Case Study
Client: Chase, US consumer and commercial banking subsidiary of $1.5 trillion global financial services firm JPMorgan Chase
Challenge: Create customer management strategies that balance risk and marketing goals
Solution: TRIAD™ adaptive control system, version 8
Results: Increased profitability by improving retention, and reducing expenses, inefficiencies and credit losses
“We’ve used CDA to solve very different types of problems. Whether retention or loss reduction, we can balance risk and marketing goals to attack each problem separately—and successfully.”
— James Bryant, JPMorgan Chase
At many organizations, building customer management strategies often pits marketing departments against their risk counterparts. But at Chase, these groups have found common ground.
“TRIAD 8 has helped our risk group work with our marketing people, refocusing us away from just expense reduction into thinking, ‘How can we provide the customer with the best experience at this time?’” says James Bryant, vice president, Home Lending Risk Management, JPMorgan Chase.
Successfully navigating the risk-reward continuum was due in large part to the use of Fair Isaac’s TRIAD™ adaptive control system 8, and specifically its Configurable Decision Area.
The CDA module, unlike other TRIAD decision areas, does not have a predefined purpose, and can be used to craft unique strategies for multiple decision areas. Chase leverages this capability to build customer-centric, profitable strategies for early warning, retention and other applications.
“If I had to summarize the top strength of CDA in one word, it is flexibility,” adds Bryant. “We have used CDA to solve very different types of problems. Whether retention or loss reduction, we can balance risk and marketing goals to attack each problem separately—and successfully.”
Raising the bar: from manual to automated strategies
Chase, a long-time TRIAD user, recently upgraded to TRIAD 8, which provides a single platform to manage at both the account and customer levels—critical to a true customer-centric view. TRIAD 8 also includes Fair Isaac’s Blaze Advisor™ business rules management system, allowing Chase to build highly customized decision keys within strategies.
The CDA module itself permits even further strategy complexity and refinement. Comprehensive strategy design capabilities enabled Chase to incorporate bureau-generated and internal data, and to consider intricate compliance and contractual issues. Reporting features allowed Chase to monitor results and to prepare for regulatory reviews.
Using the TRIAD system, Chase has automated several strategies for its home equity line of credit (HELOC) portfolio. Key line management strategies that Chase once processed manually each quarter, it now runs monthly, resulting in faster execution, more strategic use of staff time and significant operational savings.
“Automation has delivered enormous benefit,” says Bryant. “We have eliminated many manual tasks and reduced manual point-of-contact errors. It’s not just a cost issue; it has improved our accuracy and speed of response to customers, which in turn boosts retention.”
Lower losses, improved retention
“A primary focus was strengthening our early-warning strategy because of the challenging environment right now in the mortgage industry,” explains Bryant. “Subprime losses have increased, home values are changing, and many consumers are stressed from a credit perspective. We wanted to improve our ability to identify accounts before they became losses.”
Chase is successfully reducing credit losses by shutting down potential problem accounts before they become delinquent. By blocking only .25% of accounts, the bank has achieved savings equal to about 1.5% of monthly credit losses.
“The strategy has been very successful, especially considering these results come from a single strategy that impacts so few accounts,” says Bryant.
In addition, a draw term renewal strategy has also shown performance gains. More than half of customers offered renewals at the end of their draw terms chose to stay with Chase. This reflected an increase in retention rates without decreasing portfolio quality. These customers are maintaining similar utilization rates and average balances as the overall HELOC portfolio.
“Account acquisition is quite expensive, so it’s a huge win to not let good customers walk out the door,” says Bryant.
Chase is automating several other retention and line management strategies, and regular lifecycle actions such as welcome packages and quarterly communications.
Adds Bryant, “With the Configurable Decision Area, we see great potential to improve performance and add new strategies in the future.”
Decision Yield
Using Fair Isaac Enterprise Decision Management, Chase improved: