© Tobias Baer 2021
Debt collection
I believe that the approach of banks and other creditors to consumer debt collection can be completely reinvented by starting with the psychology of the debtor - which historically has been largely ignored. And this might be just the solution that banks need who observe that delinquent customers increasingly avoid them (thus becoming non-contacts) or prefer to pay other lenders first.
Today's typical collection approach - a call-center-centric and pretty much one-size-fits-all strategy - actually flies into the face of a range of psychological needs of customers, such as the need of agency and the need of a relaxed mental stage in order to effectively explore solutions to a thorny financial problem. Banks also tend to be oblivious to the way how customers motivate themselves for debt repayment and hence fail to offer the right incentives and tools (e.g., gamification, alternative payment frequencies, and convenient chunking of larger balances).
For a good summary of some of my ideas and core beliefs you can read this article.
As part of my psychological research, I am conducting field experiments
with innovative psychological techniques that promise an immediate positive bottom-line impact. If you and your institution would like to explore participation in some of my experiments, please contact me!
Credit Risk Management
What is credit risk management? A hurdle consisting of rules and processes impeding the sales force in originating loans? A heroic effort to protect the bank against a constant bombardment with applications from ineligible borrowers? Volumes of reports and statistical algorithms? Obviously, no.
Truly superb lending businesses are built on a superb credit risk management strategy. I define such a strategy as a holistic, end-to-end vision implemented through product design, go-to-market strategy, underwriting IP, and tools enabling highly effective and efficient processes. Superior choices around product and channel cause the right borrowers to self-select and motivate them to service and repay the credit. Such a strategy originates in a superior understanding of borrowers and a brilliant answer to the question how to find, attract, and retain them. Unique intellectual property around these features and privileged access to data create the competitive moat to build a lasting lending franchise.
My passion is to help clients to daringly enter uncharted territories - new markets, new businesses, and unbanked populations - or to revolutionize legacy lending businesses through digitalization and transformation.
Latest thinking
How to adjust credit scores for Covid-19 How to recession-proof your credit scorecard Social media and credit scoring: Hype or the future? The magic trick of loan pricing with continuous LGD Wholesale credit risk models: How multinational banks can solve the "small data" dilemmaCredit portfolio risk management
My PhD thesis "Predicting and Hedging Credit Portfolio Risk with Macroeconomic Factors" was written when the banking world was still optimistic that internal rating systems and sophisticated economic capital models would afford substantial capital savings. In my research, I showed both how using macroeconomic factors to dynamically recalibrate Probability of Default (PD) models can reduce the magnitude of Unexpected Losses (UL) and that contemporaneous macroeconomic factors only have limited value in explaining and hence hedging residual systematic credit risks.
Conduct risk
In my blog post "Smoke and mirrors: The subtle art of managing conduct risk" I offer innovative thought on how to use psychological strategies to reduce unethical and non-compliant behavior in a company and thus reduce conduct risk.
