Crédit du Nord Scores!

Improving customer knowledge and controlling credit risk with SAS®

Arising from the merger of 80 French banks, the Groupe Crédit du Nord is today a federation of seven regional banks operating throughout France. Owned 80 percent by the Groupe Société Générale and 20 percent by the Dexia Group, this community of financial institutions serves 1.3 million individual, professional and business customers through a network of 625 branches. Still, despite its size and scope, Crédit du Nord places a priority on the relationship with and proximity to its customers. The company has chosen SAS solutions to help it maintain that focus by obtaining a better understanding of its customers and controlling customer risk.

Beginning in 1999, Crédit du Nord launched its CRM (customer relationship management) project to increase its customer knowledge. The strategy was to build a more permanent information structure, one that would enable the company to perform scoring, manage campaigns and establish a more sophisticated customer relationship program – not to mention automate processes.

Sell the right product to the right customer
The first step was to set up a data warehouse based on an information model that centered on the concept of the "specific" customer and then use data mining techniques to create RFA (recency, frequency, amount) indicators. The first version of the data warehouse to contain reliable customer data became operational in 2001. Crédit du Nord had already been using SAS to consolidate data – now it could process customer data in a comprehensive environment that provided easy access to data.

Although the Crédit du Nord data warehouse was designed to eventually meet marketing, commercial and risk-related goals, the first uses focused on marketing, in particular on scoring. For example, Crédit du Nord used SAS to rapidly export propensity scores, which were then used directly in commercial campaigns to "sell the right product to the right customer."

Vincent Leclerc, director of customer research, explains: "We target, for example, customer categories based on the best scores, which enables us to control the budget and maximize the return on investment." When the approach was put to the test, according to Leclerc, the company noticed a strong correlation between return rates on campaigns and customers' scores. "Customers with the best scores sign up most often," he says. "For some targets, we were able to double the profitability. This proves the value of the scores established using SAS solutions."

Better management of the customer relationship
Crédit du Nord also uses these propensity scores to define selling recommendations for its customer consultants. Directly within the customer profile that displays on their workstations, these sales agents view the four products most likely to interest each customer based on his or her profile. So not only is SAS supporting strategic decisions such as campaign targeting, it is also enabling Crédit du Nord to apply the results of its scoring activities in an operational capacity to improve sales.

Today, 20 products are scored, including Visa Premier cards and Etoile Avance revolving credit. Crédit du Nord intends to continue to develop its scores for all of its products and thus develop even more efficient selling recommendations. Every month, the selling recommendations for all of the bank's customers are recalculated, another example of increasing process automation with SAS.

As Leclerc emphasizes, "We want to stay one step ahead of our customers' expectations by being proactive, by deciding for ourselves when to contact them to suggest a meeting. But for a 'relationship' bank such as Crédit du Nord, it is also important to tailor the amount of time we spend to each customer's expectations and potential. We can do it with SAS, our primary research tool for our customers and the one with which we segment them."

Control credit risk
The consultants, and in certain cases their supervisors, are authorized for final credit approval. To facilitate consultants' decisions and response with respect to customers, acceptance scores were also designed using the SAS solutions. The scores make it possible, for example, for them to offer credit more easily or even to offer credit through a direct marketing approach, all while controlling risk.

The SAS solution, combining approval prerequisites with propensity scores, has been fully operational now for several years. This risk scoring experiment is currently being extended to meet the requirements of the Basel Capital Accord, or Basel II -standards that prescribe the way banks should monitor, measure and report risk. In this environment, Crédit du Nord must in fact be able to very accurately assess its risk by class of assets. Fortunately, a significant amount of the required data is already available. And because the SAS solutions are well established at Crédit du Nord, it is not surprising that they will be used to calculate Basel II parameters, such as default probability, loss in the event of default and exposure at the time of default.

A fully evolving project
Crédit du Nord is currently extending its database to professional customers and businesses and plans to multiply its uses, in particular the aspects related to commercial organization and risk management. Concludes Leclerc: "Today we can say that at Crédit du Nord, all views of customers, whether related to risk, commercial or customer profitability, are developed based on SAS."

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