1 steven parker head crm consumer banking standard chartered data mining in the financial services...
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Steven ParkerHead CRM Consumer BankingStandard Chartered
DATA MINING INTHE FINANCIAL SERVICES INDUSTRY
PRESENTATION TO KNOWLEDGE DISCOVERY CENTRE(15 FEBRUARY 2001)
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STANDARD CHARTERED• World’s leading emerging markets bank - Asia,
Sub-Continent, Africa, the Middle East and Latin America
• 740+ offices (55 countries); US$90bn in assets
• Key business lines:
– Consumer Banking - deposits, mutual funds, mortgages, credit cards, personal loans
– Commercial Banking - cash management, trade finance, treasury, custody services
• Long-term commitment to Hong Kong e.g. note issuer, #1 consumer credit card etc.
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KNOWLEDGE - WHY?THE NEW IMPERATIVE
Identify Opportunity and Key Success Factors
Focus on a Precise PropositionGOAL
METHOD
RESULT
Business Plan
Build World-Class Talent
Gather Purpose-AppropriateInfrastructure
Amass Actionable Information
Deliver Best-of-Breed Solutions
Earn Superior Returns
Earn Customer Loyalty
Business Plan
I would liketo buy ...
+
DatabaseDatabase
Source: Corporate Executive Board
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KNOWLEDGE - WHY?
CostCost
RevenueRevenue
Years ofYears ofRelationshipRelationship
10
• It is the customers usage of the product over time which has the potential to create profit
• And our ability to cross-sell & up-sell other products which are also used profitably
1 2 3 4 5 6 7 8 9
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KNOWLEDGE - HOW?
Retention
CustomerRelationshipManagement
New CustomerManagement
Acquisition
Re-pricing
time(months) 0 6-12
AcquisitionModel
Customer Segmentation Retention Model
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KNOWLEDGE - HOW?
TAILORED TAILORED PROGRAMMES AND PROGRAMMES AND COMMUNICATIONCOMMUNICATION
TAILORED TAILORED CUSTOMER CUSTOMER
SERVICESERVICE
KNOWLEDGE KNOWLEDGE OF OF
CUSTOMERSCUSTOMERS
• Purchase
Behaviour
• Service Needs
• Demographics
• Product Usage
• Relationship
• Price Sensitivity
etc.
• Customer Retention
+
• Cross-sell/Utilisation
+
• Pricing Optimisation
+
• Customer De-marketing
+
• Product Re-design
+
• Channel Management
+ ___________________________
= HIGHER PROFIT
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KNOWLEDGE - HOW?
Time
Learning
Today - some learning based on assumptions about “what worked”
Test & Learn Cycle –Definitive Results
Proprietary Knowledge = Competitive Advantage
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DATA MINING INTO PRACTICE
Data WarehouseData Warehouse
Customer Profitability/Customer Profitability/SegmentationSegmentation
Campaign ManagementCampaign Management
Contact ManagementContact Management
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DATA MINING INTO PRACTICE
Hong KongDW
CampaignContact
TaiwanDW
Philippines
DW
Singapore
DWCampaign Contact
MalaysiaDW
Campaign Contact
BruneiDW
IndiaDW
ThailandDW
Indonesia DW
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CHALLENGES
• Changing the culture - data-driven, product to customer, volume to value
• Shortage of skills - analytical, technical, marketing
• Immature market e.g. vendor networks, public data, lists etc.
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SUCCESSES
• Building on “early wins”
• Learn from developed markets - faster cycle time
• No public data = proprietary data even more valuable
• Ability to combine emerging markets channels with information capabilities
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EXAMPLE: RETENTION
Attrition Cycle
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Length Of Relationship
DataWarehouse
CustomerProfitability
CampaignManagement
Predict Attrition Win-
Back
ContactManagement
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EXAMPLE: RETENTION
Attrition Gating
Post Attrition
Pre-Attrition
Retained
Post Post Attrition
Attritors
Yes
NoNo
Yes
Yes
Yes
No
High Profit
Low Potential
High Profit
Low Potential
No No
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EXAMPLE: MIGRATION
Customer SegmentationCustomer Segmentation
10.0%10.0%
14.2%14.2%
17.1%17.1%
15.6%15.6% 11.4%11.4%
9.7%9.7%
9.9%9.9%
7.6%7.6%
1
2
3
45
6
7
8
DataWarehouse
CustomerProfitability
CampaignManagement
ContactManagement
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EXAMPLE: MIGRATION
Mid Market Affluent
Retain / GrowMaintain
1 2 ( 3 5 6 )
Profitability/Balance Sheet/Potential
Strategic Importance
8 7 6 5 4 3 2 1
Up-sell
Re-Package
SegmentFocus
Branch Branch
Self- service Self- service
Channel UsageMix
Migrationand RelationshipPackages
Mass Market
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EXAMPLE: CROSS-SELL
Intensity of relationship (no. of transactions)
Depth of relationship
(no. of products held)
DataWarehouse
CustomerProfitability
CampaignManagement
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Segment 7
Segment 5
Segment 3
EXAMPLE: CROSS-SELL
Un-Secured
Segment 1
Segment 2
Segment 4
Wealth BFSSecured
Business Value Centre
Cu
sto
mer
Seg
men
ts
Segment 6
BUILD CUSTOMER VALUE
BUILD CUSTOMER VALUE
BUILD CUSTOMER VALUE
BUILD CUSTOMER VALUE
BUILD CUSTOMER VALUE
BUILD CUSTOMER VALUE
BUILD CUSTOMER VALUE
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EXAMPLE: CROSS-SELLEstablished Loyals
Share of customers
Share of profits
3%
8%
Developing Loyals I
Developing Loyals II
Borrowing Potentials
•Card
•bill
• Multiple account holding is common
• Long relationship time
• High transaction activities
• High phone banking usage
Share of customers
Share of profits
9%
44%
• Highest asset balance across segments
• 25% of segment has high bank assets
• Liabilities low
Share of customers
Share of profits
12%
13%
• Highest level of multiple deposit account holding
• Average account balance very high
• Mean age is 45
Share of customers
Share of profits
10%
12%
• All hold credit cards
• Most have loans in small amounts
• Deposit balance low
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EXAMPLE: CROSS-SELL New Savers
Share of customers
Share of profits
12%
3%
Low Value Savers Low Activity Savers •z
•z•z
• Dominated by single deposit account holders
• Short relationship time
• Open accounts in response to promotions
Share of customers
Share of profits
10%
0%
• Single deposit account holders – mainly saving accounts
• Longest relationship time with SCB
• Mean age is 50
• Over-represented by females
Share of customers
Share of profits
15%
2%
• Mostly customers with one deposit account
• Dormant customers over-represented
• Highest proportion of static balance
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TARGET BENEFIT - QUICK WINS
RETENTIONRETENTION
MIGRATIONMIGRATION
High
Medium/high
CROSS-SELLCROSS-SELL Medium/low
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FACING THE CHALLENGES
• Building competencies
• Integrating value concepts into all points of customer contact
• Re-engineering processes in marketing, sales and service
• Continuing technology investment