October has digitised its credit analysis further for loans below €250,000. To do so, we have built 2 in-house automatic scoring models using machine learning algorithms to assess the borrower's probability of default, called Financial X-Ray and Transaction X-Ray. These models enable October to make a loan offer to companies in a matter of seconds. Loan request analysed automatically by either Financial X-Ray or Transaction X-Ray are called Instant Projects.

What is the objective of using a data-driven credit analysis? Making a shift to data-driven credit analysis for some projects enable us to take faster decision and serve more companies while extending the loan offer for our retail lenders. By offering companies a fast and simple product, we give them time to concentrate on their core activity. At the same time, this new credit analysis enables October to do more loans by allowing our teams to focus on fraud detection or to work on larger and complex loan applications. Finally, lenders have access to a larger loan offer to diversify further their portfolio.

Financial X-Ray analyses the borrower's financial and behavioural information to assess the probability of default of the company. To do so, we use machine learning algorithms on a large amount of data gathered by October across our 5 countries. This scoring model is constantly improving as we collect more data and apply cross-country learnings.

Financial X-Ray estimates the probability of payment default (PD), which is then converted into a credit score using the October scale (from A+ to C-).

We rely on Financial X-Ray to make faster credit decisions for loans below €250,000 (and below €500,000 with state guarantee).

All projects that fall outside these criteria are analysed using our standard credit analysis.

Transaction X-Ray analyses the borrower's bank transactions over the past 12 months to assess the company's probability of default.

To do so, October connects with the borrower's main bank accounts through application program interfaces (APIs) and analyses the bank transactions to estimate the company's capacity to repay and spot potential red flags. For these projects, October will not display the same financial information.

Based on that information, Transaction X-Ray estimates the default probability of the company which is then converted into a credit score using the October scale (from A+ to C-).

We rely on Transaction X-Ray to make faster credit decisions for 2 types of projects:

All projects that fall outside these criteria are analysed using our standard credit analysis.

With our standard credit analysis, our financial analysts are in charge of collecting the quantitative and qualitative information necessary to assess the risk of a project. They interview the borrower and fill the scoring model with detailed information about the company's financial results, market outlook and management team. The analysis generates a credit score and an interest rate that would be offered to the borrower. This is what we call underwriting.

For Instant projects, we rely on Financial X-Ray and Transaction X-Ray to make a faster credit decision. The analyst is only involved in antifraud and compliance checks. The role of analyst will also include verifying the company's eligibility for a state guarantee (if it applies). There is no borrower call.

For Instant Projects analysed with Financial X-Ray, the FCCR (i.e. ratio calculating the repayment capacity of the borrower) could be below 1. Why? Because the data we have accumulated shows the "FCCR > 1" criteria is not as relevant, when combined with other factors, as we do in Financial X-Ray.

For Instant Projects analysed with Transaction X-Ray, the key figures displayed on the project description will be different as we only analyse bank transactions on the last 12 months. The borrower's financial information will include the amount of cash generated, the income, the monthly income / monthly expense ratio, the payment history, the level of indebtedness and the equity of the company.

You can recognise an Instant project by the project description. On all Instant Projects, you will find a dedicated box indicating the automatic scoring model (Financial X-Ray or Transaction X-Ray) used to analyse the project.

The project description of Instant projects is standardised and contains less information, because this information is normally written by our financial analysts. If the Instant project was analysed using the Financial X-Ray scoring, the project description will be written automatically using a template developed by October. If the Instant project was analysed using the Transaction X-Ray scoring, the project description is also standardised but some information will be written directly by the borrower.

Learn more on our retail and institutional lenders.