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Customer Segmentation, Valuations, and Credit Policy

Financial Services, Marketing, Risk Management

We developed application level credit card LTV model for a leading bank and used LTV model to overhaul decision & line policy and evaluate new products

Approach

  • Client was a large global bank w/ ~6 Million card customers
  • Indus was tasked with overhauling valuations of the credit card business
  • We developed comprehensive application-level valuation model that predicted revenue & cost drivers at a granular level
  • Behavior-based customer segments were identified for each profit driver; Key month-over-month assumptions were developed for each driver

Analysis

Profitability Drivers of LTV Model & Calculations

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Monthly Loss Rate by Product (#CO/#Open)

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Credit Line Utilization by Risk (Product A)

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Profitability per Account by Product

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Results

  • Identified 2 new segmentation dimensions with differentiated usage patternsLaunched outbound phone sales campaign on target population.
  • Optimized approve/decline policy to increase profitability by ~10% while reducing exposure
  • Currently using the model to optimize initial limit assignment
  • Model being used to evaluate new product decisions & perform macroeconomic scenario gaming