RFMS Method for Credit Scoring Based on Bank Card Transaction Data

22 Pages Posted: 16 May 2018

See all articles by Hansheng Wang

Hansheng Wang

Peking University - Guanghua School of Management

Jing Zhou

Renmin University of China

Danyang Huang

Peking University

Date Written: May 2, 2018

Abstract

Microcredit refers to small loans to borrowers who typically lack collateral, steady employment, or a verifiable credit history. It is designed not only for start-ups but also for individuals. The microcredit industry is experiencing fast growth in China. In contrast with traditional loans, microcredit typically lacks collateral, which makes credit scoring important. Due to the fast development of on-line microcredit platforms, there are various sources of data that could be used for credit evaluation. Among them, bank card transaction records play an important role. How to conduct credit scoring based on this type of data becomes a problem of importance. The key issue to be solved is feature construction: how to construct meaningful and useful features based on bank card transaction data. To this end, we propose here a so-called RFMS method. Here “R” stands for recency, “F” stands for frequency, and “M” stands for monetary value. Our method can be viewed as a natural extension of the classical RFM model in marketing research. However, we make a further extension by taking “S” (Standard Deviation) into consideration. The performance of the method is empirically tested on a data example from a Chinese microcredit company.

Keywords: Credit Scoring; Frequency; Logistic Regression; Microcredit; Monetary Value; Recency; Standard Deviation

Suggested Citation

Wang, Hansheng and Zhou, Jing and Huang, Danyang, RFMS Method for Credit Scoring Based on Bank Card Transaction Data (May 2, 2018). Available at SSRN: https://ssrn.com/abstract=3172163 or http://dx.doi.org/10.2139/ssrn.3172163

Hansheng Wang (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

HOME PAGE: http://hansheng.gsm.pku.edu.cn

Jing Zhou

Renmin University of China ( email )

No. 59 Zhongguancun Road
Haidian District
Beijing, Beijing 100871
China

Danyang Huang

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

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