How the right holistic risk decisioning platform enables profitability across the lifecycle
It’s more critical than ever to be at the top of your game – whatever financial services you offer. Sure competition has increased and evolved, but so have consumer expectations. With near-instant access to just about everything and an abundance of personalized recommendations (what to watch/eat/wear/buy/scroll to next), consumers expect their financial services offerings to be the same. Quick, easy, and above-all else, personalized. According to The Financial Brand, 31% of consumers will switch primary financial services providers over things like fee levels, rewards, security issues and convenience. Sixty-six percent of customers also expect companies to understand their unique needs and expectations, but only 32% of executives say they have the ability to turn data into personalized prices, offers, and products in real-time across various channels and touchpoints.
The current economic climate (really, whenever you’re reading this!) makes this personalization even more crucial. Times are tough. On top of the lingering after-effects from the global-health-crisis-that-shall-not-be-named, the world is facing high inflation and interest rates, continued supply chain disruptions, ongoing political unrest, and that R word (recession) that lingers as a topic at the (remote) water cooler. Consumer and commercial debt levels continue to climb and for many financial services customers, that means a significant shift in buying behaviors. Whether it’s needing to access more credit and increasing defaults, or putting off mortgage and auto lease renewals, the bottom line is that acquiring new customers, whatever your financial services offering, is increasingly challenging. (And we haven’t even touched on the sharp rise in competition. As Forbes puts it, “Fintech and open finance have changed the landscape across multiple consumer financial functions. In recent years, fintech startups have been challenging traditional banks and financial institutions.”)
What it all really means is that while it’s still critical to remain competitive and win new customers, it’s just as critical to retain your existing ones. And there are some key ways to do this. We’ll look at some reasons (and methods) to improve the customer experience and what your risk decisioning platform has to do with maximizing customer value across the entire lifecycle.
Enhancing the Customer Experience – and Customer Loyalty
Data-driven personalization is a key first step in optimizing the customer experience and improving loyalty. By leveraging customer data and analytics, providers can deliver personalized financial solutions that cater to customers’ individual needs, preferences, and behaviors. With a tailored services approach, providers can both attract and retain customers. For example, a provider can offer a lower interest rate to customers who have maintained low credit utilization over several consecutive months, or who have made consistently on-time payments – essentially incentivizing good behavior through personalization.
Further to that, providers can use data to make more personalized decisions across the entire customer lifecycle, including:
- Using AI-powered intelligence to target customers with bespoke upsell and cross-sell opportunities at just the right time
- Accurately predicting potential defaults before they happen and using advanced risk models to identify the best treatment strategies and most effective communication channels for the customers that do default (Want to read more about optimizing your collection strategy? Check out this blog.)
- Integrating alternative and open banking data to enable customized financial solutions that align with consumers’ changing status and long-term goals, like savings accounts, retirement plans, mortgage refinances, short-term loans, etc.
Providing diverse and tailored financial products and services allows providers to better retain customers whose preferences and needs vary over time, by anticipating their needs before they do.
Holistic Risk Decisions Across the Customer Lifecycle
Managing risk decisions for financial services providers is about far more than just determining creditworthiness at origination. Often onboarding gets the most attention from decisioning solutions, but it’s only one piece of the puzzle. There are numerous other risk decisions to be made through the lifecycle of your customers – including the previously mentioned renewals/upsells/cross-sells, compliance and fraud, and of course, pre-collections/collections strategies. The issue with focusing more energy, effort, and money on onboarding solutions is that you can actually maximize the value of your customers if you also up your game with regards to those other risk decisions. And often these different risk decisions are managed in different ways, through different teams, with different data sets and risk models, via different decisioning solutions. Which makes it incredibly difficult to integrate and orchestrate a number of diverse data sources, keep track of how your risk models are performing, and manage your overall risk at a strategic level.
Eliminating disparate, siloed environments and bringing your risk decisioning into one holistic, AI-powered solution ensures optimal efficiency and effectiveness of all of your risk decisions.
AI-driven intelligence enables you to:
- Improve your decisioning accuracy at all stages of the lifecycle
- Maximize fraud detection and prevention capabilities
- Predict instead of react to delinquent accounts, changing consumer behaviors, and evolving market trends
- Personalize pricing and offers to delight your customers
- Power financial inclusion with real-time, data-driven decisions
There is immense reward in focusing on both maximizing the value of your customers and ensuring more holistic risk decisioning across the entire lifecycle. And thankfully, they go hand in hand! Because when you have the right risk decisioning solution you can make sophisticated, AI-driven decisions across identity, fraud, and credit enable more personalized, optimized experiences for your customers. Everyone wins!
For more info on how to choose the right risk decisioning platform for your specific needs, check out our new Buyer’s Guide. It shares more insights on using AI-powered decisioning, the role data plays in decisioning success, and the key capabilities to look for in a risk decisioning solution.