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Innovative Strategy Approaches Strategies, Tactics & Dreams

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Setting the Scene Create a backdrop against which the credit industry leaders will be operating during 2015 3

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Portfolio Life Cycle 4 NEW BUSINESS CLOSED BUSINESS EXISTING BUSINESS THROUGH THE DOOR [Branches & Sales Channels] PROSPECTING (ACQUISITION) [Direct Marketing] APPLICATION PROCESSING (ORIGINATION) WRITTEN-OFFCLOSED NTUNTU [Transactors][Low Utilisation][High Utilisation][Medium Utilisation] UP-TO-DATE FPDFPD INACTIVE [Recently Inactive] [Highly Inactive] [Long Term Inactivity] DELINQUENT [Mildly Delinquent] [Highly Delinquent] [Severely Delinquent] 1 1 2 2 3 3 4 4

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Maturity Life Stages 5 1 st Gen Strategy Strategy MIS Bespoke Models Simple Direct Marketing Basic Portfolio Segmentation Champion Strategy Base Operations Base Reporting Risk Proxies Generic Risk Pooled Data One Rule For All Empirical Strategy Keys Node Level Analysis Profit Driven Design Closer to Ops Forecasting 2 nd Gen Strategy Profit Metrics Spend Stimulation Cross-Sell Customer Loyalty Attrition Models Multiple Complex Models Frequent Outcome Review Markov Matrices Brand Affiliation Customer Value Management Product Needs Commodity Clusters Year 1 Year 2-5 Year 4-10 Year 6-14

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Strategies, Tactics & Dreams What are the credit industry leaders considering in terms of longer term strategies, shorter term tactics & in some cases dreams? 6

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New Business Knowing Your Future Customer 7 Direct marketing strategies are deeply entrenched underpinned by affordability regulations through to data privacy SA has a rich source of consumer/credit information which is often not applied/used optimally Response models not producing cost effective results generating consumer direct marketing fatigue Innovative leaders are understanding future customers product needs i.e. which product are they likely to acquire next brand affiliation i.e. which brand appeals to them the most driving more focussed call centre strategies 1 1

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New Business contd. Knowing Your Future Customer 8 Modelling towards a brand results in a lower acquisition cost as no longer directly linked to the marketing message, the channel used nor time Select for Marketing Do Not Market 2.5 x better response rate!

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Up-To-Date Accounts Managing Past Credit Decisions 9 Leaders perform stringent champion: challenger testing crowning the new champion at the end of the test (12 months) Longer term effect of new strategy was not understood often resulting in poorer credit risk performance Leaders are rethinking this approach ensuring that these longer term effects are measured over a longer period (36 months) applying Credit Risk Mandates Credit Risk Mandates curb breaching waterfall points Ensuring longer term profitability improvement of more than 10% 2 2

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Delinquency Management Optimising Cost of Collections 10 Dire level of consumer indebtedness creating stresses collections burden falls back onto the collections dept. (R1.5BN?) Proven technologies & strategies no longer working bespoke Payment Projection scores, bureau-based collections scores, multiple champion: challenger strategies, etc. having limited real, long term effect Contact optimisation techniques are being sought sophisticated collection of contact information from within the call centre, dialler, collections notes and alternative source other than traditional credit bureaux Interactive self service Omni-channel technologies redirecting the collector costs/process back to the consumer 3 3

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Inactive Accounts Remembering Your Customer 11 4 4 Retaining customers has been always challenging the true nature of their attrition never really understood is it your product? Is it that the competitor simply has a better product? has the customer outgrown your brand? Leaders are turning to complex modelling techniques commodity clustering analysis (baskets) ensures an improvement in spend stimulation (particularly in the retail and FMCG sectors) Models are assisting with longer term customer retention more importantly understanding customer behaviour allowing a more targeted retention approach

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In Conclusion Simple Strategies Often Work Best 12 Consumers product needs, brand affiliation & commodity cluster models are producing results: Sizeable reduction in direct marketing costs: 25% to 75% Satisfying customers needs and spend stimulation: 10%+ lift Profit-driven, longer term Credit Risk Mandates tend to chalk out the credit risk playing field has curbed the effects of shorter term challenger wins Optimal use of internal & external contact information tends to outperform sophisticated collection strategies Redirection of collections (and customer services actions) using self-service omni-channels is proving to reduce high staffing costs

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