Credit Automation Glossary
Definitions of key terms in credit automation, cash-flow scoring, SME lending, and document intelligence.
- Credit risk modeling— The discipline of quantifying the likelihood of borrower default and expected loss, using statistical and machine learning techniques on historical and current data. Outputs feed pricing, provisioning, and capital decisions.
C
- CCD2 compliance— Compliance with the EU Consumer Credit Directive 2 (Directive 2023/2225), which replaces the 2008 directive and applies from November 2026. It expands scope, tightens creditworthiness assessment rules, and mandates the use of relevant and accurate data.
- Cash-flow based credit scoring— Credit scoring that assesses borrower risk using actual money movement in bank accounts rather than historical bureau data. It reflects current repayment capacity in near real time.
- Credit automation— The use of software, data, and AI to handle credit decisioning steps, such as data collection, analysis, scoring, decisioning, by minimizing the manual analyst work. It compresses underwriting time from weeks to minutes.
D
- Document intelligence (in banking)— AI-driven extraction and structuring of data from financial documents (bank statements, tax returns, balance sheets) into machine-readable formats. It replaces manual keying and OCR-only workflows.
F
- Financial document parsing— Extracting transactions, balances, and line items from financial documents (bank statements, P&Ls, balance sheets) into structured data. The first step of any automated credit workflow.
I
- Instant credit decisioning— Automated credit decisions delivered within seconds to minutes of application, based on real-time data ingestion, scoring, and policy evaluation. Standard for retail credit, increasingly expected for SME.
O
- Open banking alternative— A way to obtain transaction-level financial data when open banking APIs are unavailable, incomplete, or not consented typically by parsing uploaded bank statement PDFs into structured data.
S
- SME lending— Lending to small and medium-sized enterprises — businesses too small for corporate banking but too complex for retail credit. It's the highest-volume, lowest-margin commercial segment for most banks.