Risk & Compliance Model Management: When Compliance Undercuts Performance

Insights_82_Model Management

For many banks implementing model management practices, ensuring compliance and managing model effectiveness are often at odds. Case in point: An August 2014 article by Butler Analytics reports that “the modeling staff in one major US bank now spend 80% of their time meeting regulatory requirements, detracting from much needed new model development.”

While this case is extreme, every bank is seeing increased demand for the services of their analytics teams. An executive in the mortgage division of a banking client told us that for a period of time, 25% of its analytics workforce had to be diverted to collecting, preparing and reporting on data required by regulators—costing the bank tens of millions of dollars on labor costs alone.

The good news is that some banks are moving ahead of the curve. They’re improving their ability to answer questions about analytics while lightening the burden on their analytics teams. In... [Read More]

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Risk & Compliance FICO Data: Irish Cardholders Are Charging More and Paying More Promptly

Irish Cards Payments and Sales

The healthy signs on the UKI economy continue with the latest figures from the FICO® Benchmarking Service. Average total sales on cards issued in Ireland reached a two-year high in September of €778 per card, an increase of 9 percent compared with September 2013.

Veteran accounts (those five or more years old) had the highest average, at €791 per card. The ratio of monthly payment to balance reached 45 percent, also a two-year high. In another positive sign, the percentage of accounts that have missed two consecutive monthly payments fell to a two-year low.

Although card spending is rising, interest income per account is dropping. For veteran accounts, interest income has fallen by 5 percent in each of the last two years. For the full set of active cards in the FICO consortium, this represents €2 per account in lost revenue for issuers.

The card performance figures are part of the... [Read More]

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Fraud & Security When Your Fraud False Positives Are Breaking Bad

False Positive


If you haven’t watched the TV series Breaking Bad but it’s on your holiday (or birthday) gift list, you may want to avoid reading the next two paragraphs.

There’s an episode in that seminal cable series where leading character Walter White, who is recovering from lung cancer treatment, is getting a PET scan at the hospital. A family member, who happens to be a medical technician, mentions that Walter will have to wait a week for the results and comments that he could discern scan results if he quickly glances at them. After his scan, Walter follows her advice, glancing a reflection of the resulting image – which reflects a very scary-looking (read deadly) white mass.

With Walter believing his days are now seriously numbered, he adopts urgent measures to ensure his family is taken care of after he dies – leading to near-disastrous circumstances in the process.... [Read More]

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Analytics & Optimization Video: Chief Analytics Officer Panel

CAO Panel

The rise of analytics-driven decision making, the role of the chief analytics officer (CAO) and the profession took center stage at FICO World. Watch the video of Dr. Andrew Jennings, FICO’s CAO, and three fellow CAO’s exploring these themes. The panelists consisted of Alfredo Cateriano, Ph.D., vice president and chief analytics officer at Ford Motor Credit Company, Ruben Sigala, chief analytics officer at Caesars Entertainment and Michael Wu, Ph.D., chief scientist at Lithium Technologies.

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Risk & Compliance Does the FICO® Score Work in Both Good Times and Bad?

Credit Score Image

As I engage clients about the recently released FICO® Score 9, one of the questions that comes up frequently is how effective will the score be if it is used in a more turbulent economic period.  The FICO® Score 9 development sample was based on an October 2011 to October 2013 timeframe.  For many lenders, this represents an extremely clean vintage as losses were extremely low.  They wondered how a score developed on data that was so pristine would hold up under a more unsettled time period.

Over the last 25 years, there is an extraordinary body of work that demonstrates that the FICO® Score performs well in both good economic times and bad.  Since the first FICO® Score was released in 1989, we’ve validated various versions of the score across many different points of the economic cycle and for a wide variety of industries (auto, bankcard, mortgage, etc.) for... [Read More]

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Risk & Compliance The Year of the Free FICO® Score

ONE-YEAR anniversary image

The FICO® Score Open Access program has reached a major milestone — its 1st anniversary. And we couldn’t be prouder.

Since we launched the program in the fall of 2013, FICO® Score Open Access has expanded significantly, with over 60 million account holders gaining regular access to free FICO® Scores by January 2015. Participating banks and lenders include Barclaycard, Citi, Discover, First Bankcard, Hyundai Motor Finance and Kia Motor Finance. We’ve also added the largest provider of student loans in the US, Sallie Mae, and one of the largest credit unions in the US, Pentagon Federal (PenFed).

Not only are these institutions providing their customers with free access to the same FICO® Scores they used to manage their accounts, they are also providing comprehensive credit education content, putting knowledge at their customers’ fingertips.

We launched the program to help clear up consumer confusion about credit scores and support our clients’... [Read More]

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Customer Engagement Smart Banks Unite Mobile, PC and In-Branch Customer Experiences

Who Wants Automated Fraud Alerts-thumb

Dynamic forces are at play across retail banking. US consumers continue to move heavily into digital (68% of North Americans use online banking weekly or move often vs. 24% for the branch)[1].  Millennials, however, are leading the digital trend, and now form a demographic tidal wave (the 20-24 year old, 5-year cohort became the largest population group in the US in 2013, displacing the 45-49 year old cohort that led in 2010)[2].

These trends are deeply influencing how banks view their branch networks. In 2013, US banks collectively reduced their branch locations by 1,487, a continuation of a trend that we have seen in recent years with a little over 4,000 branches closed since 2010.[3] So digital is forcing banks to right-size their retail footprint as well as creating new opportunities for re-invention.

To meet this challenge head-on, banking needs to be seen as a seamless activity rather than discrete... [Read More]

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Analytics & Optimization Video: Stuart Wells Explains the Big Data Way

Stuart Wells

Here is the video of FICO’s Chief Technology Officer’s keynote from FICO World. In the keynote  Stuart Wells explains how FICO is applying Big Data Analytic software to meet an array of challenges and business needs. He specifically touches upon the ways that FICO is using Big Data Analytics software to help its clients address customer value, anticipate criminal activity and tackle an elevated regulatory environment. Wells showcases some new technologies and closes with a look into the future of Big Data Analytic software.

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Analytics & Optimization Kaggle Competition: Optimizing Santa’s Workshop

Santa's Workshop

Each year, Santa (the jolly old elf) has a grueling toy-production schedule to keep. Toy orders arrive all year long, and production must be completed by noon North Pole Time on December 24 in order to make an on-time Christmas delivery. Santa’s workshop also must comply with strict rules of the Elfin Workers Union.

This year, in partnership with Kaggle, a platform for predictive modeling competitions, we are asking: Can Santa’s operation be optimized mathematically? Is it possible to create a job scheduling algorithm that not only meets Santa’s toy target, but keeps his elves healthy and happy? Can Santa’s workshop be brought out of the dark ages of magic and holiday spirit, and transformed into a highly optimized modern operation?

If you have answers, there are prizes of up to $20,000 to win in three categories, and, of course, a spot on the nice list. Competition details are available... [Read More]

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