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APAC banks not using analytics lose 20 percent of their deposit revenue: FICO

Nurdianah Md Nur | June 15, 2015
Lenders need to use analytics to offer deposit rates that are attractive to customers while enabling profitability.

Not using analytics could be a costly move for banks, reveals a survey conducted at the 2015 FICO Asia Pacific CRO Forum in March this year.

Out of the 34 senior risk officers (CROs) and banking executives in the Asia Pacific (APAC) region surveyed, nearly half said that analytics could have helped their organisations deliver up to 10 percent more revenue. One in five of them even said that they could have delivered more than 20 percent additional revenue using analytics.

 The new findings come at a time of slowdown in growth of deposits in the region. According to HSBC's research in 2014, year-on-year growth in Asian bank deposits has decelerated from above 12 percent to 10 percent. One reason cited for this slowdown is a tendency for Asians to invest their money in speculative vehicles such as property, equities, or in some cases, shadow banking products. Deposits are often seen as performing at or below inflation, and tend to attract more dollars only when other markets look volatile.

FICO's survey also found that 75 percent of APAC CROs believe that customers are using interest rates to decide which bank to make deposits to. Understanding this, FICO is offering its Optimisation Solution for Deposit Pricing solution to enable lenders to offer deposit rates that balance customer satisfaction with profitability and portfolio growth.

"Banks need a speedy and precise strategy around rate-setting that is individual to the customer," said Dan McConaghy, President of FICO Asia Pacific. "This type of segmentation and offer-making is only possible with advanced analytics. This will help ensure profitability, while maintaining customer satisfaction and make deposit products more attractive to Asian customers."  

With regulations such as Basel III gradually being enforced, there is a need for banks to increase their capital to be compliant. "Since deposit funding is one of the least expensive forms of capital available to banks, it is becoming a greater focus for many CROs," said Phil Norman, Head of Analytic Services at FICO Asia Pacific.

CROs looking to better manage their deposit strategies could look to the FICO TRIAD Customer Manager solution. According to FICO, the solution measures customer risk with predictive analytics, set up targeted risk-based strategies, automate a host of decisions using these strategies, and test new "challenger" strategies against their current "champions" to continually improve results.

 

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