Despite the rise of multichannel banking, the branch has remained a preferred channel for retail customers, and many banks have stepped up branch transformation and renewal initiatives over the past several years. (For more on branch modernization efforts, see related article, page 33.) Branch automation has helped banks be more responsive to customers, streamline processes, eliminate redundancies and do more with less. Now, with the convergence of deeper and more-accessible data sources, sophisticated analytics, and automated decisioning tools, banks can score big returns by standardizing new-account decision making, product selection and ongoing cross-selling initiatives, while protecting themselves against deposit fraud.
While checking accounts are not the most profitable product for retail banks, they do offer an opportunity to build customer loyalty and up-sell more-lucrative products, such as credit cards and automobile loans. At the branch level, however, sophisticated risk-management and fraud-prevention technology has often been lacking.
When consumers enter a branch to open a checking account, staffers must work their way through a time-consuming review of consumer data points before making the decision to open the account. In borderline cases, a subjective decision can occur. The evaluation process itself can also be very cumbersome. Staffers are often required to submit consumer information to multiple Web sites and evaluate the information returned based on policy rules.
Fortunately banks can automate the new-account opening decision process by incorporating a risk score that weighs consumer credit and debit information to approve or decline a new account. The scoring can be customized to reflect the unique risk parameters of each branch and integrated into the new-account setup functionality of the branch channel software.
By automating new-account opening decisioning, banks can help their branches standardize decisioning around risk and policy parameters to open more-profitable accounts. They can also use the technology to return best-fit product selections when consumers are approved for an account, allowing them to properly price their risk while delivering products that meet the needs of their customers.
Managing Deposit Fraud Risk
Since most new checking account customers open their account with a check (either their own or one written out to them), automated decisioning can also help branches identify check funding risk and respond appropriately. According to TowerGroup (Needham, Mass.), most fraudulent checks are not detected until after presentment to the paying bank. By the time a check has bounced, the new checking account may have insufficient funds to cover the check, and the financial institution incurs a loss.
Retailers and check-cashing companies have deployed real-time check fraud detection through third parties for some time to minimize check fraud. Third-party providers are able to access vast data resources to analyze and determine whether a check is valid. The approve/decline decision is automatically delivered to the point of sale. This same capability can be integrated with the branch channel platform and deployed to automatically inform decisions about fund availability.
While economic realities may temper new IT spending in the near term, the implementation of automated decisioning tools like these offer "low-hanging fruit" that can generate positive results quickly.