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Toyota uses analytics to keep delinquent customers in their cars

Thor Olavsrud | March 29, 2016
Toyota Financial Services' Collection Treatment Optimization (CTO) program helps its collections agents optimize which borrowers to call to help reduce delinquencies and keep customers in their vehicles.

In the wake of the global financial crisis of 2007-2008, Toyota Financial Services (TFS) started seeing record numbers of customers fall delinquent on their auto payments every day. By 2009, TFS, which provides auto financing to more than four million U.S. customers, was hitting a high water mark.

"2009 was the first time there were over 100,000 customers per day who were more than one day behind on their car payments," says Jim Bander, national manager for decision science at Toyota Financial Services.

From the beginning, Bander says, Toyota's goal was to keep as many people in their vehicles as possible. The company needed to get better outcomes for its collection efforts, helping their customers avoid repossession or credit impacts as a result of their delinquencies, while still profitably growing its lending portfolio. To do it, the company had to venture into new waters with regard to analytics.

Toyota is well-known for its eight-step methodology for problem solving:

  1. Clarify the problem
  2. Breakdown the problem
  3. Set the target
  4. Analyze the root cause
  5. Develop countermeasures
  6. Implement countermeasures
  7. Monitor results and process
  8. Standardize and share success

The problem, Bander says, is that the number of late customers was completely overwhelming the number of collectors TFS could dedicate to help customers get back on track.

Identifying the self-starters

Agents can make only so many calls per day, Tim VanTassel, general manager and vice president of the Credit Lifecycle Line of Business at analytics software company FICO, says. But customers who fall behind aren't all the same. Some, VanTassel notes, will find a way to get things back on track without any intervention on your part. Contacting those customers is a misallocation of resources — they don't need your intervention. Other customers won't self-start; they need the spur of a call to formulate a plan of action. Identifying and prioritizing those customers is the key, VanTassel says.

[ Related: Toyota to produce a self-driving car by 2020 ]

"In the collections business, how do we take a borrower who's behind on their payments, how do we deal with them and resolve their issue to our join satisfaction," VanTassel asks. "I have only so many collectors, can only make so many calls, what are the right calls to make this week?"

TFS needed to better understand its customers and then target the correct customers to most efficiently reduce delinquencies and keep the most customers in their vehicles.

To help it identify those customers, TFS turned to FICO for help. The partners drew on optimization concepts that credit card companies have been using for decades, but which had not yet been used for auto financing, to develop a Collections Treatment Optimization (CTO) program that would integrate decision management, reporting and advanced analytics for a data-driven, scientific and customer-centric approach to collections.


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