Imagine the following scenario. Tom bought an expensive house pre-GFC but then lost his well-paid job and has been struggling with the mortgage ever since. He goes online to his small state bank and up pops a home equity line-of-credit marketing offer. It’s an offer he finds pretty insulting given he is underwater on the existing loan and was just talking to the collections team a few hours ago.
Mismatched offers like these hurt the customer experience and waste the efforts of lending organizations and their risk and marketing teams.
While larger banks have been able to solve a lot of these problems for many years, they have been spending many millions of dollars to do so. Rolling out intelligent, risk-aware marketing informed by their own customer data or external sources such as credit scores has been complicated and expensive.
Today however, a confluence of technology advances and deployment in the cloud means that FICO can offer real-time risk-aware marketing at a fraction of the cost. Credit unions, mid-market banks and other small lenders can now access these technologies as a cost-effective monthly subscription.
This could be a real boon to smaller lenders who are trying to grow. The problem is they are currently executing marketing that is not risk-aware.
The Current State of Marketing
Usually smaller lenders can only afford to do push marketing in batches, so a quarterly campaign is what they do. Their fixed budget allows them to execute on a certain number of records that they have purchased. The reality is that a lot of this budget will end up being wasted as the customer’s attention is limited, there is a lot of time lag between campaign start and offer delivery, and the offers are not tailored – the dreaded ‘spray and pray’ approach to marketing.
Not surprisingly there is still a lot of adverse selection happening with these marketing approaches – people with the highest debt or most overextended lifestyles are the most likely to respond to the card or loan offer. This leads to the risk department rejecting those candidates, which creates an unpleasant customer experience and results in a lot of time and money wasted by the lender.
Most institutions would like to grow their initial funnel into the originations process and use their limited marketing funds more effectively, so the payoff of injecting timely risk assessment into marketing can lead to a significant lift in revenue and profits.
The ideal opportunity for interactive engagement is when consumers come to your website, mobile site, teller or ATM but to take advantage of that opportunity, you need advanced real-time capabilities.
The ‘new black’ in financial services marketing is really about leveraging fresh credit information and advanced decisioning within the marketing process to produce relevant, prescreened offers during every interaction with prospects and customers. Chief Risk Officers probably don’t devote too much time to thinking about marketing, but they should be demanding a high-quality stream of applicants they can approve from their CMO.
Regulators Are Focused on Marketing Efforts
Of course, while there is plenty of carrot to invest in risk-aware marketing, there is also some stick. Regulators in the US respond to consumer complaints and look closely at pre-screened offers made to ensure they use consistent risk criteria.
All of the engagement, privacy and communication laws defined by the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA) need to be followed across the originations process regardless of the communications channel or stage in the process.
Prescreening is the only circumstance in which credit report information may be obtained from the credit bureaus for marketing purposes. So apart from passing scrutiny on the way offers are made, a record of actions must also be recorded to ensure financial institutions can pass an audit. Having a system that can accurately capture all the actions taken in marketing and originations can go a long way to help executives sleep at night in the face of what can be a very intense regulatory environment.
This means meshing real-time streaming data with stored customer profile and behavior history data. It requires predictive (what is the customer likely to do?) and prescriptive (what is the best action to take?) analytics across multiple channels, all the while, engaging customers with a coherent, single voice.
Some examples: Imagine you have multiple products with a bank but not a credit card. The bank should be able to work out the most suitable card for you based on what it knows and make you that offer in real-time.
Or if your first interaction with a bank is to be declined for a product, that could pretty much sour you on their brand for life. So how could they immediately suggest other card offers like a secured card offer to minimize the chance they will lose your business?
The opportunity to solve a problem, satisfy a need and exceed expectations exists at a given point in time. The challenge for marketers is to act on these insights in real-time, in the moment. Given that financial services is one of the most highly regulated markets it stands to benefit from this more sophisticated approach.
Forrester recognizes FICO as A Strong Performer for Real-Time Interaction Management
Recently, leading analyst Forrester named FICO as a strong performer in its latest Forrester Wave™ on Real-Time Interaction Management.
“FICO enables analytically driven decision management . . . in addition to marketing, FICO addresses real-time decision making with solutions for originations, fraud, cybersecurity, compliance and collections. We spoke with customer references in these regulated sectors who value FICO’s governance credentials for their B2C and B2B2C marketing activities,” stated Forrester in its Real-Time Interaction Management report.
(Download The Forrester Wave™: Real-Time Interaction Management, Q2, 2017.)
Forrester notes that the RTIM market is growing because more B2C marketing pros see it as a way to address expectations for personalized customer experiences.
FICO’s Real-Time Pre-Screen of One solution uses real-time data integration and advanced analytics to find out right now whether or not you have an appropriate product to market to each individual consumer.
This will allow lenders to grow faster and to be more nimble. It links all of FICO’s risk decisioning and analytic capabilities in a new framework, delivered on the AWS cloud that avoids the need to do batch processing. Smaller lenders can now develop new risk-aware marketing in a way that is intelligent, increasingly automated and fast.