Paychex is an HR and payroll services company serving hundreds of thousands of businesses across the United States. In the company's streamlined, automated service model, each payroll run consists of two types of transactions that happen simultaneously: ACH payments to the client's employees and billing the client to cover those paychecks.

"So, if you're a client that is paying 10 employees this Friday, our debit will go into your business's operating account at the same time the direct-deposit credits are going out to your workers' checking accounts," explains Neil O'Brien, credit risk manager for Paychex. "That means there is always some uncertainty in whether our debit is going to be honored. Perhaps your business operating account does not have sufficient funds, or perhaps there's another reason the debit might be denied. Whatever the reason, if that happens, our credits have already gone out to your employees. That uncertainty creates a credit exposure for Paychex."

In the past, Paychex managed this risk by performing a credit review during the client onboarding process that relied on commercial credit reports, public records, and other external data. Some lines of business incorporated automation into certain areas of credit scoring, but much of the work was manual. The outputs of this credit review were a customer credit limit and parameters for indicating whether a transaction required a closer look. Subsequently, transactions would be flagged if they fell outside the parameters that Paychex had established during the initial review.