My fellow blogger Rita Chakravarti recently noted that customer centricity has become a central theme in her conversations with banking professionals. I’ll add that most financial institutions are tackling this in stages. We’re seeing them move toward full customer-level management capabilities gradually, and reap profit gains at each stage for each product line.
Here’s an example. I’ve been working with an Australian bank committed to putting the customer “at the center of every decision.” The bank began by implementing a policy that required all account-level strategies to be evaluated with customer-level data and scores, even if only as a knockout rule.
The bank then advanced to customer-level scoring. Traditionally it had calculated account-level risk scores in isolation then rolled them into a cumulative customer-level score. But this resulted in sub-optimal identification of risk, as influencing product relationships (cards, deposit accounts, insurance, investment/pension holdings) were not being taken into account. Also, multiple good/bad definitions created complexity and structural weaknesses in decision processes.
By integrating its models and scorecards, the bank is now able to generate a streamlined customer risk score, which it is incorporating, along with other customer-level analytics and data, into action-oriented segmentation aimed at expanding customer relationships.
For the time being, the bank is creating decision strategies that match offers and other treatments to customer segments at the account level. A credit card line increase strategy, for example, was optimized to maximize both offer response and profitable utilization. The ability to run multiple scenarios by varying constraints also helped the bank adapt to the country's changing regulatory environment.
The holy grail, of course, is for banks to use customer-level data in customer-level analytics for decisions implemented at the customer level. Most aren't there yet—but it’s on the horizon.