Many FICO clients are seeing benefits from customer-level decisioning. But some of the impacts are a bit tricky to quantify. One of these is the so-called “halo effect.”
It’s intuitive that customers who have a good experience with one type of account are likely to be more receptive to offers to extend the relationship into other types of accounts. “My bank is doing a good job with A, so they'll probably do a good job with B.” When this broader relationship is established and nurtured, customers tend to behave more profitably across all their accounts than customers with only a single account.
The halo effect also works in reverse. Customers angry at being charged fees on their debit accounts, for example, may transfer a negative view of the bank's performance to other existing or potential future account relationships. Even if a customer closes just one account and looks for an alternative provider, the opportunity is now there for that competitor to develop a halo effect of its own. They might do such a good job that the customer begins to look to them for other financial needs.
Preventing this kind of erosion in customer relationships is a key reason many banks today are working to improve management of and expand transactions in their current accounts / demand deposit accounts. The more advanced the use of these accounts for inter-account transfers, as well as for automatic payments, point-of-sale purchases and other transactions, the more challenging it becomes for customers to migrate to another financial provider. Strong performance in this area, therefore, creates "sticky" relationships that yield longer-term loyalty and encourage cross-sales.
