June 2017 by Finacity
Finacity has begun analysing payments data – a by-product of its receivables financing business – in a bid to create an in-house predictive default tool that informs at both micro and macro levels.
According to Adrian Katz, Finacity CEO: “We have roughly three million-plus obligors and track approximately 32 million receivables per year. We have the ability to extract a lot of information from that data. One of the things that we’ve learnt is that at the macro level, there are trends we’re seeing that others may not be aware of, because they don’t have the same micro data set.
Finacity has integrated accounts receivable data for a large number of debtors across different industries and countries and is distilling this information into a set of scores. “Our data notes the trends not the causes,” says Katz. The company’s project is to provide predictive credit assessments by country, industry and company. The dataset spans from Finacity’s first client in 2002 through to today.
Some of the results are surprising. For example, in the UK, where the Brexit vote resulted in a sovereign downgrade at the macro level, the fallout has had little impact on the payment patterns of UK corporates at the micro level. “UK Corporates are still paying on time and as reliably as before, this is true regardless of whether the receivables are intra-country or cross-border. Even the decline in the value of sterling has yet to have an impact,” says Katz.
Brazil and Mexico are also producing similarly unexpected results. “We initially saw a deterioration of payment behaviour when Brazil was downgraded. But since then there’s been an improving performance from Brazilian corporates, despite people’s perceptions. When we score behaviours a significant factor we look at is the average days for payment and in Brazil that measure has shrunk.
“While Mexico’s rating is stable, many macro considerations are deteriorating, yet when we look at our data we see a steady performance in the corporate sector in the number of days past due,” says Katz. Stable performance data for the corporate sector is contrary to an anti-Trump political backlash, declining oil price, a potential leftist win in the 2018 election and the hit on the value of the peso.
For now, the new predictive tool is being developed for in-house use only. But Finacity is exploring the viability of a commercial product launch.