Consumer Lending in Banks: System Dynamics Modelling

Modern consumer lending, which is carried out by banks, financial companies, and, to a lesser extent, credit unions, is a complex system. This system includes many blocks that interact with each other and affect the result. As a result of their interaction in dynamics, the values of indicators of effectiveness are formed. The task that arises is to identify the mutual dependency of the constituent units and their influence on the result of consumer lending over time. The aim of the article is to model consumer lending processes using system dynamics methods. The model proposed in the paper by the system of dynamics makes it possible to display the behaviour of the consumer lending system over time. To display the logic of the system, we used the causal loop diagram tool. This made it possible to visualize the consumer credit system taking into account interconnections. The system is structured into blocks that characterise the main components of the functioning of the lending system. When building the model, four important units of the system were analyzed: technological rating, marketing funding, marketing strategy, and risk management. For this, a simulative analysis was applied. Based on this, it is shown that the marginal results are quite different. The ways are provided to optimize priority of expenses. The dependency of income management has a specific non-linear form. It is possible to find out the level of rigidity of risk management by using simulation analysis