Waves, Quantum Theory, and Retail Credit

New Research by Dimitri Bianco and Agora Data

Retail credit models have come a long way. We’ve moved from intuition-based scorecards to statistical models and machine learning. Yet even with all this progress, most models still simplify borrower behavior too much, which can lead to missed risks and lost opportunities.

In Waves, Quantum Theory, and Retail Credit, Dimitri Bianco and Agora Data offer a thought-provoking new way to look at loan performance, drawing on quantum theory and wave mechanics concepts.

Key Takeaways from the Paper

• Quantization hides important details. By converting continuous data into broad categories — like reporting income monthly instead of tracking daily — models miss the true relationships due to the oversimplification of the data.
• Borrower behavior follows cycles. Daily cash flows, bill due dates, and paydays create risk patterns that rise and fall like waves—averaging these out mask the peaks and valleys that matter most, especially for subprime borrowers.
• Loans exist in multiple states until measured. Just as quantum superposition describes particles existing in multiple states at once, a loan may be simultaneously “on-time,” “delinquent,” and “defaulted” — each with its own probability — until a payment date confirms its status.
• Wave-based modeling could improve predictions. Lenders can better capture risk timing by combining transaction-level data with wave equations and build more accurate cash flow and loss forecasts.

The paper doesn’t claim finance is bound by the laws of physics. Still, it uses these analogies to open new ways of thinking about credit risk — and points toward models that may become more common as richer, real-time data becomes available.

This paper is worth your time if you work in credit risk, auto finance, or fintech. It challenges conventional modeling assumptions and offers a fresh framework that could sharpen both predictions and decision-making.

Read the full paper here to see how concepts like quantum superposition and wave-particle duality could transform the way we think about retail credit modeling.