Can System Log Data Enhance the Performance of Credit Scoring?—Evidence from an Internet Bank in Korea

The credit scoring model is one of the most important decision-making tools for the sustainability of banking systems. This study is the first to examine whether it can be improved by using system log data that are stoed extensively for system operation. We used the log data recorded by the mobile application system of KakaoBank, a leading internet bank used by more than 14 million people in Korea. After generating candidate variables from KakaoBank’s log data, we created a credit scoring model by utilizing variables with high information values and logistic regression, the most common method for developing credit scoring models in financial institutions. To prove our hypothesis on the improvement of credit scoring model performance, we performed an independent sample t-test using the simulation results of repeated model development and performance measurement based on randomly sampled data. Consequently, the discrimination power of the proposed model using logistic regression (neural network) compared to the credit bureau-based model significantly improved by 1.84 (2.22) percentage points based on the Kolmogorov–Smirnov statistics. The results of this study suggest that a bank can utilize the accumulated log data inside the bank to improve decision-making systems, including credit scoring, at a low cost.

Can System Logs Enhance the Performance of Credit Scoring? – Evidence from an Internet Bank in Korea

This study is the first to examine whether the performance of credit rating, one of the most important data-based decision-making of banks, can be improved by using banking system log data that is extensively accumulated inside the bank for system operation. This study uses the log data recorded for the mobile app system of Kakaobank, a leading internet bank used by more than 14 million people in Korea. After generating candidate variables from Kakaobank's vast log data, we develop a credit scoring model by utilizing variables with high information values. Consequently, the discrimination power of the new model compared to the credit bureau grades was significantly improved by 1.84% points based on the Kolmogorov–Smirnov statistics. Therefore, the results of this study imply that if a bank utilizes its log data that have already been extensively accumulated inside the bank, decision-making systems, including credit scoring, can be efficiently improved at a low cost.

Internet banking brand strategies amongst German commercial banks since the 1990s

Purpose In the mid-1990s, market demands for around-the-clock (24/7) banking and financial transacting began to converge with advances in internet-based technologies. This confluence of forces gave rise to the birth of internet banking. Building upon the relevant literature, this paper aims to develop a set of propositions to address the following questions: what brand strategy or strategies were used at the birth of internet banking roughly 25 years ago? In the years since then, have merger and acquisition transactions involving internet or “direct” banking businesses only come to fruition where the direct bank was previously under a specific brand strategy? And finally, where there have been changes in internet banking brand strategy, have these invariably been in the ultimate direction of one particular brand strategy? Design/methodology/approach Because of the exploratory nature of the research question, this paper uses a case study examination as the research approach. In addition to gaining deeper insight into issues involving internet bank branding as these actually existed, this paper aims to propose preliminary and tentative conclusions that can later be tested empirically with larger sample size. The case studies specifically examine German commercial banks with direct bank businesses. Findings In the examination of the German commercial banks, this paper finds that their internet banking activities some 25 years ago were, in fact, never launched using an umbrella brand strategy but rather with a combined brand strategy or multi-brand strategy. Mergers and acquisitions (M&A) transactions involving internet-based direct banks were only consummated where the direct bank had previously been operated by the parent bank using a multi-brand strategy. Where the brand strategies of internet-based direct banks have been changed by their parent banks, this has invariably been in the direction of an umbrella brand strategy. Originality/value Within the marketing and banking literature, there are no in-depth examinations of internet banking brand strategies to be found. This paper, in addressing this research topic, marks the first full survey of German commercial banks with internet-based direct banking businesses. This survey, moreover, examines branding not only at the time that internet-based direct banks were first established starting in 1994 but also the subsequent development of internet banking brand strategies to the present day.

A New Model to Identify the Reliability and Trust of Internet Banking Users Using Fuzzy Theory and Data-Mining

As a result of changes in approach from traditional to virtual banking system, security in data exchange has become more important; thus, it seems essentially necessary to present a pattern based on smart models in order to reduce fraud in this field. A new algorithm has been provided in this article to improve security and to specify the limits of giving special services to Internet banking users in order to pave appropriate ground for virtual banking. In addition to identifying behavioral models of customers, this algorithm compares the behaviors of any customer with this model and finally computes the rate of trust in customer’s behavior. The hybrid data-mining and knowledge based structure has been adapted in this algorithm according to fuzzy systems. In this research, qualitative data was gathered from interviews with banking experts, analyzed by Expert Choice to identify the most important variables of customer behavior analysis, and to analyze customer behavior and customer bank Internet transaction data for a period of one year by MATLAB and Clementine. The results of this survey indicate that the potential of the given structure to recognize the rate of trust in Internet bank user’s behavior might be at reasonable level for experts in this area.

Client Cluster Identification of Internet Bank Services

Remarkable developments and innovation in the information and communication technology has led to significant paradigm shift in banking sector. Internet banking phenomenon has been widely accepted by the banks, as a convenient channel of service delivery owing to its multiple advantages. In spite of being beneficial to the users as well, the acceptance rate of this delivery channel is very slow among bank’s clients. In order to increase consumer internet banking, banks must take steps to leverage internet banking adoption among customers. Banks have to promote internet banking by segmenting their targeted customers and positioning them with suitable strategies. This study aims at segmenting the customers based on their usage of services and to identify the perceptions of consumer segments regarding the various attributes of online banking. Hierarchical cluster analysis, k-means cluster analysis was used to segment the respondents based on their usage of the internet banking service. The respondents were formed into three clusters viz, extensive users, moderate users and constrained users. A profile of each segment of user is made based on their demographic, psychographics and perception towards attributes of internet banking. Subject to their profile, usage patterns and their perception towards different attributes of internet banking, various recommendations were made to the service providers to formulate strategies targeting the specific type of users. This study would be facilitate the bankers to draft user focused strategies for increased usage of internet banking services.

Home and overseas experience in developing turquoise organization

Transformation of organizations is a regular and continuous process proving the development of all spheres of economy and society. The article deals with the theory and practice of establishing organizations of the new type, which can reveal the potential of every employee. The author investigated the evolution of organization development for the last 100 years, showed the foundations of the theory of turquoise organizations by F. Lalu and described three discoveries of this theory and the essential characteristics of the turquoise organizations, which could crucially change the current system of management and provide a real breakthrough in raising its efficiency. Special attention is paid to specificity of introducing the model of turquoise organization in Russian and overseas companies. Key elements of the organizational model of well-known foreign turquoise companies, such as Buurtzorg, Sun Hydraulics, FAVI, working in different fields, were given in the article. Competitive advantages of these companies working by turquoise principles of management and showing fast growth in key lines of activity were demonstrated. The author studied the experience of establishing turquoise organizations in Russia (the VkusVill company, the Saving bank, the Modulbank and the internet-bank Tochka) and identified the basic turquoise principles introduced in management of these organizations, their results and prospects of development and analyzed problems connected with limited use of the turquoise model. The article provides concrete recommendations aimed at introduction of turquoise principles in practice of Russian companies’ work.