Customers

Australia and New Zealand Banking Group

Scoring Big in Reducing Customer Risk with Help from SAS

As one of the world's 100 largest banks and with total assets of approximately $180 billion, Australia and New Zealand Banking Group Limited (ANZ) has utilized SAS Data Mining Solutions as key components of its credit scoring systems for over seven years.

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Within Australia alone, credit-lending decisions for products including mortgages, credit cards, personal loans and overdrafts are valued at around $38 billion per annum. Central to this figure is the responsibility of banks and other lending institutions to protect not only their own investments, but also the customers to whom they extend credit.

Identifying Customer Risk
According to Andrew Wilson-Annan, ANZ Senior Portfolio Modeling Manager, the use of credit scoring assists in three key areas: identifying those applicants who should receive credit, determining the amount of credit they should receive, and the steps that should be taken – on an individual basis – should there be a failure in commitment.

"SAS has given us the ability to develop credit scoring models that support a fully automated assessment system," said Wilson-Annan.

Prior to the introduction of SAS and the credit scoring systems for retail lending, ANZ branch staff had the complex task of assessing each loan/credit application manually on a consistent basis. This assessment process is now largely automated and incorporates SAS Enterprise Miner to develop models, which assist the bank in assessing 20 million credit decisions annually. "By automating the more straightforward lending decisions, assessors can spend more time with customers who have complex borrowing requirements -aligning assessment resources and credit risk".

By basing credit approvals on specific data, such as assets, liabilities and stability, personal biases that might otherwise affect decisions are completely removed from the process.

"The SAS-based models are completely objective," explained Wilson-Annan. "Every application stands on its own merits, which leads to consistent lending decisions."

Rapid Reaction
Given the highly competitive nature of the banking industry, the ability to react quickly to market changes is an important feature of any bank. In retail lending, SAS provides ANZ with additional strength, for example, when a change is required within the assessment process. Having analyzed the issues using SAS, the solution can be applied centrally and consistently, avoiding any miscommunication and error.

"Using SAS as an analysis tool, we are able to identify changes quickly within a portfolio and through the automated process, modify our assessment strategy for certain products in a matter of hours," said Wilson-Annan. "In the event of customers failing to uphold their commitment, models developed within SAS Enterprise Miner allow ANZ to manage customers consistently and appropriately."

Protecting Customers
Quite apart from protecting ANZ's exposure to risk, the credit scoring system is regarded at all levels as a critical component in the bank's customer protection mechanisms. Credit scoring models developed by SAS help the bank identify credit applicants who could be at risk of overextending themselves.

"There is a great deal of responsibility for banks to enhance customer service and support by protecting customers from taking out credit facilities they will find extremely difficult to re-pay," said Wilson-Annan. "SAS, along with the other components in our credit scoring system, assists us in developing tools to aid in the practice of responsible lending and therefore ensures our risk management policy is adhered to."

"Advantages of SAS technologies are diversity and flexibility," he said. "Aside from being an extremely flexible development environment and enabling sound data management, SAS is a recognized standard with a wealth of expertise in the market. On top of this is its proven reliability, and that's something we've appreciated for more than seven years."