London — December 2, 2015
- Česká Spořitelna, the largest bank in the Czech Republic, optimized loan strategies to achieve a 26 percent increase in portfolio profit and a 29 percent increase in new sales.
- Optimized strategies are forecast to add $16 million in portfolio profit per year, and $41 million in new sales.
- The bank’s analytic team used FICO optimization tools, part of the FICO® Decision Management Suite.
- Česká Spořitelna has won the 2015 FICO Decision Management Award for Customer Onboarding and Management.
Česká Spořitelna, the largest bank in the Czech Republic, has increased portfolio profit on pre-approved loans by 26 percent, and new sales by 29 percent, by developing optimized strategies using FICO software. For this achievement, Česká is a joint winner of the 2015 FICO Decision Management Award for Customer Onboarding and Management, along with China Minsheng Bank.
More information: www.fico.com/dmawards.
Česká Spořitelna, part of the Erste Bank group, wanted to combat aggressive pricing by competitors, which was cutting into the bank’s market share. “We wanted to be more competitive without destroying our loans’ profitability,” said Zuzana Sloukova, who leads the optimization, reporting and analysis team for Retail Risk at Česká Spořitelna. “Optimizing our strategy for pre-approved cash loans would be a significant part of this campaign.”
The bank had performed analysis showing that it could increase the absolute portfolio profit (APP) of pre-approved cash loans by identifying the optimal offer price and initial credit limit for each individual borrower, based on their risk profile, loan appetite, price sensitivity and personal wealth. Using optimization tools that are part of the FICO® Decision Management Suite, the bank could crunch masses of data to arrive at the best price and credit limit.
The Česká Spořitelna team developed a new approach using an iteration algorithm that took into consideration all the possible loan limits in order to maximize profit. The team also developed a highly sophisticated amount take-up model, which predicts the loan amount that clients will take.
Based on the successful results from a similar project for non-pre-approved loans, the bank expected to see a 5 percent to 10 percent increase in APP, and a 7 percent to 12 percent increase in new volume. When the bank’s analysts tested optimized scenarios in FICO® Decision Optimizer, they showed even better results, estimating a 22 percent increase in APP and a 25 percent increase in new sales compared with the prior strategy for pre-approved limits.
“When the strategy went live, it outperformed our expectations,” Sloukova said. “APP increased 26 percent, and new sales increased 29 percent, without an increase in credit risk costs. Currently, the strategy runs on our entire cash loan portfolio of pre-approved loans. Projecting the results across our portfolio, we forecast an annual increase of $16 million in APP, and $41 million in new sales.”
In order to react to increasing demand for debt consolidation loans, Česká Spořitelna has now begun using even more advanced analytical procedures involving real-time optimization. For this, the bank’s analysts use FICO® Optimization Modeler, powered by the FICO® Xpress Optimization Suite, to configure the optimization models used for real-time decisions. The first generation of this optimization, which returns optimized results within one second, is being currently implemented into the bank’s loan origination platform.
“We expect a 15 percent increase in new sales compared to the prior strategy, which again is part of our campaign to win market share,” Sloukova said. “FICO Xpress for Debt Consolidation should help us to be even more ambitious about increasing market share and lowering attrition.”
“We are very proud to have developed new optimal strategies on our own,” said Sloukova. “Our achievement was recognized by members of our Board of Directors.”
“Analytic excellence is the core of the financial services industry,” said Michael Versace, global research director for digital strategy at the industry analyst firm IDC, and one of the judges for the FICO Decision Management Awards. “In the digital era, firms can further differentiate their products and services by using data and analytics to improve customer engagement and risk management, and support relationships with regulators. Česká Spořitelna has shown great innovation in their use of the FICO analytics technology.”
“Our optimization tools are second to none in giving analysts and business teams the power they need to develop, test and deploy new strategies,” said Bill Waid, vice president and general manager for decision management solutions at FICO. “Česká Spořitelna has put these tools to the test, and achieved remarkable results.”
The FICO Decision Management Awards
The FICO Decision Management Awards honor companies that have achieved outstanding business results using FICO predictive analytics and decision management solutions. Winners will be featured in presentations at FICO® World 2016 in Washington D.C., April 26-29.
Winners were selected by a panel of esteemed industry leaders, analysts and journalists; Philip Alexander of the Financial Times; Joel Wells from Discover Card, Michael Versace from IDC and Michael Wu of Lithium Technologies.
For more information: http://www.fico.com/dmawards/
FICO (NYSE: FICO) helps individuals and businesses worldwide make better decisions by applying data science to solve human problems. Using predictive analytics, FICO has dramatically improved profitability, customer satisfaction and growth for companies in 100 countries across financial services, telecommunications, health care, retail and other fields. Founded in 1956 and based in Silicon Valley, FICO holds more than 170 US and foreign patents for technologies that have transformed entire industries. Whether protecting 2.5 billion payment cards from fraud, helping hundreds of millions of people worldwide obtain credit, or ensuring that millions of airplanes and rental cars are in the right place at the right time, FICO powers decisions that help businesses and people prosper.
Learn more at https://www.fico.com.
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