taking your credit union’s collections performance to the top · take your credit union’s...
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Taking Your Credit Union’s Collections Performance to the TopIntelligent communications and member self-serve help you scale the shifting economic, regulatory and social environment
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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 members 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 financial institution used intelligent omnichannel communications and member self-serve to collect 51% more debt than its current call center, at an even lower cost than an offshore alternative.
©2015 Fair Isaac Corporation. All rights reserved. 2
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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 members in the way likely to succeed
©2015 Fair Isaac Corporation. All rights reserved. 3
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Use automated intelligent omnichannel communications to determine the best contact strategy for each member
� Reduce friction in valuable relationships by giving members 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 promiseto pay
Contact members in the way likely to succeed
“…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
©2015 Fair Isaac Corporation. All rights reserved. 4
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Automated contacts are preferred by most membersOne collection organization reports:
61% Of surveyed members said they preferred an automatedcontact (voice, email or SMS) over being called by a collections agent
70% Average member satisfaction with the experience
84% Average member satisfaction, high-risk members
Contact members in the way likely to succeed
Also, experiments FICO is conducting with a large European financial institution indicate some consumers may be more responsive to evening contacts for simple, self-serve transactions.
©2015 Fair Isaac Corporation. All rights reserved. 5
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Contact members in the way likely to succeed
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.
©2015 Fair Isaac Corporation. All rights reserved. 6
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Keep contact information current and the lines of communication open while time is on your side
10% > 25% lift in found rate for “lost” members
A global financial institution is using automated telephone number capture and validation on all member interactions. It also reaches out with proactive communications. For instance, the financial institution contacts members with interest-only mortgages to help them consider options for early repayment, reducing the number of members reaching loan maturity in a negative equity position.
Connect before they’re late
©2015 Fair Isaac Corporation. All rights reserved. 7
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Even good members 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 financial institution offering optimized loan modifications has achieved these results:
27% > 47% Increase in take-up rates
35% > 10% Decrease in 6-month default rates
Resolve delinquencies in a flexible manner
©2015 Fair Isaac Corporation. All rights reserved. 8
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Resolve delinquencies in a flexible manner
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 member and credit union
©2015 Fair Isaac Corporation. All rights reserved. 9
Optimizing for Net Present Value
65%
55%
45%
35%
25%
75%
85% $240,000
$235,000
$230,000
$225,000
$220,000
$215,000
$210,000
$205,000
$200,000242322212019181716151413121110987654321
RE�D
EFAUL
T RAT
ES &
POS
T MOD
HDT
I
NPV
TREATMENT
Baseline NPV Re-default rate Household debt-to-income ratio
Optimized NPV Re-default rate Household debt-to-income ratio
65%
55%
45%
35%
25%
75%
85% $240,000
$235,000
$230,000
$225,000
$220,000
$215,000
$210,000
$205,000
$200,000242322212019181716151413121110987654321
RE�D
EFAUL
T RAT
ES &
POS
T MOD
HDT
I
NPV
TREATMENT
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
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Take the guesswork out of collecting
Collection scores
+15–20% recovered amount
Placement optimization
+5–20%recovered amount
Typical results from advanced collections analytics
©2015 Fair Isaac Corporation. All rights reserved. 10
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%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
1 2 3 4 5 6
PERC
ENTA
GE
OF
BALA
NC
E RE
COVE
RED
PER
ACC
OU
NT
X
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Close the loop between data analysis, decisions, actions and learning from results
� FICO is helping credit unions 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
©2015 Fair Isaac Corporation. All rights reserved. 11
Take your credit union’s 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
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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.
©2015 Fair Isaac Corporation. All rights reserved.
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