Many lenders’ back-offices continue to be weighed down by legacy customer affordability systems. Updating them to meet rapidly changing market conditions has become hugely time-consuming and a typically onerous challenge. But there are quick wins when it comes to ensuring the adoption of true customer-centricity.
The notion of affordability has evolved and increased in sophistication during the past 30 years as businesses refined and improved their models. At the same time, regulators across the globe continue to heap greater scrutiny on lenders to ensure customers are treated fairly, assessments and decisions are consistently applied, while commitments are appropriate and sustainable for the duration of the agreement.
Given many rules are principles-based rather than simply being prescriptive, there is now much focus on ensuring lenders can show a reasonable assessment of their customers’ ability to meet repayments before sanctioning credit. Unfortunately, this has resulted in many banks and institutions failing to take a genuinely customer-centric view when it comes to affordability. Instead, they've adopted multiple models across product lines and use cases, all propped up by a number of differing legacy processes.
It's a common practice and a back-office headache we're often presented with at FICO.
Affordability as a Service
We set out to develop Customer Affordability as-a-Service (CAaaS) as a key addition to FICO® Platform to enable our customers to adopt a truly comprehensive perspective by fully leveraging the vast range of internal and external datasets now available when it comes to assessing affordability.
The result enables fast, smart, and scalable management of net disposable income models, calculations tailored by critical business context, with an overview of the volume of sanctioned lending being made at any given time. It delivers clarity with standardised, granular data assessments of customers’ income, exposure, and commitments. Data can be further enriched with real-time credit bureau analyses and open banking insight to validate customers’ financial positions.
The ability to offer full control of affordability strategies and models to ensure agility, flexibility and transparency really matters — because it’s getting ever more complex. By using modular components to consolidate the complexity created by multiple affordability models into one hub, you can ensure consistency, the right customer outcomes, agility and an increase in customer satisfaction metrics.
Demonstrating consistently fair customer treatment across the complexity of a changing lending landscape also poses a big challenge. But CAaaS fully supports Treating Customers Fairly principles, while also standardising and centralising models and calculations. It reduces the risk of non-compliance right across the business thanks to a uniform level of transparency.
Finding the Right Keys to Unlock Innovation
There are additional benefits with a broad drive to agility. Managing a wide range of models and calculations has a tendency to stifle analytical innovation and may lead to overly restrictive rules, which in turn may limit responsible revenue growth. But our flexible data model enables experimentation; you can test the impacts of differing scenarios and business outcome models.
With CAaaS the speed to market is faster, it’s a driver for growth and it reduces attrition. Removing internal siloes and siloed thinking will always help deliver leaner, efficient and more cost-effective back offices.