Banks outsourcing customer analysis

Banks sit on a heap of customer information, but most of them lack the analytical expertise to build better consumer banking portfolios based on it.

This has driven some private and foreign banks to outsource predictive analytical solutions for customer acquisition and retention and cross-selling.

ICICI Bank, HDFC Bank, IDBI Bank, UTI Bank, Citibank, ABN Amro Bank have all rushed to avail of analytics services for cross-selling credit cards, personal loans or housing loans.

And they all have found that it helped them enhance customer acquisition to almost 2.5 times. Fractal Analytics, a comprehensive analytics solutions provider, helped banks capture as customers 75 of the respondents to offers from among a lower base of about 30 per cent of their total customers.

The bottomline is these banks saved on unnecessary expenditure on sending mailers and making phone calls "" Rs 10 per mailer and Rs 15 per telephone call to all their customers. Also these banks could avoid a large percentage of undesirable customers they would have otherwise built into their portfolio.

ICICI's consumer loan defaults got reduced by 50 per cent without harming approval rates, besides analytics scorecards providing for real time decisions and quicker turnaround time for approvals.

Citibank reaped benefits with a customer capture rate of over 95 per cent of the respondents to campaigns and 30 per cent higher customer conversion.

Fractal Analytics vice-president Ramakrishna Reddy told Business Standard Fractal's analytical models tell banks not only whom to target, but also when to target and at what price. Fractal also helped ICICI Bank check high attrition rates among credit card customer.

Reddy said "ICICI Bank's credit card attrition rate was as high as two per cent. We developed a predictive model that could tell in advance who are likely to drop out."

The findings of the predictive model helped ICICI Bank adopt a proactive approach and reduce attrition rate by almost 50 per cent. The reactive approach earlier followed by the bank helped retain only 10 per cent of the credit card holders who were likely to opt out, Reddy said.

Fractal's customer analysis has also helped Visa International members with enhanced spend and also profit per customer. Fractal it was made possible by implementation of segment specific spend enhancement programmes based on analysis insights.

A "30-minute product" for consumer durable loans for ICICI Bank three years ago was the first assignment won by Fractal, a company promoted by a group of four Indian Institute of Management, Ahmedabad graduates. The product was to screen a loan application while a prospective customer decided on which consumer durable model to purchase.