Original Article

Can Machine Learning Algorithms Change the Landscape of Credit Card Loan Portfolios?

FinNovate Insights Journal

  • Year: February 2024
  • Volume: 1
  • Machine learning gives the capability to move from risk-based to profit-based underwriting in credit card loan portfolios.
  • The banks can now focus on a ‘sweet spot’ that exists on the risk gradient which focuses on borrowers with sufficiently large credit limits, sufficiently long loan lives, and sufficient revolvers to accumulate finance charges that the borrowers subsequently pay back. The objective of profit-based underwriting should be to identify and enable operations in this sweet spot.