Customer Management focus is shifting based on a Macro-framework. Some good indicators are GDP change, unemployment, NPLs and regulations. For the finance sector it boils down to distributing credit OR managing delinquencies – and a little of what lies in between, namely managing the anticipated behavior of creditors. When the distressed portfolio is predominant, the settlement process can become the primary customer access channel, and the success of implementation will affect results and reputation of the financial institution. The trends are (and this is transposable also to banks in non-distressed environments) • the decomposition and standardization of the collection and recovery blocks (well beyond the call center), • pre-collection alerts and handling • emphasis on settlements • and the merging of added value services with recovery practices in the electronic channels.

1. Enabling Intelligent Action

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The Phases of Customer Management in distressed portfolios
Manos Margaritis
Deputy CEO

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Customer Management
origination
servicing
collection

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Customer Management
Macro- framework
Change in GDP
% unemployment
Loans/GDP
NPL
Regulation
Credit Culture
origination
servicing
collection

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Customer Management
Credit Expansion
SE ASIA
Parts of Africa
origination
servicing
collection

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41.7%

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The objectives
Cross-sell
Minimize churn
Maximize profit
Increase market share
Manage risk

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Customer Management
Distressed
Europe
origination
servicing
collection

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The European Landscape
European Banking Federation, 2012 report
Cyprus 2013: 39%
Spain 2013: 17%

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The concerns
Manage the balance sheet
Handling Stress tests
Manage the debt cycle
A business opportunity?

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Customer Management
origination
servicing
collection
Pre-collection

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Short term
settlements
Grace period
Capitalization of
delinquencies
Extension
Medium term
settlements
Final settlements
Not just a matter of banks: A new agent in the relation to the client
Central Bank directive example (European example) ,
22 ways for settlements
Interests reduction
Interest type change
Partial write-off
Split to securitized / non
securitized fractions
Liquidation of securities
legal actions ..
Voluntary securities handover
..

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Not just a matter of the banks: A new agent in the relation to the client
Central Bank directive example
The collaborative customer (as per prescription on behavioral patterns)
Contact information update
Available to communicate
Gives info re: his financial situation
Collaborates
for new settlements

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In the words of a senior Retail Manager:
The development and deployment or settlement policies is nowadays the most important Marketing process for every financial institution.
The success of this process will influence :
financial results (short and medium term)
reputation and position in future competition landscape

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EWS (early warning systems) (as a loan from corporate banking)
Signals
(balance change,
credit behavior,
credit scores, lists)
Globals
(occupation sector)
Warning
Categories
Treatments (
( early collection like )

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New
credit policies
Adapted risk management
Flexible products
That must convince
the client to
cooperate
Efficient processes
Realistic solutions
Channels
branches, central services, lawyers, online
What shapes the customer-facing activities in the new norm?(1)

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The new KnowYourCustomer (consider what you can)
What is the economy cycle?
What is the (un)employment cycle?
What is the lender economic prospect?
What about the lifestyle?
Can the lender pay? When?
What is the lender’s attitude?

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Target:
Social considerations
Maximize
NPV*(1-PD)

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The channel – an example
‘ Aggressive collection is not working. We need to bring a service that the client can manage’

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Collection portal
Self-service
Access 24x7
No regulatory limitations

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Collection portal

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Collection portal

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Collection portal

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Collection portal
Lower cost of service per client
Access to difficult to reach customers
No Agent pressure
Good quality information
Tailored to customer needs

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Customer management is the result of a plethora of sub-processes that must be identified and managed
The customers is unaware of the
sub- processes
Rethink the processes

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Phases*
collection
prelegal
legal
Early
warning
*segments
#1: securities

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process decomposition
collection
prelegal
legal
Early
warning
Call center activity
Monitor
Payment Promice
Settlement
Auction
Legal Actions
(Pre Legal and Legal)
Restructuring
Signal detection

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Vendors & Fees
Call center activity
Letter format
Settlement terms
Legal actions
Segments
Transition between phases
Sub-processes per phase, transitions, parallelization and prioritization
Automation
High level
Detail level
What you can control

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Social Considerations
Maximize
NPV*(1-PD)
KPIs
Process metrics

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collection
prelegal
legal
precollection
Risk-Related
Exposures back to performing
Coverage Ratio
RAC (part)
Process–related
Cost/Collections
Closing Rate
Self-Cured
Collection – Related
Time in current NPL status
Average Age
Gross collection
Total recovery
Roll rale (upshifts – downshifts)
Legal expenditures/ Recoveries
KPIs
Social
Performance

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Segment
Sub-process
Phase
Dials per hour Contacts Per Hour Collections per Contact Promise kept rate
Delinquent amount
Total Balance
Cured
Promises
Payments on Promises Amount
Actions
Agent performance
Right Party contacts
Restructuring rate
Restructuring kept
Value managed per account manager
Auctions
Duration of legal actions
Duration of Asset retrieval
(K) PIS
Breakdown
to metrics

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10
segments
X
4
(phases)
X
3
process
=
120
Different Approaches,
Heterogeneous systems
Δ
Different units
Δ
Competitive objectives
Challenge

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Champion
Challenger
Portfolio
Level of trials:
Per segment
Dependent of previous phase
2 Χ10=20
Segment
Sub-process
Phase

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That must convince
the client to
cooperate
We are working on new ecosystem to face the client
New
credit policies
Adapted risk management
Flexible products
Efficient processes
Realistic solutions
Channels
branches, central services, lawyers, online

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Helping banks:
Social Considerations
Maximize
NPV*(1-PD)

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END
END
"First Annual Middle East Retail Banking Summit”