Insights into Effectiveness through Data Science

We’re excited to share our Credit Risk insights from Q1 2025! We’ve never seen such a wide gap between recent delinquency data and forward-looking lender sentiment. Card delinquencies decreased slightly without any real tightening and Personal Loan delinquencies remained relatively stable. However, consumer sentiment metrics approached all time lows and, in conversation, consumer lender sentiment trended […]

We’re excited to share our Credit Risk insights from Q4 2024! This quarter, our team of experts dove into recent trends and observations across all US consumer credit asset classes. We also continued our monitoring of potential post-inauguration impacts to consumer lending.

Over the last four years, the federal government has embarked on an unprecedented array of assistance programs for student loan borrowers. As of October 1st, the last universally-applied major adjustment (a bureau DQ freeze) has drawn to a close. For the first time since March of 2020, student loans will begin to accumulate delinquent statements [...]

Check out our latest Credit Risk insights from Q2 2024! In this report, we discuss headwinds and tailwinds affecting the US consumer credit industry across all asset classes. This quarter we review key trends in the mortgage and auto markets, heightened delinquencies in credit cards, and tighter underwriting standards across most asset classes. While certain metrics have continued improving since the pandemic, there is strong evidence that consumers are still feeling the squeeze.

A Small Business (SMB) lender in the US approached 2OS to aid in the creation and implementation of a custom credit risk model, valuations model, and a full credit policy. The new credit infrastructure supported future opportunities to increase origination volume of profitable, low-risk loans.

Check out our latest Credit Risk insights from Q1 2024! This quarter we focus on the headwinds and tailwinds affecting the US consumer credit risk industry across different asset classes, including our thoughts on the new late fee regulation, an analysis on Credit Builder products, and our insights on a credit environment with continued elevated delinquencies having a recent March decline.

Fraud detection and prevention are critical concerns in today’s industry. At 2OS, our team of fraud experts is committed to guiding our clients toward optimal fraud outcomes. Explore our latest case study to discover how we utilized association networks to help a large bank reduce false positives, predict linkage influence, and uncover fraud schemes.

Over 75% of consumer complaints submitted to the CFPB last year were related to Credit Bureau Reporting. With delinquencies on the rise and consumers struggling to obtain credit due to tighter credit standards, we expect to see an increase in consumers disputing historical delinquencies in an attempt to improve their credit score.

This paper, authored by Justin Metacarpa and Dave Wasik, offers a roadmap to improving Credit Bureau Reporting and Disputes processes, including an overview of some key challenges and where the major pain points may lie.

Our latest white paper offers a snapshot at the current state of AI usage in lending, with a specific focus on regulatory alignment. Authors Aaron McGuire and Syed Raza PhD. aim to address key questions and topics including nuances in Large Language Models (LLMs), the intersection of automated decisioning and AI, and the potential risks of AI in transactions servicing. 

In the latest of a series of moves to reduce ”junk fees” from banking products, the CFPB has announced new regulation to reduce credit card late fees to a maximum of $8, without higher late fee safe harbor amounts for subsequent violations. While this regulation will only apply to card issuers with greater than 1 million credit cards at this time, this regulation will lead to large reductions in approval rates, especially for subprime borrowers, and reduce the profitability of existing card portfolios. In this white paper, we analyzed the proposed regulation by looking at (1) Historical precedent and the current landscape of late fees in the U.S., (2) a case study simulating the impact of proposals on a subprime credit card portfolio, and (3) a walk through of the impacts this regulation will have on the back book.

Check out our latest Credit Risk Insights from Q4 2023! This quarter we focus on the various headwinds and tailwinds affecting the US consumer credit risk industry overall, as well as more specific trends across Credit Cards, Personal Loans/Mortgages, Auto Loans, and Student Loans.

A regional credit union in the US approached 2OS to aid in the implementation of its new Initial Line Assignment (ILA) and Credit Line Increase (CLI) policies. Through an initial diagnostic and an analytic deep- dive, 2OS developed new initial lines and CLI strategy to improve member engagement and profits.

In our latest white paper we examine the resumption of Student Loan repayments, explore insights from Equifax Ignite data on performance expectations, and discuss how lenders can best prepare. 

Check out our latest Credit Risk insights from Q3 2023! This quarter we discuss headwinds and tailwinds affecting the US consumer credit risk industry across all different asset classes, including our thoughts on rising delinquencies with increased interest rate environments, and our expectations with the resumption of student loan payments.

Check out our latest Credit Risk insights from Q2 2023. This quarter we focus on the headwinds and tailwinds affecting the US consumer credit risk as a whole, as well as discuss recent trends across Credit Cards, Personal Loans/Mortgages, Auto Loans, and Student Loans.

During the pandemic, consumer stimulus led to lower credit losses and therefore less of a strategic focus on Recoveries. As the U.S. enters a more challenging macro-economic environment characterized by inflation, interest rate increases, and resulting pressure on consumers, we are seeing losses increase back to pre-pandemic levels and even worse for some segments. Now is a perfect time to revisit Recoveries and refresh your strategic and operational approach. This paper will explore how the industry has evolved since the last economic downturn, provide an updated view of winning strategies, and highlight what is at stake for your organization.

Over the past decade, the Small Business (SMB) lending field has seen an explosion of innovation, with groundbreaking advancements in data sources, API technology, machine learning, digital onboarding, and instant decisioning. Initially driven by larger banks, these innovations have now been embraced and implemented at scale by fintech companies. In this article, we want to take you on a journey of how the SMB lending category has transformed over time, explore the emerging ecosystem of new technologies and data sources, and discuss how executives at banks, lending institutions, and payments companies can rapidly improve upon their current SMB offerings.

Check out our latest Credit Risk insights from Q1 2023, focusing on trends across various asset classes, noticeable decreases in risk levels among subprime and low-income consumers, and continued risk score warping.

As delinquencies and Collections efforts increase across the industry, our latest white paper provides a roadmap for where the difficulties and pain points lie. We start with a framework for the root causes of complexity within Collections, provide a variety of examples, and suggest a set of important first steps to make Collections a more well- managed part of the lending lifecycle.

An international bank enlisted 2OS to help spot and stop BIN Attacks. After analyzing the client’s data, 2OS identified four new rules that were effective in picking up previously undetected attacks while also minimizing the false positive rate.

Our latest white paper compares the performance of various data processing methods in terms of predictive performance for structured data. This paper also seeks to identify and recommend preprocessing methodologies for tree-based binary classification models, with a focus on eXtreme Gradient Boost-ing (XGBoost) models.

2nd Order Solutions has seen a sharp rise in new credit acquisitions in Brazil amid a high interest rate environment, which has led to debt-to-income levels that are at an all-time high. This whitepaper explores the consequences of this rapid increase in debt-to-income, uncovering a concerning risk outlook ahead. In addition to deep diving into the delinquency trends, this report uncovers specific populations that have been hit the hardest and suggests what lenders should do to help mitigate the risk.

An international bank, worried about future rises in variable interest rates, approached 2OS to help identify the customers most at-risk within its home loans portfolio. The client wanted the 2OS team to build out a risk segmentation along with contact and offer strategies for each segment.

Check out our latest Credit Risk insights from Q4 2022, focusing on trends across various asset classes, inflation’s impacts on lending, and risk score warping.

This paper reviews the overall state of consumer credit, focusing on credit cards, personal loans, auto loans, student loans, and mortgages. In addition, we examine the impacts of inflation on lending, the current macroeconomic outlook, and continued observations of risk score warping.

This paper looks at some of the trends and insights from Q2 2022 with a focus on the increasing risk levels among recent vintages for unsecured lending products and the effects of inflation on the auto lending industry.

A mid-sized lender in the US approached 2OS to aid in the optimization of its current credit line increase (CLI) policy. Through an initial diagnostic and an analytic deep-dive, 2OS developed several tests and new CLI programs for the client to implement in order to continue its high growth rate.

This paper highlights emerging trends and deep dives into the key areas Fintech leadership teams need to understand in order to create an effective default management strategy while quickly building a strong Collections practice.

This paper looks at some of the trends and insights from Q1 2022 with a focus on how lenders can leverage BNPL data, how the surge in inflation is impacting lending, and how the rise in asset prices can impact your P&L with a focus on auto loans.

This paper explores whether delinquencies and losses will stay at historically low levels, or if the effects of COVID have reversed and signs of worsening are beginning to show.

A large Latin American Fintech approached 2OS with an urgent fraud problem that needed diagnosis. We were able to not only deal with the timely attack, but also identified new areas of weakness and implemented stronger defenses.

PE firms often rely on 2OS’s expertise in the lending space to advise them understanding outstanding loan portfolios in M&A opportunities.

This paper lays out best practices we have developed to better leverage Shapley values in enabling ML model deployment in credit issuance. Through a variety of analyses and comparisons to existing Adverse Action methodology, we demonstrate how Shapley values can be used to satisfy the Adverse Action requirements and break down a common barrier that lenders face in adopting more sophisticated ML models.

2OS worked with a major international bank to redesign their machine learning model responsible for predicting risk on delinquent personal loan accounts.

Written in partnership with BCG, this paper examines the changes to the Consumer Financial Protection Bureau (CFPB) regulations around Debt Collection, and offers some tips on the implications they will have on the industry both over the next year and years to come.

A client needed help increasing enrollment in their deferral/payment programs. so our team helped them review their application process and ran analytics on the increased value from the enrollment strategy.

Working with our consulting partners at Boston Consulting Group, this paper deep dives into how COVID-19 related shifts in consumer behavior and purchasing patterns have exposed new fraud vulnerabilities and what lenders must do to protect themselves in the current economic environment.

Written with our colleagues at BCG, this paper explores how unsecured loan delinquencies are down and call centers are overstaffed during the worst unemployment and public health crisis of our lifetime; and deep dives into managing the loan deferral programs that are keeping millions of customers current on their loans. 

Co-authored by our partners at Boston Consulting Group, this paper focuses on recommendations for making credit and lending decisions at acquisitions stage and for existing customers, during an unprecedented time in financial services.

Written with our partners at BCG, this paper provides six specific recommendations on how lenders of all types and sizes should navigate through this difficult time.

2OS worked with a client to build them an NPV model to help re-evaluate their credit line increase strategy across all of their products.

Having worked with 100’s of issuers, 2OS has proven strategies for implementing new credit policies that attract new customers, while still maintaining manageable risk levels.