This blog is part 3 of a 4-part series on transforming a product-siloed organization into a customer-centric one. In part one, we discussed Insights Capabilities, in case you missed it, you can catch up here on part one and part two. In this blog, we are moving on to the third capability in consideration of customer-centric decisioning, Actions Capabilities.
Pillar 3: Actions Capabilities
Make instant sophisticated decisions across all business areas to maximize portfolio growth and profitability without detriment to an unmatched customer experience
Originations Decisioning
Exposure Management Decisioning
Pricing
Collections Decisioning
If you are thinking to start your journey towards customer centricity, make sure to subscribe to the Decision Technology blog to be notified about the next blog in this series.
Pillar 3: Actions Capabilities
Make instant sophisticated decisions across all business areas to maximize portfolio growth and profitability without detriment to an unmatched customer experience
Originations Decisioning
- Customers must be evaluated holistically when they apply for credit. Most scores, rules, and calculations forming part of the credit decisioning logic should be defined at the customer-level and be evaluated irrespective of the product applied for.
- Still, a few product-level rules are recommended to be in place during credit origination decisioning. They would cover very specific decisioning aspects pertaining to each particular product (for example, risk appetite might slightly vary from product to product) or those that are somehow unrelated to the customer’s risk profile (for example collateral evaluation in secured lending).
- Customer past payment experience with the organizations as well as her known preferences (credit product, term when applicable, communication channel) should be factored in credit sanctioning decisions.
- Products up-sold or cross-sold at the point of application should aim at maximizing customer loyalty and lifetime value across all lines of business rather than just having a short-sighted focus on short-term profitability.
Exposure Management Decisioning
- An accurate affordability estimation model is one of the cornerstones for customer centricity in general and customer exposure management in particular.
- The affordability calculation algorithm would be consistent across all stages in the credit lifecycle (originations, customer management, hardship management). What a customer earns and spends does not vary depending on where in the credit lifecycle she is; what you do as an organization with that calculated income in each stage can change though (if I make 1,000, I make 1,000; then you can decide what percentage of that disposable income I should apply to each particular transaction).
- Affordability should be calculated (or estimated) for every single existing customer monthly (batch) and every time that an event potentially affecting affordability is known (event-triggered; for example, when new credit is taken up or income evidence is updated).
- Multiple data sources are typically used for net income estimation models, being deposit account transactional data and credit bureau information the ones that have proven most valuable for this purpose.
- Open banking is gaining ground as one of the most reliable and accurate sources for affordability estimation models. The amount and granularity of available transactional data from all lenders in the marketplace facilitate the development of models providing a level of accuracy unseen before.
- Net affordability along with predicted customer risk and the overall customer relationship with the bank would be the base to calculate maximum exposure (maximum amount of credit the organization could lend without negatively impacting future performance) for every customer every month.
- Maximum exposure can then be cascaded down to product-level limits that can be exploited both proactively (marketing/cross-sell campaigns) and reactively (expedite the approval process when a customer applies for credit).
Pricing
- Account-level pricing decisions might be contradictory across products sending a confusing message to the customer.
- A customer-centric vision allows evolving from simplistic risk-based pricing to a more advanced and sophisticated relationship-based pricing. Models which utilize predictive data from across the bank rather than product level can predict customer response to price adjustments more accurately
- A customer-centric pricing profile should factor in:
- current prices that the customer has accepted
- declined prices
- offered prices
- Optimization applied to pricing provides a mathematical framework facilitating strong performance predictions and methods to select the best decisions for each customer
Collections Decisioning
- With customer-centric collections, there is a sole course of action determined for the customer that is consistent across all his/her delinquent accounts (a customer holding three delinquent accounts is called or visited once instead of three times by different agents who can potentially deliver disparate messages)
- This solid consistency of treatment not only impacts the amount collected but also improves the customer experience, potentiating loyalty, and prolonging the lifetime value of reinstated customers.
- Enhanced collections operation efficiency brought by customer centricity can be converted into optimized resources (collect the same with fewer resources) or increased collected amount (actions saved are “invested” on greater intensity for high-risk customers)
- Transitioning from a pure account-level collections operation to a full-fledged customer-centric organization requires changes and alignment across all related functional areas. To name a few:
- Dialer: 360o customer information should be made available to agents for outbound calls; incoming calls should be routed to the appropriate collector based upon customer rather than account-level profile
- Self-service channels: Should provide the customer with options to bring all accounts up to date or account-level payment options
- IVR / SMS / letters: Delivering appropriate content and tone with the messages could turn out challenging as cases will be encountered where one customer holds multiple accounts bearing disparate balances, delinquency, or risk levels.
- Outside Agency Placement: Customer-centric criteria should be established for placement/recall; external agencies should be re-evaluated to ensure their capabilities around collecting on all portfolios are adequate; agency performance tracking and monitoring needs to be adjusted to the new customer-centric model
- People: You need to evaluate the skills of staff across products to determine the pool of resources available to work at a customer-centric view (it would be recommended starting with employees handling secured as they are used to more complex cases and conversations); incentive plans should be re-examined to motivate and drive collector efforts towards new customer-level profiles
If you are thinking to start your journey towards customer centricity, make sure to subscribe to the Decision Technology blog to be notified about the next blog in this series.
Updated 4 years ago
Version 3.0