Improving the quality of the credit authorization process

Abstract

This paper proposes that the quality of a company’s authorization system should be measured by two major considerations. First, the system should enhance the quality of customer service by reducing the waiting time at the point of sale. Second, it should reduce the risk of accepting transactions of bad credit. In this paper, a major credit card company is used to demonstrate how the credit authorization process can be improved using a quantitative approach. Opportunities for quality improvement were first identified through brainstorming sessions with top management, using quality improvement tools. A new sampling inspection scheme was then developed, based on analysis of the risk of requests for transactions in different industries. With the new inspection scheme, the total inspection cost was significantly reduced. A queuing model was then used to redesign the authorization process. Finally, a simulation model was used to test and evaluate the new process design. As a result of these improvements, it was determined that more than US$2.5 million was saved annually and authorization efficiency was improved by more than 40 per cent.