Chris Pratt at Financial Insights pointed me at a nice little piece she wrote on Auto Lending - Advice for Lenders Intent on Marketing Automobile Loans Direct-to-Consumers: Don't Tug on Superman's Cape(fee or subscription required). I was struck by a comment at the end of the piece
"In the future, to secure more dealer business, lenders have to better than 35-40% automatic decisions and 15-minute turnarounds"
This is a job for Enterprise Decision Management! As Chris herself said in a past life "Decision engines, by definition and the complexity of their underlying analytics, are positioned to revolutionize the lending environment". Why is this a job for EDM? Well think about it, you need to get a high rate of automation - >40% clearly - while
- Spending as little as possible on the approval (Cost)
- Deciding in a very small window - while someone is sitting talking in the dealership (Speed)
- But you cannot afford to lose track of your risk (Precision)
- And yet the competitive marketplace changes all the time (Agility)
- And customers are using the web to research all your offers before they go so you better not contradict yourself (Consistency)
Clearly you need to improve your decision yield for the loan approval decision to win at this. So how do you do this? Well you can automate these decisions using business rules (to handle policies, regulations, requirements and to ensure you can respond quickly) and analytics (to predict risk, lifetime value, upsell/cross-sell potential etc). Indeed one of Chris' colleagues, Sophie Louvel, wrote a piece on this last year - Enterprise Analytics and Decision Management: Marketing + Risk = Value(fee or subscription required)- in which she said several things of note:
"The technology to support optimal and automated decision making across the bank is here today,"
This is all doable with technology and techniques you can buy right now and your competitors are doing it.Business applications that enable enterprise decision management incorporate customer analytics, business rules, and automated workflow functionality to provide retail banks with automated decisions that are optimal for both the customer and the bank.
Couldn't have said it better myself.In other situations, the ability to make decisions during the customer interaction would be a capability that could increase the value of the interaction to both the customer and the bank. This might be the case for an auto, mortgage, or personal loan decision.
Back to Chris' point. If you can decide quickly enough you can dramatically change the rate of response. Decide too slowly and you can forget it.
So there you have it, a perfect example of when to use EDM to improve your decision yield and grow your business.
