There are dozens (or even hundreds) of checks that have to be done on every merchant application you receive. Without the right tools, this process can quickly become one of the most expensive, time-consuming parts of any underwriter’s job. Thankfully, automated systems can reduce approval time on low-risk accounts so your underwriters can refocus their efforts where the human touch is needed most — complex and high-risk applicants.
Automated underwriting tools accomplish this by analyzing patterns to identify where flags are triggered most frequently and presenting a “scorecard” with a detailed risk analysis. Your teams can then refine those scorecard rules to reduce wasted time, minimize unnecessary flags and push more approvals forward.
The key is figuring out how to find the signal in the noise — a task easier said than done in a data-dense process like underwriting. Below, we’ll take a closer look at risk-scoring rules and how automated solutions can save your underwriters time and effort.
Refining Risk Scoring Rules Is a Dynamic Process
Automated underwriting works on pre-set rules. The provider sets pass/fail requirements for each check (along with any other specific, customized risk criteria,) and the system determines if the threshold was met. If not, a flag goes up to either auto-decline the application or alert the underwriting team to review it manually. It’s a simple system, and its effectiveness is at the core of what makes automated underwriting so useful.
But what if the rules aren’t properly optimized?
Here’s an example. Imagine a provider has its system set to flag any application with a credit score below 630. When an application comes in with a credit score of 620, it gets flagged for review. The system might even recommend a decline depending on the overall scorecard. However, since a 620 credit score is so close to a 630 score, when the underwriter goes in to review the application, they may still approve it, especially if the rest of the application is in good order.
This is a significant opportunity for refinement — if the provider can identify it.
After all, if underwriters are approving applications with scores between 600 and 629 anyway, why is the flag threshold set at 630? The simple answer is that somewhere along the line, 630 probably was the right cutoff — but it was never updated as the provider’s risk tolerance went up or their overall underwriting process improved.
Providers often treat their underwriting systems as static rather than evolving. Because of that, examples like this, where applications are needlessly declined or sent for manual review, are fairly common. In these cases, properly-refined scoring systems can save underwriters an enormous amount of time.
Refining Checks and Workflows To Squeeze More Out of Your Underwriting Tools
The reason so many providers treat automated underwriting rules as “set-and-forget” is that refining them can be challenging, especially in high-volume environments. If your team is processing hundreds or even thousands of applications, it can be hard to know where to start.
But if your goal is maximizing the efficiency and effectiveness of your underwriting, it has to be done. Constantly analyzing which flags are the most common and why they’re triggering is a critical part of getting the most value out of your investment in automated underwriting.
So, how does it work?
Identifying Patterns in a Sea of Merchant Data
Refining automated underwriting checks is all about picking out the patterns in your approvals, pending accounts and declines over time. Start by asking yourself which flags are snagging applications the most often and why.
For example, a single application being flagged for a mismatch between the name and social security number (SSN) is useless as a data point; it could be the result of a random error or data entry mistake. But if that flag triggers over and over and over again, that could mean something more significant. Is it fraud? Or is your signup form improperly validating the SSN field, allowing typos like extra numbers or letters to sneak through?
Simple, avoidable errors like bad data validation and slightly unoptimized score thresholds are common. But, even small problems can slow down approvals and create unnecessary rework, so finding and fixing them is crucial.
Unfortunately, with potentially 100+ checks in your ruleset, identifying these patterns manually can feel outright impossible — which is why so many providers avoid doing it altogether. It’s possible to track flag patterns with spreadsheets, but it’s extremely time-consuming. Instead, the best way to optimize your risk analysis workflows is by using the reporting tools built into your underwriting system, like NMI’s ScanX Scorecard Insights.
NMI Scorecard Insights Makes Optimizing Your Underwriting Fast and Easy
Scorecard Insights is a new reporting tool built into the NMI ScanX automated merchant underwriting system. It’s designed to make it as easy as possible to see the trends in your scorecard flags so you can identify opportunities to refine rules or improve processes.
Scorecard Insights enables you to generate custom reports based on time, scorecard type, individual underwriters and merchant groups, all in an easy-to-read dashboard. In a matter of clicks, you can get a high-level, at-a-glance view of where most of your flags are occurring or dig down into the details to determine exactly which flags are being triggered most often and why.
By putting the information you need at your fingertips, Scorecard Insights makes refining your workflows a quick, easy task. That not only facilitates an automated underwriting process that evolves alongside your business, but it also helps you get to the point of reliable auto-decisioning potentially months faster. The ultimate result is more application approvals, more accurate risk assessments and maximum time saved.
To find out more about how Scorecard Insights can help you push the benefits of ScanX to new heights, reach out to a member of our team today.
Don’t just turn on payments, transform the way you do business
- Generate New Revenue By adding or expanding payment offerings to your solution, you can start earning higher monthly and transaction-based recurring revenue.
- Offer the Power of Choice Allow merchants to choose from 125+ shopping cart integrations and 200+ processor options to streamline their onboarding.
- Seamless White Labeling Make the platform an extension of your brand by adding your logo, colors and customizing your URL.