Earlier this year at FICO World 2018, we held a session on the growing application of pricing optimization to mortgage loan books. We invited one of our clients, National Australia Bank to speak about its journey using this type of advanced analytics.
Check out this short video where presenter Josh Brougham, Head of Pricing for Mortgages at National Australia Bank, explains why pricing optimization was a priority for the bank.
Why Optimize Mortgage Loans? - Transcript:How has optimized pricing put NAB at the top of the lending game?
It has really freed up smart people to do what they do best, which is to design strategies for certain customer groups to allow us to win market share. It has removed the distraction of using ad-hoc pieces of analysis using very disparate data sets and giving them a really sophisticated toolset to enable them to deliver business value.
Why was pricing optimization a priority for NAB?
The mortgage market in Australia is becoming increasingly scrutinised by regulators. At National Australia Bank we had invested a lot in our process infrastructure, so when the regulators put caps on certain parts in the industry, we knew that we had to develop a solution that would enable us to offer the right price to the right customer. FICO has been a great partner in delivering that solution.
What are your objectives with the analytic technology?
To be able to optimize profits on the portfolio. So to be able to get volume margin trade-off exactly right based on the strategic objectives we have on the portfolio but also adhering to the regulatory environment we have, which is increasing in the Australian market.
What sort of ROI can you deliver?
We think we can deliver a couple of basis points worth of value on the portfolio while holding volume flat. So we’ve rolled out just a few weeks ago and we’re really excited to see the results come through over the next few months as the outcome goes.
National Australia Bank is advancing in the analytics space and is using a powerful tool to optimize what is a strategically important portfolio for NAB.
Is there a need to educate the Australian market about individualized pricing?
We’ve got some work to do to educate on the benefits of moving to individualized pricing as opposed to community base pricing. But as one of the first banks to implement a price optimization solution, we’re kind of happy to let others catch up and hopefully reap the benefits while they do.
How do you see AI impacting NAB?
National Australia Bank has a strategy to be customer-led and use the insights and data that we have on customers to deliver them solutions that they want and need. So we see AI as a critical enabler and as the mortgage business is an important product to Australians, it is a natural ground to test AI technologies in the future.