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FICO advises banks to focus on existing customers

Anuradha Shukla | Dec. 20, 2012
Encourages them to adopt new global best practices in customer-level decisions.

Analytics and decision management technology provider FICO has advised Asian lenders to focus on existing customers for untapped profit potential.

FICO says banks will be able to strengthen their portfolios from within by this strategy.

It should not be a challenging issue for the banks to achieve a 360-degree view of the customer, according to Dr. Andrew Jennings, chief analytics officer and head of FICO Labs who said banks can achieve up to 80 percent to 90 percent of the profit lift if they can take care of 20-30 aspects about each important customer.

"Asian lenders are quickly embracing the notion of having to do business with customers, not accounts," said Dan McConaghy, president, FICO in Asia Pacific. "Yet while many banks in Asia Pacific are beginning to adopt customer-level decisioning, there is increased urgency to improve on these efforts and shift away from over-reliance on new customers, fees and credit limit increases to drive growth."  

Attempts to attract customers

Asian lenders are trying to attract the best customers driven by factors such as continued macroeconomic pressures, lowered rates of regional growth, and stiff competition from non-traditional lenders.

These efforts require banks to expand their customer-level decisioning and increase customer profitability.

Analyses at the recent third-annual FICO APAC Chief Risk Officer Forum shows that risk officers can enable profitable growth through a more fine-tuned risk assessment of a customer across accounts and products.

Also, banks should use fully integrated customer management systems because as per research firm IDC, banks that do not use such systems will end up spending as much as 40 percent more in risk and compliance spending alone.

"Customer-level management is not a new idea, but for many Asian banks it's still a vision rather than reality," said Dr. Jennings. "Banks should move ahead with data integration initiatives, harness the techniques and technologies of Big Data, and tap additional data sources such as transaction data on existing current or DDA accounts."


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