What are today's customer management best practices? It's become a topic of increasing interest from our clients in the Asia Pacific region, so we invited interested bank executives to listen to the head of unsecured risk at a top Australian bank (a FICO client) over breakfast at the China Club in Singapore.
Banks in Australia are facing challenges from a number of directions, from regulation around responsible lending, to customer (and media) pressure around unfair penalty fees, as well as in the cost and source of funding. These issues aren’t unique to Australian banks, as we gleaned from the robust discussion amongst the Asia Pacific attendees, which included representatives from DBS Bank, UOB, ICICI and First Data.
The main topics that struck a chord with the attendees were:
- Ensuring that account-level and customer-level scores and decision keys are actively used in all account touch-points
- Gaining more insight into, and building more focus on, the existing customer relationship by utilizing transaction data, transaction analytics and deposit account data
- Ensuring the optimal initial credit line is set for credit cards from the outset
- Cross-selling to broaden the relationship of customers with single products
Without question, there is a strong focus on setting the right initial credit line for card customers, since new regulation may deter proactive offers of line increases and require card customers to opt-in for future line increases. Banks are looking to use decision optimization to determine the best initial credit line for a customer, given all of the known information and predictions about that customer.
Cross-sell is also important right now. Banks want to ensure that those customers with a single product relationship (e.g., via a card or deposit/savings account) remain with the bank and don’t take their business elsewhere when their product reaches its renewal date. Our own experience shows that customers with at least three products are unlikely to move their relationship to a competitor. Our speaker’s organization is looking toward transactional data to gain more insights into customer behavior and build customer satisfaction.
In responding to the new regulatory requirements, our speaker mentioned his bank has realized that customer data holds the key when assessing whether the customer’s credit offer is suitable and that they have the capacity to repay. There’s significant influence on income verification strategies and observed customer performance metrics, such as salary deposits, frequency and stability.
I’ll leave the last word to our client who spoke that morning: he said that economic, regulatory and consumer events are prompting an unprecedented shift in how banks manage customers. Risk management practices, powered by predictive analytics, will drive enhanced outcomes for all parties involved.