Pre-Delinquency Management (PDM) Solution

Click to edit Master subtitle style

- Aniket Rane Neha Singh

4/14/12

What is Pre-Delinquency Management?

The Pre-Delinquency Management solution enables proactive credit risk mitigation through identification of potentially delinquent customers/accounts before they actually turn delinquent

4/14/12

How it Works ?
The PDM solution is focused around four distinct elements: 1. Predict : Identify potential pre-delinquents early The earlier that possible delinquents are identified, the better the chance an organization has of positively affecting the customers behavior. PDM analyzes behavioral and transactional data and creates predictive analytical models to indicate the most likely future outcome. The models are then 4/14/12 to the customer base applied as a whole, providing a list of customers most

2. Discover: Understand customer circumstances The initial customer contact takes place in the discovery phase and requires tactful interactions that build rapport quickly to better understand the identified behavior.

PDM validates the need for intervention immediately prior to the interaction , avoiding contact with customers who have either selfhealed or moved into collections.

During the interaction, PDM prompts the advisor to focus their diagnosis on key behavioral indicators, derived from the predictive analysis. 4/14/12 The information revealed by the customer is

3. Manage: Treatment triggers

With behavioral analysis and an insight into the customer circumstances, appropriate treatment strategies can now be identified and invoked. This includes Real-time decisioning, utilizing both the initial analysis and information captured during the discover phase. An organizations pre-designed treatment strategies can be invoked automatically or handled personally, depending on the level of risk and sensitivity.

Treatments can include: A call or letter to offer help and advice 4/14/12 Offering to move unstructured debt to structured debt

4. Monitor: Review effectiveness

PDM utilizes a single reporting portal across all phases. This provides a real-time, consolidated view onto treatments and actions in progress, as well as the ability to review effectiveness of treatments.

It also allows exploration of the success of teams and individuals. This approach provides insight into the success of the initiative and enables continual evaluation to ensure the most effective result.

4/14/12

4/14/12

Key Product Capability

Pre-Delinquency Management includes:

An Analytics Center that analyzes historical customer data and generates models to identify early signs of predelinquent behavior A Process Monitor which provides the ability to prioritize rules, processes, communications and workflow to manage interactions and predelinquency treatments A Rules Engine that executes your chosen treatments in real time, generating Best Next Action and capturing interaction outcomes A Business Console that lets you continually evaluate the 4/14/12 success of predelinquency strategies, campaigns and control groups.

Company Scenario
ICICI Bank : Pre Delinquency Management The bank initiated this project to monitor over 3 million medium retail customers of loans and credit cards to identify which customer is likely to default or become delinquent, and take pre-emptive action to salvage the situation.

Background:

Economic slowdown had an adverse effect on everyone. Customers of credit cards and loans from ICICI Bank were also impacted by the then prevailing economic landscape. This resulted in a customer's inability to pay the dues to the bank, which in turn directly influenced the performance of 4/14/12 retail assets business of the bank.

Background (Contd.)

Since the customer's income was stressed from various payment commitments, the bank had to ensure that the dues towards the bank get paid on priority. Especially, the unsecured product dues required a proactive approach of contacting the customers. If a customer is not able to pay the dues for a period, he ends up becoming delinquent and the bank's losses increase. The economic scenario had led the Bank to focus towards two challenges:
To recover the maximum amount of outstanding from delinquent customers To minimize future delinquency 4/14/12

The bank already had a debt service management function that

Before Deployment

Due to economic slowdown bank's customers were facing pressure in paying off their EMIs. A delinquent customer reduces bank's profitability and increases NPAs.

What was deployed Pre-Delinquency Management system deployed that monitors over 3 Million customers' behavior to predict probability of defaulting customer.

After Deployment

Roll forward rate of customers reduced from 14% to 6 % resulting in significant credit loss savings. 4/14/12 The entire process from identification of a 'likely to be

Steps :
The process of identification of probable customers to default was done in the data warehouse where customer's history was mapped against certain parameters and behavioral patterns. The customers who are identified by the system as probable to default are also evaluated on a risk scale score and this whole process is automated. Once a customer has been identified, the PDM system itself generates offers that can be presented to the customer and also finds out the complete contact details of the customer from various direct-indirect channels, IVR system, internet banking, POD from courier etc.
4/14/12

4/14/12

Technology Used:
Sybase IQ - Enterprise data warehouse solution. SAS suite - Enterprise reporting tool SAS e-miner & Text Miner Used for analytics UNICA - Campaign Management & Tracking Tool Application Business Objects - Enhanced reporting

4/14/12

References
http://pcquest.ciol.com/content/search/showarticle.as p http://www.igatepatni.com/bfs/solutions/riskmanagement--compliance/delinquencymanagement.aspx http://www.signature.fiserv.com/files/Pre-Delinquency %20Management%20with%20Aperio%20for %20Signature.pdf

4/14/12

THANK YOU

4/14/12