A Credit Renaissance Is Beginning
 // . //  Insights // A Credit Renaissance Is Beginning

Going into 2020, traditional banking approaches to credit were already under strain. The data and analytics revolution pioneered by Big Tech had opened the realm of possibilities, with leading Fintechs and Neobanks adapting faster than the traditional banking industry to expand the range of bankable clients, and improve service levels and credit outcomes. The banking sector – constrained in part by the post-GFC regulatory consensus – was slow to react and left with increasingly outdated tools.

We believe the pandemic will shake the industry from its collective slumber. In the short term, it is likely to create a flood of stressed debt as companies and individuals buckle under the weight of the greatest post-war crisis to hit the world economy. In the medium term, we believe this dynamic will force banks to address their capability challenges, especially the lack of industry specificity, the lack of forward-looking analysis, and the under-utilisation of available data and analytical techniques, which will revolutionise their credit-modelling capabilities. In this paper we explore what we think the future of credit risk measurement needs to look like, the drivers for change and new capabilities required.