Decisioning in Action

Hosted decisioning can increase revenue and reduce losses.

April 25, 2011

Every year a typical financial institution with 500,000 customers makes more than eight million important customer decisions—and large institutions make more than 50 billion customer decisions a year.

Even a 10% improvement in the quality of these decisions can have a substantial positive impact on the bottom line.

Given this reality, coupled with increased competition and the tighter credit and regulatory environment, it has become critical to employ the most advanced data, analytics, and decisioning tools to compete for customers and stay in compliance.

When your service provider can deliver these capabilities easily and quickly through its own hosted environment, these decisioning capabilities can transform how you conduct business by allowing your company to react rapidly and efficiently to regulatory requirements, deploy services only when and where they are needed, and reduce operational expenses.

By improving on current business processes and decision areas, the right hosted decisioning and data analytics can also increase revenue and decrease losses by increasing approval and take-up rates; lowering charge offs and losses; and increasing revenue by more effectively cross-selling through instant prescreening at the point of sale.

In my capacity as an expert in hosted decisioning capabilities, I counsel organizations of all sizes in various industries on the best ways to use hosted decisioning tools to improve business performance. Now more than ever, companies can access a wide variety of the most sophisticated decisioning capabilities in a hosted environment to maximize profit and minimize loss.

A high performing decisioning environment:

  • Offers a vendor-hosted environment, which has lower upfront costs, a higher return on investment, faster time to benefit, minimal IT investment, and agility to respond to market opportunities;
  • Applies credit and noncredit data from various sources;
  • Spans across the customer life cycle, improving decisions throughout prospecting, acquisition, customer management, collections, and fraud management decisions. It allows you to decide where to start and add capabilities over time;
  • Includes fraud and bankruptcy scores along with predictive attributes; and
  • Uses powerful scoring and business rule engines to easily leverage robust data, attributes, analytical scores, and mathematically derived strategies to drive improved business performance.

Next: Create a decisioning roadmap

Create a decisioning roadmap

A case study on the positive impact of a hosted decisioning environment involves a regional bank that sought to improve the customer experience and increase cross-sell effectiveness through a new instant prescreen decisioning process.

The bank had committed to aggressively grow its credit card business while managing risk and expenses. It decided to take advantage of a previously untapped opportunity to cross-sell credit card accounts at the time a customer opened a deposit account.

The bank wanted the ability and flexibility to add products and services easily for expanded cross-sell opportunities through more banking channels, along with a way to modify its instant prescreen strategies and criteria quickly and easily.

By using a hosted decisioning environment that is connected to the bank’s existing processing systems, with minimal IT involvement and no software installation, the bank had immediate access to sophisticated data and decisioning analytics to make pre-approved product offers to customers as soon as they opened a new deposit account.

This allowed the bank to open new accounts more quickly.

The bank also used a proven decision engine, which provided the flexibility and control to make intelligent, accurate decisions that maximized the value of customer relationships and improved financial performance.

As a result, the bank can instantly approve about 30% of its customers for credit cards as soon as they open new deposit accounts. This enables the bank to expand its credit card portfolio in a risk-mitigated manner while deepening relationships with new customers.

As you think about how hosted decisioning tools can improve your business performance, consider using a decisioning improvement roadmap to drive business results incrementally and iteratively.

Five key factors to consider as you move forward with a decisioning roadmap:

1. Rank, for each line of business, these key business drivers:

  • Grow revenue (via acquisition);
  • Grow revenue (via cross-sell);
  • Grow revenue (via retention);
  • Reduce losses (due to bad debt and fraud);
  • Reduce operational expenses; and
  • Ensure regulatory compliance.

2. Determine which of the following decision areas would most positively impact your key business drivers through an improved decisioning capability:

  • Prospecting decisions;
  • Acquisition and underwriting decisions;
  • Customer management decisions;
  • Collection management decisions; and
  • Fraud management decisions.

3. Assess your current capabilities (and gaps) for each high-priority decision area relative to these components of the decisioning process:

  • Data and data access;
  • Predictive attributes;
  • Scores;
  • Decisions; and
  • Treatments

4. Define the decisioning improvement initiatives that will drive significant business value.

5. Implement your improvement initiatives in a phased manner so you can realize measurable business benefits within three to six months.

In today’s competitive business environment, taking advantage of sophisticated hosted decisioning tools can have a significant positive impact on the bottom line while minimizing risk.

Identifying and implementing the right decisioning capabilities to achieve your business objectives is key to ensuring that your organization responds quickly to seize opportunities and respond to the ever-changing business climate.

Roger Ahern is Senior Director of Experian’s Decisioning as a ServiceSM capabilities.