A Dynamic Credit Card Limit, You Dream it - We Do it
Leveraging AI to extend card limits based on data-driven risk analysis
We’re not playing the suspense game today. You must have come across scenarios where credit cards get declined due to exhaustion of the limit, but here is a revelation for you- credit cards can be used beyond a prescribed limit.
Due to specific guidelines over the years and rigid systems, banks have not yet provided any mainstream automated solution where a low-risk customer gets instant approval of extra limits in real-time. This means that customers can get an instant additional credit limit on their cards, allowing them to handle emergencies or other big purchases. So if the customer’s credit limit is USD 1350 but they have never defaulted in the past 18 months, and lets say they find themselves in an emergency where they have to pay USD 1700 (or more) on the spot, then guess what? Just at the time of swiping, instead of the card getting declined, it will dynamically extend the limit of USD 1350 and allow for payment of the whole amount! Too good to be true? Well, it just gets better.
How does the AI Solution Address a Bigger Problem?
Obviously, this situation is great from a consumer stand point. But what about the bank that has to bear the brunt of non-payment & default? Here’s where we let our AI technology wear the hero’s cape.
The possibility of a credit limit increase is directly associated with credit risk assessment. The AI-based dynamic credit limit assessment system provides a comprehensive insight (through prediction models) into the top defaulters and the top non-defaulters. Accordingly, credit limits are only extended for customers identified as low-risk or non-defaulters. Not only does this allow banks to increase customer stickiness, but it also allows banks to EARN more by increased fee on the increased transaction amount.
Let’s acquaint you with the Current Process for Credit Limit Setting
The current credit limit procedures do not have an automated process for a dynamic increase of the credit limit. The current process entails users swiping their credit cards at the terminal, followed by the credit card system performing a check on the available limit by the backend system. The result of the check is returned to decide whether the user has a sufficient credit limit for the particular transaction or not.
How does AI fit into setting the Credit Limit?
One of the options for AI integration would be to provide a robust and real-time solution. Thanks to companies like Fluid AI, the real-time API can receive data from the credit card switch. With this AI-powered solution, the transaction and the API respond to whether the user can be offered an additional credit limit. The AI engine considers several crucial aspects of the customer’s data to assess the risk, based on which the decision is sent back to the credit card system regarding the approval of the extended limit (or not) for a specific customer.
Another approach where AI contributes is speeding up the credit limit assessment by automation. AI algorithms are very capable of providing analytical insights in real-time. The data of the transaction amount and customer’s details can be compared to a stored table that contains the extended credit limit allowed per user. With AI capabilities, the table is kept up-to-date daily based on the customer’s dynamically changing credit limits related to spending and payback data.
Additional Benefits of Incorporating AI for Real-Time Predictions
With AI it is now possible to seamlessly integrate Credit Card Systems, Core Banking, CRM, Workflow and other services to analyze customer data. Regular batch processing is possible to ensure updated customer data on credit limit and spending. We know that a crucial aspect of banking and credit approval is real-time data processing, which can be achieved by using real-time APIs. It is fascinating to see AI incorporated even for a customer profile check, including gaining crucial insights from customer data for real-time predictions. This approach can allow accurate analysis of customer spending habits, making a good case for adopting AI to build a robust system for quick decision-making for instant credit limit extensions.
Types of Customer Data for Assessment by AI Solutions for Credit Cards
Let’s dive in.
Typically, customer data includes demographic data, which gives information on name, age, gender, and time at a current address. This data is crucial for tracking the original location of the transaction. Additionally, there is data that defines the relationship of the customer with the bank. Similarly, there is more meaningful data in card transaction history, repayment history, credit history. Card data is one of the most essential data points for understanding eligibility and finding the defaulters. Finally, financial data is taken into account, which defines the monthly income, due dates, and installment dates for a customer, and it can be used to identify a customer’s loan history. Lastly, occupational and additional relevant data such as profession, marital status, number of dependents, and home type are used for a detailed outlook of a customer’s profile.
Don’t wait too long, be dynamic and opt for dynamic credit limits. #MakeITHappen for you and your customers!