AI Consulting

Reinventing Credit Risk with AI: A Banking Transformation

Nov 15, 2023

In the dynamic financial landscape, a leading U.S. bank faced a critical challenge: their credit risk modeling system was outdated, inefficient, and incapable of scaling with their expanding customer base. The manual data analysis procedures were not only time-consuming but also lacked the precision required in the modern data-driven banking environment. It was evident that a more sophisticated, accurate, and efficient solution was necessary to handle the escalating volume and complexity of Big Data.

What was the business objective?

The bank's primary goal was to thoroughly revamp its credit risk assessment framework to achieve a higher degree of accuracy and efficiency. In response to the limitations of the incumbent semi-manual system, the objective was to implement a state-of-the-art, fully automated, machine learning-based model.

This advanced model would possess the capability to handle vast amounts of data, enabling comprehensive analysis and providing real-time predictive insights. By leveraging these capabilities, the bank aimed to enhance credit decision-making processes and optimize risk management strategies, ultimately driving better overall performance and outcomes.


How did we accomplish it?

Our journey with the bank began with a deep dive into their existing credit risk model to identify key areas for AI integration. Sigmoidal's team of experts deployed an array of sophisticated machine learning tools, including Python,TensorFlow, and Keras, crafting a predictive model that could analyze vast datasets with agility and accuracy. We embraced the challenge of Big Data head-on, utilizing PySpark and Hadoop for seamless data analysis and processing while leveraging Hive and SQL for effective data warehousing and complex querying tasks.

The technical architecture of our solution was robust, entailing a rigorous process of data preprocessing to cleanse and normalize the data, followed by feature engineering to identify the most predictive factors. Model training involved tuning a myriad of parameters to teach the system to discern subtle patterns indicative of credit risk. Post-training, the model underwent a meticulous deployment phase, where it was integrated into the bank's operational environment to begin delivering insights.

To close the loop, we equipped stakeholders with powerful Tableau dashboards, offering a granular view of the model's performance and the underlying credit risk dynamics. This allowed for real-time monitoring and swift strategic adjustments, ensuring that the model remained responsive to the ever-changing patterns in credit behavior.


The Results

The transformation was profound. The bank's adoption of our AI solution marked a leap forward in its credit risk management capabilities. Not only was there a stark reduction in manual processing time—freeing up valuable resources and reducing operational costs—but the model's predictive accuracy soared, resulting in a remarkable 20% reduction in losses and default rates. 

The bank's credit decisions became more dynamic and responsive, powered by real-time insights that enabled proactive risk management. The tangible outcomes were significant: improved loan quality, optimized interest margins, and an overall healthier portfolio. The ripple effects of this advancement were felt across the institution, as improved risk mitigation strategies led to greater investor confidence and a strengthened market position. 

As the bank leveraged our AI-driven insights, they were able to refine their credit policies, tailor their product offerings, and enhance customer satisfaction through more personalized and efficient service. In the grand calculus of finance, these improvements represented not just savings but revenue growth opportunities, as the bank could confidently expand its credit offerings, secure in the knowledge that its risk was managed by the most sophisticated AI tools available.

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Technologies used

Advanced Machine Learning Development with TensorFlow, and BERT model.

Scalable Big Data Analysis and Processing with PySpark and Hadoop.

Efficient Data Warehousing and Querying with Hive and SQL.

Intuitive Data Visualization and Dashboard Creation with Tableau.

Savings for the client


Achieved decrease in expenses associated with credit risk analysis processes.

$10 million

Estimated annual savings from reduced credit losses due to enhanced decision accuracy.

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