(Shanghai, China) - As credit markets in the Asia-Pacific region continue to expand at record rates, results of a new region-wide survey underscore a growing need for proven strategies and solutions that enable banks to make profitable customer decisions that accelerate growth while limiting risk and losses.
Commissioned by Fair Isaac Corporation (NYSE: FIC) and conducted by leading financial services research and intelligence firm The Asian Banker, "The Asian Banker Consumer Credit Practice Survey 2007" spotlights current practices in credit customer management, risk management and fraud control. The survey engaged senior banking executives, experts and practitioners in 10 major financial centers across Asia Pacific, including Singapore, China, India, and Hong Kong. The Asian Banker and Fair Isaac revealed the results in Shanghai this week, during Fair Isaac's first InterACT customer conference in China.
The survey indicated that as Asian banks work to expand their consumer credit businesses, they are in need of advanced decision-making capabilities to help them smartly capitalize on their growth opportunities. The survey found that most banks in the region are still at the early stages of building and leveraging sound analytic approaches and technologies to improve the processes that drive their most important customer decisions. Key findings of the survey include:
- 95 percent of respondents identified establishing a reliable credit scoring process as a key operational challenge.
- Less than 10 percent of respondents currently utilize advanced techniques for fraud detection and prevention on a regular basis.
- Less than one-quarter of Asian banks utilize advanced customer segmentation techniques in their marketing activities.
- Less than one-third of banks incorporate customer profiling or profitability analysis on a regular basis.
The survey was conducted at a time of burgeoning growth in Asian credit and lending markets. According to The Asian Banker, the current $3.9 trillion consumer credit market in Asia Pacific has an estimated potential of $8 trillion.
"By investigating how banks manage key functional processes and customer decisions across the consumer credit lifecycle, The Asian Banker sought to examine the preparedness of Asia-Pacific banks to achieve their growth potential," said Dr. Grace Liu, Senior Researcher at The Asian Banker. "Specifically, we looked at their current capabilities as well as the fundamental challenges they encounter. Diversity of credit markets, varying levels of process maturity and different go-to-market strategies were key themes that emerged, along with the common challenges banks face in acquiring and leveraging quality customer data."
"We are pleased to partner with The Asian Banker to provide a timely view of current practices, perspectives and requirements for success in the Asia-Pacific credit industry," said JY Pook, Managing Director for Fair Isaac Asia Pacific. "The fast-emerging markets in this region hold tremendous opportunity for banks and lenders that approach it with both the right growth strategies and the right combinations of data, predictive analytics and sophisticated decision technologies. Fair Isaac's mission is to help Asia Pacific banks embrace and leverage the strategies and solutions they need to consistently and confidently make customer decisions that enable smart growth."
Select findings of the survey include:
Data, Credit Scoring and Fraud Analytics are Keys to Growth
The Asian Banker found that the ability to capture, analyze and act on customer credit data is a key determinant for success in the lending origination process. Respondents were concerned by the state of data, predictive modelling capabilities and account automation across the consumer credit lifecycle. They indicated that an inability to effectively leverage data is an obstacle to developing advanced decisioning capabilities, and thus is an obstacle to consumer credit business growth. Eighty-seven percent of respondents indicated that making effective use of credit bureaus is challenging, while 88 percent indicated that they have difficulties achieving effective automation of credit approval processes.
In the areas of fraud detection and prevention, the survey found that banks rely largely on basic fraud detection methodology, and view fraud detection and prevention improvements as secondary to growing customer acquisition and account management capabilities. While 89 percent of respondents actively use internal or industry-shared "blacklists" - the most basic of fraud detection methods, only 22 percent use more advanced modelling methodologies such as neural networks and profiling.
A Need for Deeper Understanding of Customers
The survey illustrated that Asia-Pacific consumer credit markets are at different stages of development, with varied levels of market penetration. Emerging economies like India, China, the Philippines, and Indonesia demonstrate the highest potential for market development and growth, while more mature economies like Singapore and Australia comprised the group with the highest ratio of penetration and indebtedness.
This diversity is further indicated by different approaches to market development. In emerging economies, banks such as those in India and the Philippines (or 29 percent of all banks surveyed) utilize broader-based approaches to customer acquisition, while banks such as those in Singapore and Australia (24 percent of banks surveyed) have adopted more advanced marketing strategies in customer segmentation. However, fewer than half of all banks surveyed have established mechanisms for measuring the effectiveness of marketing campaigns, due largely to challenges in quantifying and establishing appropriate performance measures.
China Poised for Growth, But Needs Advanced Analytics
According to The Asian Banker survey, China is one of the highest-potential growth markets. However, the country is still at the nascent stages of market and process sophistication. For example, almost 65 percent of Chinese banks surveyed agreed that they were unable to target appropriate customers for their consumer credit offerings. More than half of Chinese banks also viewed the effective use of credit bureaus and historical data a major challenge.
About Fair Isaac Corporation
Fair Isaac Corporation (NYSE:FIC) combines trusted advice, world-class analytics and innovative applications to help businesses make smarter decisions. Fair Isaac's solutions and technologies for Enterprise Decision Management turn strategy into action and elevate business performance by giving organizations the power to automate more decisions, improve the quality of their decisions, and connect decisions across their business. Clients in 80 countries work with Fair Isaac to increase customer loyalty and profitability, cut fraud losses, manage credit risk, meet regulatory and competitive demands, and rapidly build market share. Fair Isaac also helps millions of individuals manage their credit health through the www.myFICO.com website.
About The Asian Banker
The Asian Banker is an authoritative provider of strategic business intelligence to the financial services community. The Singapore-based organization has offices in Singapore, Malaysia, China (Beijing and Shanghai), and Middle East as well as representative offices in Europe and North America. With a business that revolves around three core business lines - research and consulting services, publications and forums and training -the organization is highly regarded in the financial services community for its incisive and independent assessments on developments in the industry. For more information, visit www.theasianbanker.com.
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