Qorus-Infosys Finacle Banking Innovation Awards 2024

Carrington Labs: Alternative AI credit risk & limit recommendation solutions

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06/06/2024 Banking Innovation

About

Carrington Labs offers loan-specific alternative risk scoring and limit recommendations to drive improved P&L performance.

Innovation presentation

Concept and Objectives: Carrington Labs, a subsidiary of Beforepay Group, offers an AI-powered platform designed to optimize credit risk assessment and loan management. Our objective is to provide ethical financial solutions that enhance financial inclusion, reduce defaults, and offer transparent lending practices.

Reasons Behind: Traditional credit scoring models often exclude underserved individuals. Our AI models incorporate alternative data, creating a comprehensive credit profile that enables safer lending decisions, fostering financial stability for customers.

State of Competition: While traditional credit bureaus focus on limited financial data, Carrington Labs leverages over 50,000 variables, including spending patterns and payment behaviors, to predict creditworthiness accurately. This positions us ahead of competitors who rely on outdated scoring methods.

Sources of Inspiration: Inspired by the need for ethical lending solutions, we aim to disrupt predatory lending practices by offering a safe, transparent alternative. Our use of AI and ML aligns with our mission to empower consumers financially.

Departments Involved: Data Science, Engineering, Product Development, and Customer Support teams collaboratively develop and enhance our AI models and lending solutions.

Main Results So Far: Our platform's success is reflected in the rapid growth of Beforepay Group's award-winning consumer-lending fintech, Beforepay, which has originated more than 4 million loans and averages 35,000 loans each week (based on Beforepay Group 2023 Annual Report).

Uniqueness of the project

Carrington Labs' platform is unique due to its use of alternative data and credit scoring methods and advanced AI and ML capabilities that provide accurate, real-time credit risk assessments and personalized loan limits. This represents a disruptive innovation in the lending market, shifting from traditional, rigid credit scoring to a more inclusive, dynamic model.

Innovative Aspects/Characteristics:

Explainable data-driven AI models - Our AI models evaluate over 50,000 variables to find the best 400-500 predictors of credit risk.

Alternative credit risk management - We use non-traditional data clients provide to create a fuller picture of the loan applicant’s creditworthiness, driving more inclusive credit decisioning.

Mission-driven business - Our solutions expand access to finances in a safe way, fostering financial inclusion.

Personalized Loan Limits - Programmatic A/B testing and default elasticity analysis ensures value-maximizing loan limits are set that minimize default risk while optimizing and increasing margin contribution.

Differentiating Factors:

Alternative Data Utilization - Unlike competitors, we use non-traditional data sources to evaluate creditworthiness, offering a fuller picture of financial health.

Real-Time Adaptability - Continuous model retraining ensures our platform remains responsive to economic changes and user behaviors.

Fit with Current Business Model: Carrington Labs aligns with Beforepay Group's mission of ethical lending by integrating AI and ML technologies to offer transparent and responsible financial solutions. Our innovation complements the group's existing product offerings, enhancing customer trust and market positioning​​​​​​.

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