opinion
Few people have the luxury of designing a credit technology architecture from scratch. Developments are usually linked to investment in a particular part of the customer lifecycle and thus provide tools which fit into a certain role, be it origination, customer or product servicing, collections or recoveries.
So to some extent, comparisons between technologies can be difficult, since they are designed to perform different jobs; the one which best suits the job in hand may not represent the best progress towards the desired credit architecture. Getting an adequate understanding from the perspective of identifying some level of desired or target architecture is thus an important first step in being able to evaluate which technology product will move overall capability in the right direction, and crucially produce the best return on investment.
Underpinning credit management at all stages of the customer lifecycle is the ability to use information on a customer, process it into insight or a prediction of risk, and turn it into a robust decision. This sort of functionality is at the unglamorous end of technology often bereft of attractive GUIs, but because of the importance of managing credit rules and strategies, most technologies provide some level of business rules and decision management as part of a vertical offering. Such modules are often much more limited in scope than products which specialise in decision management however, since these latter products will invariably be much better at gathering and integrating data from different sources, and providing a powerful rule management interface and testing capabilities. They will also allow the sharing of data, rules and other criteria across different parts of the customer lifecycle so will improve consistency in application of credit policy. The drawback is usually cost in terms of initial purchase, integration with existing systems and in running a team with the technical skill-set to maintain and develop rules.
Generally, the simpler rule management capability included in vertical solutions, e.g. application or collection systems, will provide access to the key variables; a relatively simple GUI to amend the rules and be fully integrated with the application in question. Such a capability can usually be managed by a business user with a relatively non-technical skill-set, but the scope of rules and capacity for improvements in performance will be much more constrained. The exception is where existing market leading decision management systems are already integrated with vertical technologies, and these can to some extent provide the best of both worlds, although usually don't come cheap. A more cost effective option may be to bring in decision experts to put together an integrated solution by re-using existing technologies, or recommending cheaper products which have potential, but less of a reputation.
The trade off between simplicity and restrictiveness is a key issue since there is a clear decision to be made about the level of investment in rule management technology and the potential for benefits. If there is scope in the portfolio to deliver significant improvements from improved credit management and decision making, then investment in decision management technology, and appropriately skilled resource to use it to deliver a high volume of change, is the only way to achieve it.
One area which has been a focus of much recent development is on-line services. Various application processing technologies are now geared to provide instant decisions for on-line applications along with more traditional phone, branch and application form processes. Similarly, customer management decisions are also increasingly made available to on-line servicing developments, again by linking existing decision management tools to the website.
It is also an ideal channel to put messages in front of debtors and encourage them to make offers and set up payments. Nor does it stop there - the technology to have an on-line chat session with a customer is relatively inexpensive, and promises to open up an efficient new channel to communicate with customers who are reluctant to speak on the telephone. Whilst integrated on-line collections technologies are at an early stage of development, they offer great possibilities as a way of cost efficiently communicating with debtors and running repayment plans on-line.
Another deliverable of vertical systems is credit MI reporting. Because of the tighter remit of data and decisions of a technology which delivers in just one part of the customer lifecycle, the reports are often of a standard nature, and pre-written into the system. This is in many respects a great benefit, but on the downside does tend to fragment reporting across systems. A specialist MI technology either pointed at an off-line data source or data warehouse gives the opportunity to provide a more detailed and interactive level of customer reporting, which allows potential for much better understanding of a customer's credit journey through the organisation, but again at a cost of technology, more complexity, and a skilled team to deliver the reports.
The wide choice of technologies has a significant impact on how the credit function is run and how hard credit policy and decisions can be worked to deliver improvements. A clear view of the potential for improvement of credit performance within the customer base will dictate the level of investment to make a case for, in order to deliver the appropriate credit tools.
Of course you get what you pay for, but more importantly, it's what you do with it that counts.
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