Credit Intelligence in Banks - Managing Credit Relationships with Small Firms

Abstract: The competition in the banking industry has during the last decades been intensified resulting in smaller interest margins. As a consequence, the resources spent on each credit customer have had to be decreased, resulting in less interaction and a perceived limited access to valuable information. This has especially been the case in the banks´credit management of small firms. Earlier research approaches to credit management have in some respects been insufficient due to a limited focus on the credit intelligence production, that is, the process of planning, collection and analysis of credit customer data and information, and the role of the interaction with the credit customer and other actors in this process. This thesis suggests an interaction oriented approach to credit management with an emphasis on qualitative factors as a complement to the traditional financial orientation. A conceptual framework for credit intelligence is developed. This framework integrates credit management with complementary research areas - information management, human information processing and service management - and empirical findings. The empirical findings are based on interviews with 86 bank officials from 22 European banks as well as an in-depht study of credit relationships in two Swedish commercial banks. The overall contribution of this thesis is made by conceptually broadening credit management to include human aspects and in particular focusing the credit intelligence production process. In doing this it explores different patterns, purposes and results of the bank officials´interaction with the small firm and other actors during different phases of the credit relationship. The thesis further explores the impact of individual information processing habits and the credit service design on interaction. Finally, it categorizes matching credit intelligence systems to credit intelligence requirements and discusses how credit intelligence blindspots might occur due to the banks applying a marketing rather than intelligence orientation in their credit service design for small firms.