Lists come alive: eletronic systems of knowledge and the rise of credit-scoring in retail banking

TLDR

Retail banks are moving from manager‑based market knowledge to systematic, data‑driven credit‑scoring systems enabled by IT, transforming the industry’s knowledge base. The study critically examines how this shift to credit‑scoring systems has occurred and predicts the future form of the industry’s knowledge systems.

Abstract

Abstract This paper focuses upon a change in the type of market knowledge privileged by retail banks as a result of the rise of a new implementation of information technology. In traditional retail banks market knolwedge was embodied in the local manager and his/her staff in branches. Over the last decade or so, such embodied knowledge has been downgraded and greater emphasis has been placed on the more systematic use of empirical information on customers derived from other sources, made possible by the rise of computers, software and databases. The most significant developement in this regard has been the now routine use of credit-scoring systems, which are designed to overcome the chronic problems of information asymmetries in credit-scoring systems and the rise of a marketing discourse within the industry represents a major transformation in the knowledge base of the industry. The paper critically evaluates ways in which this transformation has been brought about and considers the likely shape of the new systems of knowledge which are now coming to dominate the industry.