how you should do the U spread game in between yeah and to serve those guidelines you come up
With dozens of tools for a perfect risk and reward optimization your policy rules scoring models limit algorithms and hundreds of um action action sets for different small micro segments yeah but you need to orchestrate all this in in in the best way possible yeah Advanced analytics is just a part of it
Which is very important part of it but just a part of it I I think you need to orchestrate all this in the in the best way possible um preferably from a central module like proir um so so that you can automate whatever you want what
To do with the fragile ones when the collection amount start to rise in your portfol or what to do with the least risky wealthy customers while coming out of the credit CR the opportunity side of it as well isn’t it it’s not not just saving yourself money at one end but you know
How can we actually generate revenue on the other side so yeah yeah yeah that’s good I think um if I if I was working with your bank I think I would suggest one more potential solution for them based on uh uh customer behavior and that’s maybe um the day before you
You’re supposed to make the payment send you a text message then and say hakan do you want to make your payment they do that to be honest uh I’m not going to lie but sometimes help sometimes it doesn’t work yeah that’s good that’s um Chena anything you want to add to that before
We uh we move to the next question uh it’s a shame on hakan for being such a lazy payer I mean Banks Banks used to love payers like H because they were the most profitable ones they always did pay but they always paid a little bit of
Interest every month so they were the perfect customer so uh they couldn’t earn as much as they could from me because I was always the employee of that now they started earning from me yeah that’s good okay so um just sort of so to wrap
Up um so Chena um just if you can share with us maybe some of the ways um that you’ve seen to sort of maximize um the interaction and growth at every stage of the customer life cycle um and you know I think coming back to you know what you’ve been saying
All along that’s of customer centered experience I think the short answer is you know utilize everything we have been talking about in the last hour or so uh but it all starts with targeting the Right audience right and in order to do that you have to be able to use data
Analytics you know segmentation techniques and ta is the one size fits all yeah yeah absolutely uh and and channel those right individuals into the right digital channels uh utilizing online platforms social media uh search engine optimization you name it uh you reach a wider audience and drive traffic to the
Lender’s you know website or mobile app uh but also being able to personalize the application process you know we talked about uh personalizing the individual experience or the product but before you even offer the product uh you can even personalize the application process by offering a seamless sort of experience across various devices
Very experience if I’m an existing customer don’t ask me things that you already know about because I’m your customer you know isn’t it yeah you know hak is gonna pay a day after the due date right so don’t don’t don’t send that text to self cure customer absolutely yeah and and maybe
Even provide a pre-approval option right uh you’re you’re you’re aiming to increase conversion rates and reduce application abandonment therefore offering a pre-approval option yeah yeah uh increase is the the conversion rates definitely uh so once we onboarded the the actual customer right we have to continue to invest in the relationship
So we have to establish a strong relationship uh a positive and welcoming interaction is key uh but also offering customers sort of an educational resource to maybe promote financial literacy is going to be really key yeah especially like you when economic conditions are changing so much you know
Being proactive about what what can you do Mr customer to protect yourself given what we’re going through yeah yeah or when you’re aiming uh tin file customers subprime you name it uh this this takes me to my next Point around offering cross sell and upsell opportunities so you have to be able to
Identify opportunities uh to introduce uh additional products and services yeah uh and also being able to uh enable like self-service options uh you can provide to your customers uh helping them uh to you know track credit usage make payments access uh their statements their accounts empowering them uh
Creating a sort of a community and loyalty aspect yeah um so the next bit will be around monitoring the con consumer Behavior right uh it’s about retaining those customers and the the good ones hopefully so you have to be able to track the interactions the account activity the financial health indicators
And maybe identify potential issues early on and proactively intervene to prevent the churn yeah get your collections in first before everybody else is absolutely yeah uh rewards programs are important uh you know offering loyalty programs and re rewards for timely payments uh and responsible credit usage
Uh and and coupled with that you know offering value added Services as well but what’s most important is to be able to gather and act on consumer feedback uh you know using this feedback you can identify areas of improvement and make necessary changes to enhance customer satisfaction there’s also another uh
Part of the customer life cycle which I like to call advocacy so actively engaging with your customers on social media platforms you know responding to their inquiries and address their concerns promptly again fostering a sense of community and loyalty and last but not least incorporating customer feedback and their suggestions into developing new
Products or Services right many uh many companies these days build customer advice reports and collect advice and recommendation and expectation from them uh to incorporate into their product road map why not do the same uh with your with your consumers uh I think by implementing these strategies uh the credit lenders can maximize
Interactions uh and and growth uh throughout the customer life cycle yeah thank you very much chka thank you very much hakan so um I hope that uh spending time with us today you’ve picked up some good hints and tips of how to win in difficult economic conditions because
That’s certainly what uh a lot of the world is experiencing currently and I would like to thank very much um hakan and Chena for your time and for your inputs this afternoon it’s been great talking to you both thank you very much thank you bye bye bye bye bye everyone