
The Bank of England?s chief economist, Andy Haldane, has won many column inches with his comments on the possibility of Bitcoins replacing cash and UK interest rates hitting zero or even moving into negative territory.
He has also received a fair amount of criticism for the suggestions from his Portadown Chamber of Commerce speech. How would a system of negative interest rates work for example? What would it mean for the general public and the cash in their high street bank? Certainly some, if not most, of Haldane?s comments were blue-sky thinking, peering out of the box to see if things could be done better. That should be applauded. Interest rates are a vital cog of the economic system both for consumers, businesses and savers. Are we really committed to staying on the decades long rollercoaster of interest rates up and interest rates down? At this time of record low rates and the intense debate over whether the economy is strong enough to take its first hike in years, it seems a good opportunity to take stock and perhaps think of a different way. Jonathan Crook of the University of Edinburgh Business School recently unveiled an innovation in risk modelling at the Credit Risk and Credit Control conference. The so-called new intensity model, he said, used a new application of ?statistical modelling to enable lenders to more accurately predict likely defaults on loans?. He said it could potentially reduce the ?13.2bn annual “black hole” that currently exists due to unpaid loans. He said banks using the new system would be able to more accurately predict which borrowers would miss loan repayments and thus enabling them to offer ?tailor-made? interest rates based on specific past borrowing behaviour and credit risk. ?Borrowers with poor credit scores and histories will pay higher interest while those with a good credit profile will increasingly benefit from lower interest rates, as lending institutions begin to compete more vigorously on lending rates,? he said. It is an intriguing idea. The buzz word in so much of business today is personalisation ? ensuring that customers get exactly the right offer and products for their needs. Read more about personalisation:- How personalisation has allowed these businesses to offer unique experiences
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- Realising the vision of true personalisation
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