LONDON–(BUSINESS WIRE)–FICO (NYSE: FICO):
Česká spořitelna was able to reduce the number of collector call minutes by 25%, while maintaining a stable performance of the portfolio in terms of turnover rate and collected cash
During the pandemic, Česká spořitelna improved customer experience by avoiding excessive collections on low-risk customers, while proactively addressing credit risk
Česká spořitelna won a 2022 FICO® Decisions Award for Debt Management
Česká spořitelna, the oldest and largest bank in the Czech Republic, has modernized its operations by optimizing its decisions about customers in the first collections. Using FICO prescriptive analytics improved customer satisfaction and reduced agent call minutes by 25%.
More information: https://www.fico.com/en/solutions/collections-optimization
“As many Czech households continued to struggle with their finances due to the impact of the COVID-19 pandemic, the bank realized it needed to change its approach to collections,” said Peter Olšák, head of credit risk analysis at Česká spořitelna. “Operational capability needed to be targeted to relevant accounts, portfolio performance maintained, customer experience improved, and resources freed up to deal with challenging situations.”
Prior to implementation, Česká spořitelna segmented collection customers according to risk. Further refinement was then assigned using the strategy team’s best judgment and progressively improved using champion-challenger testing. The traditional strategy management approach did not provide insight into the optimal intensity of collection activities or the ideal use of operational resources for different customer segments.
Applying AI-based prescriptive analytics to collections was a first for Česká spořitelna. While the bank had used FICO’s decision optimization technology for several years to improve loan consolidation and pricing strategies, this was the first time it had used this approach to solve an operational decision problem.
“The main challenge of the collections project was to find the best balance between operational efforts, portfolio performance and customer experience”, noted Olsak. “Modeling how certain customer segments reacted to different treatments, i.e. if and when they made a payment, allowed us to simulate the impact of a given strategy on key performance metrics such as month-end balances, balance turnover rates, cash collected, operational effort and variable costs.”
FICO® Decision Optimizer was used to design strategies for handling anticipated collections on the bank’s unsecured personal loan portfolio. Česká spořitelna improved customer experience by avoiding excessive collections on low-risk customers, while proactively addressing credit risk.
Obtaining information on the trade-offs between alternative treatments was a key objective of the optimization project. For example, the bank tested the impact of management strategies either at the end of the month or at the end of the cycle. Choosing a specific goal, such as minimizing balancing rates while limiting others, allowed the recovery team to understand the trade-offs and choose an optimal operating point that provided the right balance.
This project allowed Česká spořitelna to determine the optimal collection treatment for each account going into collection: when the customer would be contacted (number of days late) and through which channel.
Impressively, the entire project, including all modeling, was implemented by Česká spořitelna’s in-house retail credit risk analysis team, without any IT resources and with minimal coaching provided by FICO.
The collection optimization project was very successful for Česká spořitelna in the Czech Republic and particularly timely. The optimized strategy allowed the bank to reduce operational efforts by 25% (measured in collector call minutes), while balance turnover rates remained stable and cash collected was cleared. This freed up significant resources for other products and for more detailed discussions with complex customer cases, especially those impacted by the pandemic. The bank and its parent organization Erste Group plan to extend the methodology and framework to other products and geographies.
“Erste Group saw great value in using FICO Decision Optimizer,” Petr Kapoun, Erste Bank Group Risk Advisor. “Not only in Česká spořitelna, but in its sister organizations in Slovakia, Hungary and Romania. The future use of decision optimization for the Group involves local development of component models under Group coordination, and Group-wide sharing of knowledge and final decision optimization models.
“The pandemic has highlighted the importance of targeting resources to the area that needs them most,” said Nikhil Behl, Director of Marketing at FICO. “Česká spořitelna’s work to revamp his approach to early collections is an ideal scenario for using analysis and optimization software. Operationalizing these has automated callbacks for low-risk customers and freed up its highly skilled workforce to undertake work where it will have the greatest impact.
For his achievements, Česká won a 2022 FICO® Decisions Award for Debt Management.
“Having been involved in optimization projects myself, I know the challenge that exists in examining granular data in action/response models,” said Paul Deall, head of risk, mortgages at Westpac and one of the judges for the FICO Decisions Awards. “Česká achieved great results by reducing operational effort and improving client outcomes when the pandemic hit and loan deferrals were offered.”
About Ceská spořitelna
Česká spořitelna is the bank with the longest tradition in the Czech market. It has been one of the fundamental pillars of the Czech banking system for 193 years. Currently, the Bank provides services to 4.6 million customers. Since 2000, Česká spořitelna has been part of Erste Group Bank, a multinational financial group. Česká spořitelna is a modern bank focused on retail customers, small and medium-sized enterprises, large corporations and municipalities. Thanks to the largest network of branches, as well as ATMs and payment machines, Česká spořitelna is the most accessible bank in the national market from the point of view of retail customers. It occupies a leading position in the market for mortgage loans, consumer loans including credit cards and overdrafts, and total deposits. Česká spořitelna is also the leading distributor of mutual funds and intermediation in life insurance.
About the FICO® Decisions Awards
The FICO Decisions Awards recognize organizations that achieve outstanding success using FICO solutions. A panel of independent judges with deep industry expertise evaluates nominations based on measurable improvement in key metrics; demonstrated use of best practices; the scale, depth and scope of the project; and innovative uses of technology. The 2022 judges are:
- Sidhartha Dash, research director at Chartis
- Paul Deal, Head of Risk, Mortgages at Westpac (previous winner)
- Senthil Erulappan, Director, Merchant Product Engineering, Risk and Collections at FIS
- Armand Junior, Managing Director, Risk and Compliance at Dock (previous winner)
- Sheila Leverone, head of marketing at eDriving (previous winner)
- Sibulelo Ncamani, head of operational risk and governance at Absa Bank (former winner)
- Graham Rand, operational researcher and publisher of Impact
- Dinesh Suresh, Manager, Digital Constructs for Consumer Secured Loans at OCBC Bank (former winner)
Winners of the FICO Decisions Awards will be presented at FICO® World 2022the Decisions Conference, May 2022 in Orlando, Florida.
FICO (NYSE: FICO) powers the decisions that help people and businesses around the world thrive. Founded in 1956, the company pioneers the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 U.S. and foreign patents on technologies that increase profitability, customer satisfaction, and business growth in financial services, manufacturing, telecommunications, healthcare, retail, and many other industries. . With FICO solutions, businesses in more than 120 countries are doing everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of planes and rental cars are in the right place at the right time.
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