The Highnote Delinquency Simulator: A Powerful Ally for Innovative Payment Experiences

Sep 22, 2023
Art Gendelman, Jatin Salla

Offering credit is an exciting prospect for any fintech or platform. After all, it’s a valuable way to gain deeper relationships with customers and get closer to the tops of their wallets. But for all the promise of credit card products, they come with several uncertainties: How does any account behave when the minimum payment hasn't been paid over time (also known as 'delinquent')? What happens with deferred payments? How do I manage the credit risk of delinquent accounts?

At Highnote, we recognized that our customers needed answers to these questions long before a credit card ever found its way into a customer's hand (and well before an account actually became delinquent). Enter our solution: the Highnote Delinquency Simulator. Here, we explore how fintech companies can leverage our Delinquency Simulator to supercharge their credit programs.

Understanding Account Aging Simulations

Our simulator isn't just a tool. In fact, internally, we refer to it as a “time machine” thanks to its powerhouse data capabilities. Fintechs that use our "time machine" can employ a program's preset credit parameters and a customer's projected payment behavior to test account behavior, giving fintechs a strategic advantage in planning credit risk.

Beyond mimicking delinquency behavior, customers can test what happens when various payment behaviors occur. For instance, what happens when a cardholder makes a payment in part or in full? What if there is a reversal on an ACH payment, and what impact does that have on the account’s delinquency? What would happen if there were a refund or chargeback on the account, and how would that impact account delinquency?

By analyzing this data, fintech companies can make informed decisions about credit card offerings, including interest rates, collections strategies, credit policies, and repayment terms. These fintechs can also decide if they want to change the parameters of their current offerings based on the simulation's outcome, helping them manage risk while better tailoring their programs to their target customer profile.

The Benefits of Delinquency Simulations for Fintech

- Credit Risk Mitigation: Traditionally, if a fintech or platform wanted to project various delinquency and payment scenarios, they’d need to wait weeks or even months to see a live account go delinquent. By using the Highnote Account Delinquency Simulator, these companies can see these projections in just minutes. This helps in identifying how the data provided by Highnote’s API can be utilized within the company’s platform, integrated with a third-party vendor, and executed in customer management credit policies. By understanding how different payment behaviors impact account aging, fintechs can develop risk mitigation strategies such as notifying customers of delinquent payments, suspending authorizations on payment cards, or adjusting credit limits.

- Product Customization: Highnote allows fintechs to tailor credit card products to meet different customer segments' specific needs and preferences. For example, they can choose when a webhook event should be triggered to notify themselves and the customer of an account’s delinquency. Or, they can adjust the threshold for the number of days an account can be delinquent before suspending associated payment cards. Fine-tuning credit policies based on simulation results can increase customer satisfaction and refine risk mitigation strategies.

- Competitive Advantage: Fintechs can gain a competitive edge by leveraging delinquency simulations. By allowing for rapid testing, iteration, and integration, fintechs and platforms can quickly gain insights on important product features and potential risks within their credit policies. This allows them to achieve speed to market faster than their competitors.

How This Plays Out in Practice

Consider how an account simulation scenario would play out for a Highnote customer. Say a company wants to offer a card with the following parameters:

  • Accounts are notified of their delinquency status after 30 days of delinquency
  • Payment cards are suspended after 60 days of delinquency
  • Accounts charge-off after 180 days of delinquency

Let’s say the company simulates some purchases as of today and moves the current, open statement back three months. In doing this, the company can see that the account has become delinquent. Not only that, but because of their set parameters, they’ll also be able to see that the account and its associated payment cards have been suspended and that no charge-off has yet occurred. For each of these events, the company can subscribe to a webhook notification, ensuring they never miss the latest status update.

Now, let’s say after this simulation, the company has decided these parameters are too restrictive. So, they decide to change the card suspension to 120 days. Now, when they run the simulator and set it back to three months, the company would see the account is still delinquent, but no card suspension or charge-off has yet occurred.

At the same time, the company can also run an ACH simulation to perform a repayment on an account and observe how making a partial or full payment could make the account current again. Further, the customer could run a chargeback simulation and observe how the provisional credit has been applied to the delinquent amount and impacted the account delinquency.

Once a company runs all these simulations, they can use this information to determine whether the account would work as expected and verify what action – in the event of a webhook notification from Highnote – they should perform on their side.

A Modern Tool for Modern Payment Challenges

The world of fintech – and the credit card industry in particular — demands innovation and adaptability. This makes the Highnote Delinquency Simulator a powerful ally for fintech companies aiming to introduce their own revolutionary products to the landscape. By harnessing the power of these simulations, fintechs can design credit card offerings that are not only attractive to customers but also financially sustainable in the long run. We're excited to apply our modern capabilities to help you solve your most pressing payment challenges.

Ready to supercharge your credit card program? Reach out to us today and discover how the Highnote Account Aging Simulator can revolutionize your credit offering.

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