The use of scorecards is fundamental to driving the greatest financial returns from any application processing system. Too often, however, the initial focus to implement the system is not carried forwards into an ongoing cycle of scoring evolution.

This article puts forward an approach to secure continuous improvement of the basics, combined with step increases in the business benefits generated by the solution.

The initial business case for the introduction of automated application processing is built from predictions of increased revenues, reduced costs, reduced write-offs and improved management control. These are delivered by taking strategic control of the decisioning process, combining objectivity with speed of response and the flexibility to react to a rapidly changing business. The end-to-end process delivers a consistent approach from data capture and customer identification, through recognition of previous and current relationships, profiling of the applicant, decisioning and finally provisioning (filing away key data for subsequent management information).

At the heart of the decision is the scoring-based profiling which can give almost limitless insights into the applicant such as product/service propensities, ability/willingness to pay, revenue/profitability and churn and fraud propensities. The analytics lifecycle never ends - assessing the effectiveness of challenger strategies, building and deploying new strategies, monitoring progress and understanding results and planning the next cycle of improvements.

It is fundamental to the continued return on investment of the entire solution that existing scorecards are kept up-to-date and that new insights into the customer are continually developed and integrated into the decisioning strategy. The key to delivering this is a clear three-year roadmap that plans both the regular updates and the next improvements. This can be broken down into an annual workplan that gives visibility to the resources required.

Investment should be made in tools that reduce the workload, such as best practice scorecard monitoring software. Ultimately, however, it is people that deliver the interpretation of the results, and the size and organisational structure of credit risk teams needs to be synchronised with the delivery of the three-year roadmap.

Only with the right resources in place and regular reviewing of the workplans is it possible to drive the solution forwards and maximise the benefits that can be realised from the investment in the solution. We believe that after three years, a scorecard that has evolved through the use of monitoring software and annual workplans could demonstrate to be 10% more predictive than it was previously - an undeniable return on investment.

Ed Heal – Head of UK Telecommunications, Experian Decision Analytics - From his presentation given at the Experian Decision Analytics European Telco Forum 2007

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