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Summary of Predictive Insights

The document outlines key risk factors for customer delinquency, highlighting employment status, credit card type, and credit utilization. It recommends a targeted early intervention program for high-risk customers, aiming for a 15% reduction in delinquency within six months. Additionally, it addresses ethical AI considerations, proposing fairness metrics and model explainability techniques to mitigate bias and enhance transparency.

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8 views2 pages

Summary of Predictive Insights

The document outlines key risk factors for customer delinquency, highlighting employment status, credit card type, and credit utilization. It recommends a targeted early intervention program for high-risk customers, aiming for a 15% reduction in delinquency within six months. Additionally, it addresses ethical AI considerations, proposing fairness metrics and model explainability techniques to mitigate bias and enhance transparency.

Uploaded by

jobinjinsa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Summary of Predictive Insights

Top 3 Risk Factors

Employment Status: Unemployed customers have a higher rate of


delinquency compared to those who are employed or self-employed. This
indicates a strong link between consistent income and timely payments.

Credit Card Type: Customers with a Business credit card show a


surprisingly high delinquency rate. This may suggest that a significant portion
of these customers are small business owners who face unique financial
pressures.

Credit Utilization: While not a strong individual predictor, customers flagged


as delinquent have a slightly higher average credit utilization, indicating that
higher debt levels relative to available credit could contribute to a higher risk
of missed payments.

Business Recommendation Framework


SMART Recommendation

Specific: Launch a targeted early intervention program for new customers identified
as high-risk, focusing specifically on unemployed individuals or business cardholders.
Measurable: Aim to reduce the delinquency rate within this high-risk segment by
15% within the next six months. Achievable: The program will utilize proactive
communication (e.g., automated reminders, personalized financial advice via SMS or
email) to address potential issues before they escalate. Relevant: This program will
directly address key risk factors identified in our analysis, leading to a decrease in
delinquency rates and a reduction in collection costs. Time-bound: The program will
be implemented and its effectiveness will be measured over a six-month period, with
a full review at the end of the term.

Ethical and Responsible AI


Considerations
Fairness Risks and Mitigation

Risk 1: Socioeconomic Bias The model might disproportionately flag


customers in certain employment categories (e.g., Unemployed) as high-risk,
potentially creating a feedback loop where these groups are offered fewer
financial products or receive harsher terms.
Mitigation 1: We will use fairness metrics like the Disparate Impact Ratio
to continuously monitor the model's predictions across different employment
statuses. If a bias is detected, we will adjust the model's features or apply a re-
weighting technique to ensure fair and equitable outcomes for all customer
segments.

Risk 2: Algorithmic Transparency Using a complex model like a Gradient


Boosting Machine could make it difficult for stakeholders to understand why a
specific customer was flagged as high-risk. This lack of transparency could
hinder trust and make it difficult to explain decisions to regulators or
customers.

Mitigation 2: We will use model explainability techniques such as SHAP


(SHapley Additive exPlanations) values to provide clear, human-readable
explanations for each prediction. This will allow the collections team to
understand which features most influenced a customer's risk score, enabling
them to make more informed, empathetic, and explainable decisions.

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