Customer centricity and the halo effect

Many FICO clients are seeing benefits from customer-level decisioning. But some of the impacts are a bit tricky to quantify. One of these is the so-called “halo effect.” It’s intuitive that customers who have a good experience with one type of account are likely to be more receptive to offers...

Putting the customer at the center of every decision

My fellow blogger Rita Chakravarti recently noted that customer centricity has become a central theme in her conversations with banking professionals. I’ll add that most financial institutions are tackling this in stages. We’re seeing them move toward full customer-level management capabilities gradually, and reap profit gains at each stage for...

Gaining Speed to Market with Best Practice Collections

These days, collection managers face many tough questions. How can we do more with the same resources? How can we make sure to work the right delinquent customers? Can we improve the timing of collection actions? How can we improve kept promise rates and offer better customer service? And, how...

Big Data Changes the Analytics Paradigm

Big Data is a hot topic today that stems back to the early days of high-performance computing and parallel computing, which I worked on during my time in theoretical physics at Duke and Los Alamos. These days, Big Data tools facilitate the ease in applying these concepts. Interestingly, much of...

The Profitability Paradox

In the middle of a recession — or what seems like one — you get what I call the profitability paradox. Simply put, banks don’t want to lend to customers who want credit, even though these tend to be the most profitable customers. How does this work? If a customer...

Innovations in collections analytics

At a recent collections and recovery webinar that I co-presented, I polled attendees to find out what area they felt could be improved to drive the biggest C&R gains. An overwhelming 50% said it was technology. Process also emerged as a key theme, coming in second at 18.2%. These results...

The Buzz on Customer Centricity

My recent conversations with banking professionals in Asia Pacific has made one thing very clear: customer-centricity is all the buzz nearly in every conversation. Every bank is trying their best to attract customers by putting their best foot forward. Despite gloomy news on the economic horizon, particularly in Europe, the...

Using Mobile Technology to Improve Customer Interactions

Even lenders with the best analytics and decision management platforms often struggle to communicate advice and offers to customers. Wouldn't it be great if they could do so via a low-cost channel that their customers actually enjoy using, and thus is likely to yield more and higher-quality responses? Together with...

Consumer spending rises on UK cards

In today’s environment, even moderately good economic news needs to be celebrated. FICO just released card performance data from December 2011 that shows average sales per UK-issued card rose to a two-year high of just over £600. As reported in our news release, average card sales in December 2011 were...

How customer relationships impact credit risk

For banks that have made it their mission to deepen their product holdings with customers, here is some clear evidence that your relationship with a customer can influence their credit risk. FICO recently studied two Spanish clients’ loan performance, and the results indicated that the risk of a customer on...

Chip and PIN in the US?

For years, UK banks and their customers have had a leg up on Americans when it comes to avoiding certain common types of payment card fraud. Credit and debit cards with embedded microchips, standard in the UK and several other European countries, significantly enhance fraud prevention over traditional magnetic stripe...

Know Your Customer – Hot Topic for APAC CRO Forum

As you heard from fellow blogger Dan McConaghy, FICO recently partnered with IDC to host what is probably the biggest gathering of banking CROs in Asia Pacific. A hot topic at the FICO APAC CRO Forum was customer profitability – how to expand existing customer relationships whilst offering superlative customer...

Inextricably Linked, for Better or for Worse

Last week, more than 30 senior risk officers from 12 countries across Asia Pacific gathered at the second annual FICO APAC Chief Risk Officer Forum in Bali, Indonesia. Hosted by FICO and moderated by IDC, the forum provided a venue for us to have an in-depth discussion around what’s ahead...

Despite Basel sticker shock, banks soldier on

A new study by the Boston Consulting Group finds that banks globally face a $450 billion (€350 billion) Basel III shortfall, as reported today in the Financial Times. According to the study, banks in Europe have the biggest gap, more than half of the total. While stunners like this make...

UK cardholders paying less of their card balances

FICO has just released UK card data for September that shows a worrying pattern. The percentage of their balance that holders of classic cards paid off in September hit a two-year low. Combined with a rise in cash usage and lower average credit lines, the data suggests that consumers are...

Two Banks. Two Opposite Sides of the World. One Big Challenge.

Greater regulation in the credit card market has become a fact of life since the Global Financial Crisis, whether it’s the USA CARD Act, the NCCP Act in Australia or Canada’s new credit card regulations. As my colleague Evan blogged about earlier, in January 2011 new regulations came into effect...

Decision optimisation—not just for large FSIs

My colleague Amit Parekh recently hosted a webinar about decision optimisation, which got me thinking about best practices for financial service organisations. To recap, decision optimisation helps risk managers answer complex questions like: How do I run a profitable line increase campaign whilst reducing losses and exposure? How do I...

UK card data shows rise in cash withdrawals

FICO just released data on Q2 cards performance in the UK. In large part, we’re seeing steady patterns, with higher volatility and risk for both student and Irish cards. One area that shows a slight increase in risk is cash withdrawals. Cash withdrawals as a percentage of total sales for...

FICO fraud chief discusses mobile banking fraud on Bank Info Security

Bank Info Security has published a bylined article on mobile banking fraud by FICO fraud chief and blog author Mike Urban. In the article, Mike discusses points of vulnerability, as well as security and detection measures. Here's an excerpt: For today's retail banks, mobile banking is seen as table stakes,...

Edinburgh conference award for economic impact modeling

I’m proud to note that FICO’s Johan Jansen van Rensburg and I won the Best Paper Prize at the Credit Scoring and Credit Control XII conference in Edinburgh last week. Our paper was on “Economic Impact Grade Migration Modeling - To Address Pro-Cyclicality in Current Risk Management Practice,” and addresses...

Optimizing Credit Limits Under New Regulations

July 2012. Add a reminder to your Outlook calendar, because that’s when new Australian regulatory changes for credit card lending will take effect—specifically Phase 2 of the National Consumer Credit Protection Act 2009 (as detailed in my colleague Paul Swyny’s recent post). What does this mean to portfolio managers throughout...

Can Australian lenders learn from the US CARD Act aftermath?

Australian banks often look to their overseas counterparts for hints of new best practices, emerging challenges or troubles to come. So it appears to be with Australian regulators. Like their peers in Western markets like the US and UK, they are aggressively attempting to change the local banking landscape in...

10 Most Confusing Things About Credit Scores

In a recent joint “TweetChat” with Bankrate.com, we fielded hundreds of questions from participants on the specifics of a FICO® Score. Their questions ranged from basic to complex, reminding us that as consumers become more credit savvy, the complexities of the FICO Score can still be confusing even to a...

European lenders rank profit-building measures

With European banks under pressure on capital, fees, margins and just about everything else, lenders are considering a number of options for improving profitability. In the second European Credit Risk Survey, conducted by FICO and Efma, lenders put the likely options in this order. The figures show the percentage of...

More Scoring Myths: Closing Credit Cards

Recently I blogged about common FICO® Score myths. Here’s another widespread misconception: People believe that their credit scores should improve when a credit card account is closed. Not true. In all likelihood, closing a revolving credit account either will not affect the FICO® Score at all, or it will cause...

Customer Profitability - what are the best practices?

Managing customers better has been a hot topic lately with our Asia Pacific clients. Originating a new account is a costly process, so ensuring we build long-term customer loyalty and satisfaction is sound business practice. Also, there is a ‘halo’ effect for customers that have multiple products with us –...

How Profitable Are Your Customers?

Customer profitability is a critical question, no matter if you are a bank in a slow-growth market (where it’s probably regulation and slashed operating budgets that are making your job harder) or a high-growth market (where you have been so focused on originating and acquiring customers, that you may have...

The hidden cost of fraud

Traditionally, fraud losses are measured by looking at fraud transaction dollar losses and operational costs. But institutions should begin to pay more attention to reputation and loss of confidence—often the “hidden” costs of fraud. While it's true that these costs are less obvious and harder to measure, that doesn't mean...

Survey reveals issuer response to the CARD Act

When the CARD Act went into effect last year, compliance and rising delinquencies commanded the attention of card issuers, often at the expense of revenue-generating activity. A recent FICO client survey asks: have issuers turned the corner? To find answers, we asked a range of both large and small issuers...

How collections tactics affect the payment hierarchy

As I noted in a recent post, there is growing evidence of a shift in the payment hierarchy among European borrowers. This shift moves housing payments down in the hierarchy, and makes credit cards a top priority. Why is this change happening? Non-payment of a credit card has a more...

New Regulation Raises Consumer Awareness of Credit Scores

While the FICO® Score is certainly no stranger to thousands of US banks and credit unions, a new federal regulation is introducing this important three-digit number to millions of consumers for the first time. The Fair Credit Reporting Act’s risk-based pricing rule, issued by the Federal Reserve and the Federal...

Leveraging the deposit relationship

This is a period of cautious growth for banks, and there’s no safer way to extend more credit than to start with your good customers. That’s why we see banks focusing more and more on the customer experience and taking decisions at the customer level. That means leveraging the deposit...

Collect with Kindness

There’s an old saying, 'Kill them with kindness.' A modern version might read, 'Collect with kindness.' As Janice Horan and I discussed at recent FICO Forum events in Europe, those in debt experience profound humiliation and react badly to brute-force collection techniques. The cumulative effect of all collection efforts reinforces...

Better risk prediction in mortgage servicing

Perhaps no other entity within financial services has been more challenged by the economic downturn than mortgage servicing. It’s not just that mortgage default severity is significantly higher than other consumer loan defaults. The changing nature of assessing consumer credit risk and declining property values has put huge pressure on...

Why managing cross-channel fraud is a must

Our recent fraud survey of hundreds of financial institutions uncovered that only 26% have a team assigned to detect cross-channel fraud. The problem stems from how institutions manage fraud—by payment channel rather than at the customer level. This makes them vulnerable, unable to identify fraudsters targeting one channel for compromise...

Redefining the Path to Profitability

As lenders are developing their post-recession investment and growth plans, they are taking the recent pause in growth as an opportunity to examine alternative methods to add value for both themselves and their customers. While this has been evolving over many years outside of the United States, the movement has...

Delinquencies down, but not out, in Asia Pacific

What are some of the biggest issues collection heads face with their technology solutions in the Asia-Pacific region? What key features are they looking for in a collection and recovery system? We recently completed a series of meetings with banks and financial institutions in half a dozen countries in Asia...

New survey reveals top fraud threats and vulnerabilities

What are the top fraud threats to financial institutions? How are they fighting back? New results from our Faces of Fraud Survey provides some answers—and a few surprises. The survey, conducted by ISMG and sponsored by FICO, polled hundreds of financial institutions, primarily banks but also credit unions and payment...

What can banks learn from retailers?

Banking profits are up. Back in the summer, banks like HSBC and BNP declared record profits. Lloyds bank returned to profit promising the UK government a return on its investment, and the U.S. banking industry earned $14.5 billion during the third quarter of last year. The FDIC went on to...

Take advantage of that Magic Moment!

For any customer, the moment he or she decides to enter into a relationship with your organization — or modify an existing relationship — is a Magic Moment! This is a moment when the customer has identified their need, made the decision to fill that need, and given you the...

100 patents that changed banking

FICO has just hit a major innovation milestone — we have now been granted 100 patents over the past 20 years. You can read the news release and watch a FICO Tech Talk, but I’d also like to point out the significance of these patents in financial services alone. These...

Smarter Customer Management Strategies for APAC Banks

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...

What the GRINCH thinks about debt

Are younger borrowers taking a different stance towards repayment? There’s certainly evidence that this is the case, as we discussed the FICO Forum: The New Normal held in London on 16th November. In fact, there’s even a term for it: GRINCH refers to Generation Recognised in Need of Credit Help....

Why the holistic customer view is even more critical

Dodd-Frank is just the latest in a succession of game-changing regulations that have rocked the financial services industry over the past two years. For banks to be profitable in the new financial landscape, they’ll need to manage customers more holistically. Customer retention is going to be key, and it won’t...

Best practices for managing DDA

In a previous post, I discussed the value of using credit scores and deposit behavior scores together within deposit account management strategies—particularly as more banks extend forms of credit to deposit accounts to deepen customer relationships. Banks using this dual-score approach have found success with several key best practices. Customers...

Managing DDA—why risk assessment requires a 1-2 punch

There's no question that, between new regulations and a lingering recession, banks are seeing profits squeezed. As many look for strategic ways to manage existing customers for improved share of wallet and loyalty, deposits have reemerged a key driver of bank funding. Leading deposit managers, taking a cue from the...

Profitable line increases after the CARD Act

The CARD Act has posed a number of challenges for issuers, not the least of which is how best to determine a consumer's “ability to pay”—a requirement that applies not only to new accounts, but also for credit line increases. The predominant response from issuers has been to implement an...

New ID Fraud Technique

The AP recently released an article that describes the latest technique criminals are using to slip in through the back door of the credit application process. This technique targets fresh or clean Social Security Numbers (SSN) that belong to children or people who have been in prison for most of...

Welcome to the FICO Banking Analytics blog — why are we here?

- Posted by Tom Quinn, FICO® Score Product Manager Today's bankers are information junkies. We should know - as the creators of the FICO® score and other predictive analytics solutions, we are constantly providing our clients with new research and insights into credit trends. We created this blog to share...