Banking Analytics Value Proposition

Business Unit or Product NameBanking Offering - OverviewRedPill Solutions, September 2009© 2009 IBM CorporationBusiness Unit or Product NameWe focus on a variety of challenges faced by banks in establishing differentiation using customer dataHow to understand & utilize the customer data to differentiate in the market?How to identify and define the right offer and positioning?• How to establish potential market opportunity? • What value proposition will help capture the potential? • How to take the offers to market effectively?How to leverage insights to acquire right customers?• How to identify & acquire ‘good’ customers? • How to boost my acquisition efforts?How to monitor and control Credit Risk?How to develop customers insights?How to grow the portfolio profitably?What KPIs/ reports are needed to effectively track business performance?• How to integrate data in ‘One-view’ mode? • How to track risk performance? • How to track campaigns performance? • What KPIs / reports are required?• How to improve underwriting? • How to minimize credit loss while achieving growth? • How to improve collection efficiency?• How to understand customer usage and spend patterns? • Based on what parameters should customers be segmented? • What data is required?• Who are the high-value customers? • How to retain these customers? • What is the right product to cross-sell/up-sell and to whom?Differentiate Positioning & OffersImprove AcquisitionManage RiskGain Customer InsightsPrevent Churn, Cross-SellTrack Performance© 2009 IBM CorporationBusiness Unit or Product Name1Analytics Assessment Audit helps chart out plan to improve clients’ analytics capability through an Assessment FrameworkCRM Analytics Assessment ExerciseKEY ELEMENTS üAssessment of an organization’s capability to effectively manage their customers through an analytics-led strategy ü24 questions based on ‘best’ practices, each answered on a multi-dimensional scale; Administered through a broad range of short, structured interviews üCovers the entire customer lifecycle model BENEFITS üBaseline for assessing improvement in CRM capability üClear direction and priority setting for CRM strategy and programs üInter-business comparison and best practice identification within the organizationThese will be filled for each business line by the respective owners for Strategy, Product development, Marketing, IT and Credit & RiskOur framework covers the full spectrum of CRM Analytical competenceWell Defined End to End ProcessImpactCustomer will be able to map its existing CRM Analytics initiatives and chart-out plans for improvement© 2009 IBM CorporationBusiness Unit or Product Name2Acquisition Analytics enable better targeting to acquire the right customersPossible Acquisition Analytics initiatives Application scorecard• Scorecard for new customers at the application stage to predict future risk / delinquency • Underwriting strategies based on scorecardCross-Sell Acquisition: Increase targeted acquisition of profitable customers,Increase sales quality & efficiency• Identify hi-quality customers within banking base/external base for X-SellResponse Models• Based on conversion from targeted campaigns, develop response models to enable precise targeting & lower CoA • Identify benchmarks for Sales performance & evaluate Unit performance regularlySales BenchmarkingImprove Value Proposition• Identify behavior at customer level across products to fine tune offers, product terms© 2009 IBM CorporationBusiness Unit or Product Name3Application Scorecard : Screen out ‘bad customers’ during acquisition process through Predictive modelingDevelop an Application Scorecard to weed out high risk customers at application stageü ü üIdentify key customer profile that is more likely to default% ResponseLift Chart For Training Sample 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0 0 1 2 3 4 5 DecileCum. Good Cum. Bad99% 97%73% 81% 62% 43%87%91% 95%100%Define ‘right’ Cut-off strategy as per the acceptable NPL limit Overlay acquisition channel, region information on scorecard for optimal cut-off limit for different channel, region etcKS: 47%KS = 47 at 3rd Decile 6 7 8 9 1081% bad in 4 deciles§ § §Faster acquisitions & better risk evaluation Better approach over judgmental decision-making Leverages large width & depth of expertise across industries© 2009 IBM CorporationBusiness Unit or Product Name4For this solution, we use Multivariate Segmentation technique and profile customer baseStep 1 – Identify Customer Segments Step 2 – Profile Customer SegmentsStep 3 – Deep Dive analysis of segments to identify customer insightsStep 4 – Campaign Recommendations for segments based on insights© 2009 IBM CorporationBusiness Unit or Product Name5X-sell/up-sell : We use behavior score-card to screen the ‘good customers’ to be targeted…1 2Identify ‘good customers’ based on behavior scoreExample score-bands for a regional bankIdentify key attributes that determine customers likely to take x-sell / top-up offers • • • • • • Loan Tenor Ever Top-up Ratio of loan-balance & loan disburse amount Loan balance Vintage of customer …Focus for positive portfolio actions3Find the customer base you want to run cross-sell campaigns onCustomers owning credit cards of the same bankCustomers owning other products (SA, Loan etc.)Customers of partner company (insurance, asset management)© 2009 IBM CorporationRank orderedBusiness Unit or Product Name5X-sell/up-sell : .. and devise cross-sell campaigns that significantly improve the portfolio value4Identify the customers with high propensity to respond to a Cross-sell CampaignUse Predictive AnalyticsTargeting 30% of customers (top 3 deciles) enables one to capture 76% of the opportunityPredictive modeling rank orders the customers based on the propensity to respond to the 100% campaignTop 2nd 3rd 4th 5th 6th 7th 8th 9th Bottom 46%Larger target base, with lower risk resulting in revenues and cost-savings 30KBefore After76%18% 12% 8% 6% 4%0.6%Deciles – without Predictive modelingModeled dataIncreased Target BaseReduced ‘Bad’ rate© 2009 IBM CorporationBusiness Unit or Product Name7Attrition Scorecard: proactively retain potentially high value customer1A decision tree / scorecard to predict the customer base who are likely to attrite19 nodes 7 Key Decision Variables • Amount of Credit/ Amount of debit (last 3 months) • Principal Paid ratio • Disbursal Amount/ EMI • Worst DPD in last 6 months • … • …2Identify customers to be retained by the bank through profitability estimatesProfits, USD/Customer Most profitable customers Customers who are over promoted with no returns 200 100 -10 -30 -60 -100 -350 Customers who can be allowed to attrite due to low returns 3 4 5 6 7 8 9 10 Worst1,200 800 400Decile 1 2 Best4Results in decrease in attrition as well as increase in revenues$ 50K increase in Revenues/ Program3Devise retention strategies for the selected customer base (who may attrite)Top- up Propensity model Cross- sell Model30% decrease in AttritionCheck with bank officersCustomer behavior & product holding patterns© 2009 IBM CorporationBusiness Unit or Product Name9Risk mitigation : Stress test using key risk factors, quantify size and probability of risk and identify mitigation measures1Get a full understanding of the Environment, Portfolio and InfrastructureUnderstand Environment2Create a ‘Heat Map’ of risks based on impact on revenues & frequency of occurrence4 7 x 1 3 5 2 1 2 3 4 5 6 Natural disaster Liquidity crunch Slump in property prices Credit crisis New regulation Other operational risksDecide which KPIs require Stress testingUnderstand the Portfolio Understand the business infrastructureFrequency of occurrence6x8Low impact risks => removeImpact of occurrence3Decide actions for each risk based on risk size and available optionsProbability Adj. Loss 1 2 3 4 5 6 Natural disaster Liquidity crunch Slump in property prices Reduce / Exit Credit crisis New regulation Other operational risks Absorb / Grow TransferManagement action…who is better able to control …who is better able to bear Both Asset Sales Mitigate risks Use real options Re-balancing Diversify risks Adjust leverage © 2009 IBM Corporation De risk from external factors achieved through systematic approachiOpener : We design the KPI framework to track business performance and identify problem areasAverage revenue percustomer Average revenue per product categoryNumber of activecustomersNo targeted by campaignResponse rateIncremental revenue fromcampaign targets Portfolio change of campaign targetsDefine KPIs relevant to client ’s business objectivesOverall Campaign RelatedDesign a KPI framework & define structure for10By ProductBy SegmentBy DemographicsBy RegionA c r o s s m u l t i p l e c u t sBy TenureBusiness LineFocus AreasCategoriesKPIsEg. Credit cardsEg. Business performance, Campaigns etc.Eg. Products, behavior segments etc.Eg. Avg. Revenue/customer, response rate to campaign etc..By Credit limitNote: We use this framework for our proprietary web-enabled dashboard ‘i-Opener ’. ‘Opener ’ comes with set of pre-defined business specific KPIs and reports which can be customized.We apply the appropriate statistical technique anddevelop quick models based on our ready toolkitLogistic Regression /Decision Tree Analysis toidentify embedded trendsCross-matrix analysis for product holding & profitability to identify opportunity areasAAAAProduct Holding MatrixProductprofitability matrixBinary tabulations, i.e. have vs. don ’t have tabulations across otherdimensions for specific segment, for segment specific behavioral insightsThank You。