Transcript Title of Presentation

Customer Centric Decisioning
at Lloyds Banking Group
Chris Keeling
Head of Risk Programmes,
Risk Infrastructure
Lloyds Banking Group
Jeremy Bryson
Head of Architecture
and Risk Systems
Lloyds Banking Group
© 2014 Fair Isaac Corporation. Confidential.
This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent.
Lloyds Banking Group is on a journey to develop
Customer Centric Decisioning to support their Risk
process for personal customers across retail products.
Jeremy and Chris will provide an insight into their drivers
for this and progress to date which is underpinned by the
implementation of FICO® Origination Manager and
FICO® TRIAD® Customer Manager.
2
© 2014 Fair Isaac Corporation. Confidential.
Agenda
► Lloyds
Banking Group and Our Risk Transformation
Programme
►
The context of Lloyds Banking Group and its credit function
► Our vision for risk transformation and investment rationale
► Why we picked FICO and what influenced our choice
► Implementation
of Acquisition Decisioning Using
FICO® Origination Manager
►
Scope and Objectives
► Delivery Experience and Lessons Learned
► Creating
FICO®
►
a Customer Centric Organisation Using
TRIAD® Customer Manager 9.1.1
Our strategy and approach
► Closing
3
Comments and Questions
© 2014 Fair Isaac Corporation. Confidential.
Chris Keeling
Head of Risk Programmes, Risk Infrastructure
Lloyds Banking Group
► Lloyds
4
Banking Group and Our Risk Transformation Programme
© 2014 Fair Isaac Corporation. Confidential.
5
MODEL
LBG formed 2009…
dates back to 1695
Relationship banking
model
UK focused, Retail,
SME & Corporate
SCALE
30m customers, 22m
current accounts
Provides 1 in 5 of all
UK mortgages
2300 branches,
98,000 staff
CSR
LBG Is the United Kingdom’s Largest
Consumer Bank
Critical to UK
Economy and
communities
Supports home
buyers, SMEs, social
inclusion
25% UK government
stake
© 2014 Fair Isaac Corporation. Confidential.
We Operate Three Strategic “Relationship” Brands
Plus 10 more major brands addressing
specific products and market segments
6
© 2014 Fair Isaac Corporation. Confidential.
Today, Parts of Our IT Estate Are Complex and
Organically Derived…
Target LBG
Fraud
Manual
Underwriting
Your
Finances
Acquire
HBOS Legacy
PBS
CLP
I/B
T/B
MSP+
WinXcel
FEBS
LSP
MSP
PLP
CEMS/
SCEMS
Open
Account
B2B
Manual
Underwriting
SAS Analytics
LeMans
Fraud
Hunter
SIRA
Caps
APPSCORE
ASM
Credit
Score DB
SM v2
CDS
Results DB
CDS
Dynamic
Decisioning
EM
Credit Cards
AMT
GDW
7
SW
v2
CapS
v3.34
SMG3
SM
v3
CapS
V3.33
CapS
V3.34
Lifecycle Decisioning
© 2014 Fair Isaac Corporation. Confidential.
Retail
BASEL
(via CDS)
Asset
Impairment
Regulatory
Reporting
SAS Analytics
RDI
ME
Acquisition Decisioning
TDO1
DARIL
Bank CMF
Bank Letters
SW
v1.5
Call Credit
Equifax
Acquisition Decisioning
Debt Manager
CLP
SW
v2
Experian
Provisioning
CBS
CRAs
FTC
CMT
CPC
LDO2
BASEL 5
CMT
Overrides
AMT
BD02
Lifecycle Decisioning
Regulatory
Reporting
Or Put Another Way…
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© 2014 Fair Isaac Corporation. Confidential.
Retail Credit Risk Transformation Programme
Trailing to industry best practice
► Sustainable business growth
► Simplify architecture and processes
► Significant new business capabilities
► Strengthen the control environment
► Deliver material income and
impairment benefits throughout the
lifecycle
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© 2014 Fair Isaac Corporation. Confidential.
Focus on Strategic End State:
► Early quick wins
► Continuous delivery
Benefits Delivered:
► Benefits overtook investment
Q3 2013
► Income Growth
► Reduced Impairments
► Enhanced Productivity
The Programme Is Delivering through Investment in
Four Key Capability Blocks
1
Outstanding Breadth,
Depth and Recency of
Customer Data
►
►
►
4
10
All relevant internal data
available at all significant
decision points
Broad use of external data such
as credit referencing, income
verification, housing equity, and
fraud indicators
Today’s data today (and real
time in selected instances)
2
Powerful, Agile and
Fully Integrated
Decisioning Capability
3
Slick, Highly Automated
Enactment of Decisions
►
Able to accommodate high
bandwidth of change at low cost
►
Individual customer decisions
hit operating systems quickly
►
Overnight decision review
where customer circumstances
change
►
Strategy changes can be
deployed without lead times
►
Need for human intervention
removed wherever practicable
►
Multi-channel technology used
to deliver customer experience
►
►
Capable of taking customerlevel decisions
Joined up across credit, fraud,
collections and marketing
Underpinned by Great Analytics and Insight Capability and Robust Control Environment
►
Train of thought analysis enabled and improved analyst throughput
►
Rapid scorecard and model development
►
Executive information systems and automated performance monitoring
© 2014 Fair Isaac Corporation. Confidential.
The Retail Credit Risk Investment Vision Creates a Simple,
Modern, Agile Technology Landscape
2017 Vision
Customer
Acquisition
Fraud Screening
Personal
Current
Accounts
(PCA)
Loans






Mortgage
Core
Mortgage
Buy To Let
Small
Business
Banking
Asset
Finance
FICO® Origination Manager
Application Fraud Prevention/Falcon v6



CRA Data
Agile Bureau Hub

Customer
Management
FICO® TRIAD® Customer Manager v9.1
Collections
FICO® TRIAD® Customer Manager v9.1 + FICO® Debt Manager™ solution v9
Analytics &
Reporting

Capital &
Impairment
11
Cards
© 2014 Fair Isaac Corporation. Confidential.


SAS Analytics
SAS Analytics
Wealth


Selection Criteria for Our Solutions:
Product and Supplier
The Product
►
►
►
►
►
►
Meets all our functional requirements
Compatible with our existing architecture
Scalable to our size/customer base
Easy to implement
Easy to use/maintain/improve
Enable rapid speed to market when live
The Supplier
►
►
►
►
►
►
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A strong implementation track record
A large, skilled team to support us
A team we can trust when the going gets tough
A partner who will stretch our thinking
A clear roadmap on the future product strategy
A competitive price!
© 2014 Fair Isaac Corporation. Confidential.
We Selected FICO for Both Acquisition and
Customer Management…Here’s Why
► Ability
to deliver
► Passion
► Clear
articulation how systems work with
our key processes
► Proactive
demonstration of benefits
short- and long-term
► Competitive
► Strong
13
price
FICO executive commitment
© 2014 Fair Isaac Corporation. Confidential.
Chris Keeling
Head of Risk Programmes
► Implementing Acquisition
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© 2014 Fair Isaac Corporation. Confidential.
Decisioning
Our Initial Plans Were Ambitious—and Evolved!
H1 2012
H2 2012
H1 2013
Define and Build for
Unsecured Acquisition
Review of Scope/
Plans and Budget
Key Events
Mobilisation, Selection of
FICO and Ambitious Scope
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© 2014 Fair Isaac Corporation. Confidential.
H2 2013
Testing and
Implementation
Clear Success Criteria Established—and Achieved
Success Criteria
RAG
Examples
►OM
now supporting all core brand Unsecured Acquisition Decisioning
unplanned downtime since live
►Over 1m applications/month processed (c500k new accounts and 500k limit increases)
Robust platform delivered which can handle LBG
volumes/response times
Green
►Zero
Improved Quality of Credit Decisions and increased
cross-sale opportunities
Green
►Improved portfolio performance across all products
►Initial uplift in credit card cross sales from Current Account
Improved speed to market/response times for strategy
changes
More consistent and simpler credit strategies
developed
Green
Amber
►Significant reduction
►46 OM releases and
Green
achieved, average turnaround has gone from months to days
128 scorecard & strategy changes implemented (31/10/2014)
►Current account and Credit Card policy rules aligned
►Cross heritage scorecards implemented
►160k fewer referral to underwriting per annum
►260k fewer bureau calls per annum
►Good progress made but more opportunities to take
►12
Improved ability to support other LBG initiatives and
reduce regulatory costs
applications
instances of legacy engine replaced by single solution
►Enabled business programme to provide unsecured loans to non franchised customers
►Significantly reduced complexity and costs of achieving Consumer Credit Reform
compliance
►Strong
Clear advocacy amongst stakeholders and users for
new system
Green
Tangible Financial return on Investment
Green
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© 2014 Fair Isaac Corporation. Confidential.
advocacy with users
►Improved cross team knowledge and collaboration
►Intense demand from stakeholders to deliver Mortgage
►Income, Impairment and efficiency benefits
►On track for 2 year payback on investment
interlocked
Acquisition, SME lending etc.
Jeremy Bryson
Head of Architecture and Risk Systems
Lloyds Banking Group
► Creating
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a Customer—Centric Organization
© 2014 Fair Isaac Corporation. Confidential.
The Architecture We Are Working to
Credit Risk Operations:
FICO® Origination Manager,
FICO® TRIAD® Customer Manager,
underwriting and fraud solutions
Credit Risk Insight:
Consolidate on a single analytical solution
as the preferred solution for use of insight
Integrated reporting layer
Capital
System
Data Accuracy
System
Real-time
Decisioning
System
Batch Decisioning
System
Impairment
System
Operational collections and
recoveries/scorecard/fraud/underwriting layer
Derived level data
Operational Underwriting
System
Credit Risk
Analytics
System
Credit risk data
• Event level data
• Transaction level data
• Customer level data
Credit Risk
Analytics
System
Model
Repository
Risk Operation
Data Store
(RODS)
Operational Collections
and Recoveries System
Risk Data
Management
Layer:
Separate layer
Data Service
Risk Service
Bureaux Hub
Model
Repository
Data Layer
External source level data
Fraud System
Internal source system level data
Core source system data
Credit
Reference
Agencies
Valuations
Source
Systems
Acquisition
Systems
Operational
Application
Analytics
System
Operational Collections and
Recoveries System
Customer
System
Workflow
System
Derived
Source Data
Transactional
Operational
Data Store
(TODS)
Customer
Operational Data
Store (CODS)
Core
NonCore
Group Data
Management Layer:
acting as the master for customer
and our source of transactions
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© 2014 Fair Isaac Corporation. Confidential.
to actively manage
data used in
retail credit risk
We Have Wrestled with the Customer/Product
Dilemma…
LBG currently operates independent
product strategies
PCA
19
Cards
Loans
The FICO solution offers the opportunity to
embrace a customer-level approach
Mortgage
Customer
►
Each product has independent scorecards,
policy rules, segmentation, and decision rules
►
One tree using common rule blocks to
segment & filter
►
Changes can be made without impacting
other products
►
Contains scorecards and decision logic for
each product
►
Common logic is not supported
►
Supports different decisions/limits per product
►
Introduces interdependency in strategy design
© 2014 Fair Isaac Corporation. Confidential.
…And This Is a Significant Decision for Us
Customer strategy drives significant benefits…
►
Drives consistent, coherent customer treatment
►
Facilitates re-use of common logic
►
Forces simplification of strategy and elimination of
arbitrary complexity
►
Avoids technology overhead of executing multiple
Triad runs
►
Aligned to strategic direction of LBG, ‘Best bank
for customers’
►
FICO case studies highlight broad client
aspirations to customer approach, but reality
often lags
…but requires several design challenges to be solved
►
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Demands additional work to align and simplify
current product risk strategies
►
Need to avoid mutual co-dependence blocking
agile product changes
►
Need to preserve legitimate product differences
and value-adding sophistication
© 2014 Fair Isaac Corporation. Confidential.
►
Needs to preserve the multi brand approach
►
Need to leverage FICO® TRIAD® Customer
Manager 8.5 capabilities (e.g. FICO® Blaze
Advisor® logic) fully to achieve modular,
manageable outcome & avoid exponential
complexity
►
Challenges today’s operating model
Evolving Towards a Customer Strategy
Customer strategies
Customer enabled
product credit
decisioning strategies
Product credit
decisioning strategies
► Unique
product rules
► Unrelated
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data
© 2014 Fair Isaac Corporation. Confidential.
► Single
► One
► Common
rules
► Common
data
rule set
data source
Customer Enabled Product Credit
Decisioning Strategies!
Personal Current
Accounts (PCA)
Lloyds Bank
PCA
Halifax, Bank
of Scotland
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4
2
7
1
7
15
7
11
4
Loans
Credit cards
Loans
Credit cards
Customer Less Than 18 Years Old
Adverse Credit Bureau (Without Noc)
Credit Policy Decline
Customer Is Not A UK Resident
Adverse Credit Card Performance
Customer Less Than 18 Years Old
Customer Is Unemployed
Adverse Mortgage Performance
Customer Is Not A UK Resident
Employment Status
Product Inappropriate
Decline: Level Of Indebtedness
Decline: Level Of Indebtedness
Fraud
Adverse Credit Bureau (With Noc)
Account On Repayment Plan
Previous Loans
Adverse Credit Bureau (With Notice of
Correction (Noc))
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© 2014 Fair Isaac Corporation. Confidential.
5
Adverse Credit Bureau (Without Noc)
Fraud
Our Vision for a Genuinely Customer-Centric
Approach to Lending Decisions
Fully
Eligible
Further
Review
Ineligible
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© 2014 Fair Isaac Corporation. Confidential.
Increasing Credit
Worthiness And
Affordability
Fully
Eligible
Limited
Eligibility
Qualify for all lending products—
customer needs determine take up
Eligibility extended through product
specific tailoring
Detailed customer assessment
required to determine eligibility
Customers considered ineligible
based on risk appetite—“no-go” area
Customer Strategy Hierarchy
All Customers
Fail
1. Risk appetite & common rules
Weak
2. Relationship Strength
Fail
Unclear
Low
3. Affordability Assessment
4. Customer-level Risk Profile
Medium
High
5. Product Risk Profile
No-Go
Further
Review
6. Limit Calculations
24
© 2014 Fair Isaac Corporation. Confidential.
Enhanced Eligibility
Core Eligible
7. Limit Management (increase/reduction)
Jeremy Bryson
Head of Architecture and Risk Systems
Lloyds Banking Group
► Closing
25
Comments
© 2014 Fair Isaac Corporation. Confidential.
The Law of Unintended Consequences
► Changes
to product profitability measures
► Changes
to the customer experience
► Changes
to the customer proposition by brand
► Testing
‘as is’ product decisions against ‘to be’
customer decisions is not that easy
► A healthy
tension to implement customer
scores early on current systems
► Customer
strategy segmentation may not
align to marketing segmentation
26
© 2014 Fair Isaac Corporation. Confidential.
In Conclusions
► Lessons
learned
► Stakeholders
extend beyond the risk function
► Regulators
► Product
owners
► Collections and recoveries
► Fraud management
► Senior management
► Marketing
► Look
at the current operation and see if you are doing elements of customer
decisioning already
► A need
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for common data definitions and common credit decisioning rules
© 2014 Fair Isaac Corporation. Confidential.
Thank You!
Chris Keeling
Head of Risk Programmes,
Risk Infrastructure
Lloyds Banking Group
Jeremy Bryson
Head of Architecture
and Risk Systems
Lloyds Banking Group
© 2014 Fair Isaac Corporation. Confidential.
This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent.
Please rate this session online!
Chris Keeling
Head of Risk Programmes,
Risk Infrastructure
Lloyds Banking Group
29
© 2014 Fair Isaac Corporation. Confidential.
Jeremy Bryson
Head of Architecture
and Risk Systems
Lloyds Banking Group