Czech Republic’s, Česká spořitelna Uses FICO Prescriptive Analytics to Improve Effectiveness of Collections by 25 Percent During Pandemic
Nation’s largest retail bank wins FICO® Decisions Award for debt management using FICO Decision Optimization technology
LONDON–(BUSINESS WIRE)–FICO (NYSE: FICO):
Highlights:
- Česká spořitelna has been able to reduce collector call minutes by 25%, while maintaining a stable portfolio performance in terms of balance roll rates and cash collected
- During the pandemic, Česká spořitelna improved the customer experience by avoiding over-collecting on low-risk customers, while proactively addressing credit risk
- Česká spořitelna won a 2022 FICO® Decisions Award for debt management
Česká spořitelna, the Czech Republic’s oldest and largest bank, has modernized its operations by optimizing its decisions around customers in early collections. The use of FICO prescriptive analytics has improved customer satisfaction and reduced agent call minutes by 25 percent.
More information: https://www.fico.com/en/solutions/collections-optimization
“As many Czech households continued to grapple with finances due to the impact of the COVID-19 pandemic, the bank understood that it needed to modify its approach to collections,” said Petr Olšák, head of retail credit risk analytics at Česká spořitelna. “Operational capacity needed to be targeted on relevant accounts, portfolio performance maintained, customer experience improved, and resources freed up to address hardship situations.”
Prior to the implementation, Česká spořitelna segmented collection customers according to risk. Further refinement was then assigned using the strategy team’s best judgement and incrementally improved using champion-challenger testing. The traditional approach to strategy management did not provide insights into the optimal intensity of collection activities or the ideal use of operational resources to different customer segments.
Applying AI-powered 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 strategies in loan consolidation and loan pricing, this was the first time it used the approach to solve an operational decision problem.
“The key challenge with the collections project was how to best balance operational efforts with portfolio performance and customer experience,” said Olšák. “Modelling how certain customer segments responded to different treatments, namely whether and when they made payment, allowed us to simulate the impact of a given strategy on key performance metrics such as month-end balances, balance roll rates, cash collected, operational effort and variable costs.”
FICO® Decision Optimizer was used to design treatment strategies for early collections on the bank’s unsecured personal loans portfolio. Česká spořitelna improved the customer experience by avoiding over-collecting on low-risk customers, while proactively addressing credit risk.
Gaining insights into the trade-offs between alternative treatments has been a key objective for the optimization project. For example, the bank tested the impact of driving strategies either by month-end or cycle-end. Choosing a specific target, such as minimizing balance roll rates while constraining others, allowed the collections 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 entering collections: when the customer would be contacted (number of days past due), and through which channel.
Impressively, the full project including all modelling was implemented by Česká spořitelna’s in-house Retail Credit Risk Analytics team, without any IT resources and with minimal coaching provided by FICO.
The collections optimization project has been very successful for Česká spořitelna in the Czech Republic and particularly timely. The optimized strategy allowed the bank to reduce operational efforts by 25 percent (measured in collector call minutes), while balance roll rates remained stable and cash collected was matched. This has 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 additional products and geographies.
“The Erste Group has seen great value in using FICO Decision Optimizer,” Petr Kapoun, risk advisor to the Erste Bank Group. “Not just at Česká spořitelna, but in its sister organizations in Slovakia, Hungary and Romania. The future use of decision optimisation for the Group involves local development of component models under Group coordination, and Group-wide sharing of knowledge and the final decision optimisation models.”
“The pandemic has highlighted the importance of targeting resources to the area of greatest need,” said Nikhil Behl, chief marketing officer at FICO. “Česká spořitelna’s work to review its early collections approach is an ideal scenario for using analytics and optimization software. Operationalizing these has enabled reminders for low-risk customers to be automated and freed up its highly-skilled workforce to take on work where they will have the greatest impact.”
For its achievements, Česká won a 2022 FICO® Decisions Award for debt management.
“Having been through 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 FICO Decisions Awards judges. “Česká have had a great result reducing operational effort and improving customer outcomes when the pandemic was hitting and loan deferrals were being offered.”
About Česká 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 clients. Since 2000, Česká spořitelna has been part of Erste Group Bank, a multinational financial group. Česká spořitelna is a modern bank focused on retail clients, 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 on the domestic market from the retail clients’ perspective. It holds a leading position in the market for mortgage loans, consumer loans including credit cards and overdrafts, and in total deposits. Česká spořitelna is also the leader in the distribution of mutual funds and life insurance mediation.
About the FICO® Decisions Awards
The FICO Decisions Awards recognize organizations that are achieving remarkable success using FICO solutions. A panel of independent judges with deep industry expertise evaluates nominations based upon measurable improvement in key metrics; demonstrated use of best practices; project scale, depth and breadth; and innovative uses of technology. The 2022 judges are:
- Sidhartha Dash, research director at Chartis
- Paul Deall, head of risk, mortgages at Westpac (previous winner)
- Senthil Erulappan, director, product engineering for merchant, risk and collections at FIS
- Armando Junior, general manager, risk and compliance at Dock (previous winner)
- Sheila Leverone, chief marketing officer at eDriving (previous winner)
- Sibulelo Ncamani, head of operational risk and governance at Absa Bank (previous winner)
- Graham Rand, operational researcher and editor of Impact
- Dinesh Suresh, head, digital builds for consumer secured lending at OCBC Bank (previous winner)
The winners of the FICO Decisions Awards will be featured at FICO® World 2022, the Decisions Conference, May 2022 in Orlando, Florida.
About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, manufacturing, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 120 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.
Learn more at www.fico.com.
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