Risk officers are feeling a little more optimistic these days.
In the most recent of its quarterly Survey of Bank Risk Professionals, FICO found bankers were more positive about the financial health of customers than they have been over the past year.
"This is the first time we see an uptick, a sense of optimism, where finally risk managers believe that there’s a demand and that there will be an equilibrium between demand and supply," says Chisoo Lyons, vice president, Analytics, at FICO.
Lyons emphasized that while risk professionals expected delinquencies on auto loans, credit cards and small businesses to decline, they weren't so positive about mortgage foreclosures.
"It's something that’s a brand new phenomenon," Lyons adds, "consumers more likely to default on mortgage than credit."
But where the optimism exists, there also seems to be some data to back it up. Some 53 percent of respondents to FICO's survey expected the amount of credit requested by consumers to increase, while 50 percent expected the amount of consumer credit offered by lenders to increase as well. The survey also showed that 41 percent of its more than 200 respondents anticipated credit card balances to increase over the next six months.
So from a technology perspective, how can a bank leverage the growing optimism in consumer credit and turn that into a profitable opportunity?
"It requires that a bank is efficient in collecting data, extracting insights, analyzing it and turning that into treating their customers differently," Lyons says.
Banks could benefit from a better understanding of the customer, not just from a deposit side, but also on the credit side to be able to offer the right products to the right individuals.
"Customer level decisioning requires first and foremost data," Lyons adds. "If you don’t have data you can’t act on it. Many banks have good data, they’ve invested a lot in collecting that customer-level data view. But treating the customer is the challenge."
In that sense it's not just about selling products to make a profit in the moment, Lyons explains, but rather developing a more complete view of the customer in order to continue developing a long-term valuable relationship.
"Being able to understand customer and their lifetime value to you, not just short-term profitability, is a shift in paradigm that most banks have not made," Lyons says. "Extract insight and treat your customers better, that’s the next level of learning of what banks need to drive."