Even during the most challenging economic downturn in decades, Cleveland-based KeyBank was able to drive improvement in its collections performance through a relationship-focused initiative powered by FICO® TRIAD® Customer Manager. Chip Clarke, KeyBank’s senior vice president for strategic analytics, talks about the program with Andrew Beckman, FICO’s principal consultant in customer management.
Andrew Beckman, FICO: What were your goals with this initiative?
Chip Clarke, KeyBank: Even though we’re one of the country’s largest regional banks, we think of ourselves as a big community bank. That means making decisions about how to treat customers based on the total customer relationship, not just one account. Especially in collections, we felt we needed more information about our customers so we could make better decisions.
With TRIAD Customer Manager, we now leverage the full width and breadth of our customer and household-level credit and deposit relationships in our account management decisions. So if somebody has healthy deposits with us but has been late with a couple payments on their equity line, we take that into account. Or at the household level, if someone is a multi-million dollar private banking client, we may not want to block his son’s unsecured credit line if it’s a bit behind. We’ll want to work that out appropriately.
AB: How are you leveraging adaptive control to improve results?
CC: Adaptive control means that the TRIAD system gets “smarter” about the customer with each interaction and as more data comes in. We have account-level, customer-level and household level data flowing in from a variety of sources: our internal loan and leasing servicing systems, our analytical datamart and data warehouse, and bureau data and scores that we refresh regularly. We see a huge advantage in the ability to bring these disparate data sources together within the TRIAD framework to make decisions.
TRIAD Customer Manager allows us to better prioritize delinquencies for action based on severity and probability of payment. We have multiple champion/challenger strategies competing at any given time. We update strategies quarterly and roll in new champions.
We’ve also automated the revocation and reduction of high-risk credit lines, with less and less need for manual exceptions. So we’ve improved our line management and can demonstrate to regulators that we have better control of capital.
AB: What are the most notable results you’ve seen?
We’ve reduced collection costs, by bringing in-house nearly 80% of the early collections we used to outsource to agencies, for a savings of around 20%. We’ve reduced roll rates and charge-offs. We think things could have been worse for us in the downturn had we not had this system in place.In terms of exposure, we’veprobably reduced our open-to-buy by about 5%. That adds up to millions of dollars that would have gone to charge-off.
Because we look at the whole customer, we have also enhanced the customer experience in collections. We can talk more effectively to customers about their delinquencies, explain what’s going on, and use offsets against their DDA balances to help them get current.
AB: How would you characterize your return on investment?
CC: We presented a business case for the upgrade, and we exceeded the projected ROI within the first year.
For more information, view the KeyBank case study or FICO World 2011 presentation, “Applying Adaptive Control to Collections.”
