taking your collections performance to the top

Taking Your Collections Performance to the TopIntelligent communications and customer self-serve help you scale the shifting economic, regulatory and social environment

©2014 Fair Isaac Corporation. All rights reserved. 2

Today you have more challenges, and more ways to succeed

Take steps to raise collections performanceIn today’s dynamic collections environment, traditional approaches are less and less effective. New techniques—like self-serve ways for customers to resolve delinquencies from their mobile phone—produce higher ROI for collections time, effort and expense.

Browse the five key steps—and learn how one bank used intelligent omnichannel communications and customer self-serve to collect 51% more debt than its current call center, at an even lower cost than an offshore alternative.



Five ways to increase your collections effectiveness

Keep getting better, faster

Take the guesswork out of collecting

Resolve delinquencies in a flexible manner

Connect before they’re late

Contact customers in the way likely to succeed



Use automated intelligent omnichannel communications to determine the best contact strategy for each customer

� Reduce friction in valuable relationships by giving customers quick, easy ways to take care of a missed payment.

� Targeted mobile contacts (not mass blasts) work. One creditor collections organization using self-service voice and SMS achieved:

80% Right-party contact

79% Self-serve pay or promise

69% Conversion rate from promise to pay


“…improving personalization is about more than just making better use of customer data. It means developing technology to give customers greater control over when and how they interact with their bank.”

Ernst & Young2012 Global Banking Survey



Automated contacts are preferred by most customersOne collection organization reports:

61% Of surveyed customers said they preferred an automated contact (voice, email or SMS) over being called by a collections agent

70% Average customer satisfaction with the experience

84% Average customer satisfaction, high-risk customers


Also, experiments FICO is conducting with a large European bank indicate some consumers may be more responsive to evening contacts for simple, self-serve transactions.




Intelligent automated communication is more cost-effective than any other methodOne company compared its current call center operations with two alternatives: an offshore call center and a FICO-automated solution.

Both used the same risk-based methodologies to target collections actions.

Results 51% more collected by FICO solution compared to current operations at a lower cost than the offshore alternative which collected only 14% more than current operations.



Keep contact information current and the lines of communication open while time is on your side

10% > 25% lift in found rate for “lost” customers

A global bank is using automated telephone number capture and validation on all customer interactions. It also reaches out with proactive communications. For instance, the bank contacts customers with interest-only mortgages to help them consider options for early repayment, reducing the number of customers reaching loan maturity in a negative equity position.

Connect before they’re late



Even good customers can end up in financial distress—how you treat them when they need help may affect their loyalty later onUse decision modeling and optimization to offer tailored payment plans and debt adjustments. Balance risk with long-term relationship value.

A European bank offering optimized loan modifications has achieved these results:

27% > 47% Increase in take-up rates

35% > 10% Decrease in 6-month default rates





FICO is helping a large US mortgage lender find loan modifications with better net present value (NPV)

Projected benefit is conservatively projected at:

$2,000 per loan modification x1,000 modifications per month

Advanced analytics pinpoint the best modification for both customer and bank


Optimizing for Net Present Value

65%

55%

45%

35%

25%

75%

85% $240,000

$235,000

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$200,000242322212019181716151413121110987654321

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TREATMENT

Baseline NPV Re-default rate Household debt-to-income ratio

Optimized NPV Re-default rate Household debt-to-income ratio

65%

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85% $240,000

$235,000

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$200,000242322212019181716151413121110987654321

RED

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& P

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Baseline NPV Re-default rate Household debt-to-income ratio

Optimized NPV Re-default rate Household debt-to-income ratio

XMapping relationships between factors in complex decisions


Take the guesswork out of collecting

Collection scores

+15–20% recovered amount

Placement optimization

+5–20%recovered amount

Typical results from advanced collections analytics


Use predictive models not only to determine when accounts enter collections, but also how to most effectively treat themCollection scores predict which early-stage accounts are most likely to self-cure and which to roll. They rank late-stage accounts by the amount they’re likely to pay.

Placement optimization makes data-driven recommendations for where to place accounts to achieve maximum results.

Impact of collection scores on late-stage accountsWhen FICO did research on a sample of charged-off accounts from a major US lender, the use of collection scores resulted in a +14% recovery rate.

Figure 1 shows that replacing randomly applied effort with score-focused effort increases ROI.

Figure 2 translates the lift to monetary impact. For this group of accounts, it’s an annual benefit of more than $2 million.

Figure 2: Scoring leads to collection of additional $2+ million per yearMonthly number of accounts: 10,000 accounts Average balance: $3,000

Recovery rate without scores 4.10%

Lift with scores 14%

Recovery rate with scores 4.67%

Monthly benefit amount $172,200

Annual benefit amount $2,066,400

Benefit per account $17.22

Figure 1: When effort is determined by collection scoring, amounts collected increaseRelationship between effort and recovery rate

Scores

No Scores

RELATIVE EFFORT PER ACCOUNT

6.5%

6.0%

5.5%

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4.5%

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3.5%

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2.5%

1 2 3 4 5 6

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Close the loop between data analysis, decisions, actions and learning from results

� FICO is helping banks set up analytic learning loops to perform champion-challenger tests in shorter cycles.

� One of the great advantages of automating collections contacts through intelligent omnichannel comunications is capturing operational results faster. So you can use them to help accelerate this process even more.

Drive continuous collections performance gains

Keep getting better, faster

Assess

Decide

Act

Resolve


Take your collections performance to the topIt’s where you ought to be.

Learn more:Download the white paper on this topic:

Insights #66: Five Imperatives in a Shifting Collections LandscapeCheck out our blog:

Banking Analytics Blog

For more information North America toll-free Latin America & Caribbean Europe, Middle East & Africa Asia Pacificwww.fico.com +1 888 342 6336 +55 11 5189 8222 +44 (0) 207 940 8718 +65 6422 7700 [email protected] [email protected] [email protected] [email protected]

FICO is a trademark or registered trademark of Fair Isaac Corporation in the United States and in other countries. Other product and company names herein may be trademarks of their respective owners. © 2014 Fair Isaac Corporation. All rights reserved.

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