Method and system for enhancing credit line management, price management and other discretionary levels setting for financial accounts
First Claim
1. A computer implemented method for managing financial accounts by changing at least one control variable including at least one of a credit line and an annual percentage rate, the method comprising:
- collecting and storing in one or more storage devices account data for a plurality of financial accounts, where the account data are associated with a plurality of variables;
establishing at least one control variable and at least one behavior variable based on the plurality of variables;
determining, by a data processor, a plurality of interval breakpoints for the at least one control variable and the at least one behavior variable;
defining a plurality of account states based on the at least one control variable, the at least one behavior variable and the plurality of interval breakpoints;
forming a transition matrix based at least in part on the account data and the plurality of account states;
generating a Markov Decision Process (MDP) model based at least in part on the transition matrix;
generating a policy lookup table based on an output of the Markov Decision Process model, the policy lookup table listing pricing actions to be taken in response to the plurality of account states, each pricing action comprising changing or maintaining at least one control variable including at least one of a credit line and an annual percentage rate;
determining behavior variable data associated with a financial account;
slotting the financial account into one of the plurality of account states based at least in part on the determined behavior variable data associated with the financial account; and
determining, from the policy lookup table and based on the slotted account state, at least one pricing action to be taken on the financial account.
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Abstract
A method and system is disclosed for enabling the accurate determination of price points (APRs), credit limits, and other discretionary levels for each cardholder that maximize Net Present Value (NPV) for the portfolio, given constraints on quantities such as risk of default. In accordance with one embodiment, the present invention uses a Markov Decision Process (MDP) methodology to generate a simplified transition matrix representative of the potential state transitions for account holders. This model applies account level historical information on purchases, payments, profitability and delinquency risk to make these decisions. In addition, a data structure is disclosed constructed to implement a transition matrix computationally in different sizes.
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Citations
25 Claims
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1. A computer implemented method for managing financial accounts by changing at least one control variable including at least one of a credit line and an annual percentage rate, the method comprising:
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collecting and storing in one or more storage devices account data for a plurality of financial accounts, where the account data are associated with a plurality of variables; establishing at least one control variable and at least one behavior variable based on the plurality of variables; determining, by a data processor, a plurality of interval breakpoints for the at least one control variable and the at least one behavior variable; defining a plurality of account states based on the at least one control variable, the at least one behavior variable and the plurality of interval breakpoints; forming a transition matrix based at least in part on the account data and the plurality of account states; generating a Markov Decision Process (MDP) model based at least in part on the transition matrix; generating a policy lookup table based on an output of the Markov Decision Process model, the policy lookup table listing pricing actions to be taken in response to the plurality of account states, each pricing action comprising changing or maintaining at least one control variable including at least one of a credit line and an annual percentage rate; determining behavior variable data associated with a financial account; slotting the financial account into one of the plurality of account states based at least in part on the determined behavior variable data associated with the financial account; and determining, from the policy lookup table and based on the slotted account state, at least one pricing action to be taken on the financial account. - View Dependent Claims (2, 3, 4, 5, 6, 7, 8, 9)
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10. A non-transitory computer readable medium for causing a processor to manage financial accounts by changing at least one control variable including at least one of a credit line and an annual percentage rate, the computer readable medium comprising one or more instructions for performing the following:
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collecting and storing in one or more storage devices account data for a plurality of financial accounts, where the account data are associated with a plurality of variables; establishing at least one control variable and at least one behavior variable based on the plurality of variables; determining, by a data processor, a plurality of interval breakpoints for the at least one control variable and the at least one behavior variable; defining a plurality of account states based on the at least one control variable, the at least one behavior variable and the plurality of interval breakpoints; forming a transition matrix based at least in part on the account data and the plurality of account states; generating a Markov Decision Process (MDP) model based at least in part on the transition matrix; generating a policy lookup table based on an output of the Markov Decision Process model, the policy lookup table listing pricing actions to be taken in response to the plurality of account states, each pricing action comprising changing or maintaining at least one control variable including at least one of a credit line and an annual percentage rate; determining behavior variable data associated with a financial account; slotting the financial account into one of the plurality of account states based at least in part on the determined behavior variable data associated with the financial account; and determining, from the policy lookup table and based on the slotted account state, at least one pricing action to be taken on the financial account. - View Dependent Claims (11, 12, 13, 14, 15, 16, 17)
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18. A computer implemented system for managing financial accounts by changing at least one control variable including at least one of a credit line and an annual percentage rate, the method, the system comprising:
at least one data processor and one or more storage devices that are adapted to; collect and store in the one or more storage devices account data for a plurality of financial accounts, where the account data are associated with a plurality of variables; establish at least one control variable and at least one behavior variable based on the plurality of variables; determine a plurality of interval breakpoints for the at least one control variable and the at least one behavior variable; define a plurality of account states based on the at least one control variable, the at least one behavior variable and the plurality of interval breakpoints; form a transition matrix based at least in part on the account data and the plurality of account states; generate a Markov Decision Process (MDP) model based at least in part on the transition matrix; generate a policy lookup table based on an output of the Markov Decision Process model, the policy lookup table listing pricing actions to be taken in response to the plurality of account states, each pricing action comprising changing or maintaining at least one control variable including at least one of a credit line and an annual percentage rate; determine behavior variable data associated with a financial account; slot the financial account into one of the plurality of account states based at least in part on the determined behavior variable data associated with the financial account; and determine, from the policy lookup table and based on the slotted account state, at least one pricing action to be taken on the financial account. - View Dependent Claims (19, 20, 21, 22, 23, 24, 25)
Specification