Blog Posts Process Analysis

Persistent Debt – Moving from Prevention to Competing

Blog: Enterprise Decision Management Blog

My last two posts on persistent debt in the UK focused on compliance and prevention. Here’s a different angle: Can issuers actually compete in this area?

The competition in the credit card market is fierce and it is more expensive to book a new customer than retain an existing one. An issuer who can prevent consumers going into persistent debt or have their account suspended will gain a competitive edge.

If affordable higher payment amounts are identified, communicating these in a timely and frictionless way may lead to a competitive advantage. This would provide opportunities in the digital space — for example, an iSMS delivering an immediate response, removing the need for the consumer to calculate this themselves. This would also demonstrate knowing your customer.

Issuers can take a data-driven approach at various points, including:

In my experience, data-driven projects highlight subpopulations meeting your criteria that you would not have expected, which provide extra benefit when incorporated into lifecycle strategies.

Optimising Your Strategies

Issuers can take this one step further and follow the account identification by optimising the actions for those accounts, so the most appropriate is taken for any given segment of their customer base. This can benefit both the customer and issuer. Firstly, the issuer would need to establish what options are available, such as:

Optimisation provides uplift versus a blanket approach. For example, a segment of customers could be offered a lower APR for life or moved to a lower rate product, whereas for a subset of this group lowering the APR for a set period would be enough to take the customer out of persistent debt. This can even go down to the level of optimal rates and time periods.

An example of an optimisation goal could be to maximise the profit of revolving customers, working within the constraints of not allowing them to get within x% of a persistent debt threshold and they must not have a high propensity for strategic default into persistent debt. An additional constraint could be to keep the % of closures below x%. The most appropriate APR and minimum payment could then be set.

In summarising my three posts, FICO can see focus and actions in 2019 and into 2020 progressing through three stages:

  1. Compliance – meet the FCA requirements
  2. Prevention – minimise the number of accounts going into persistent debt
  3. Competing – use data-driven and optimisation techniques to determine the targeting and best action to take

My colleague Ulrich Wiesner will be posting next to discuss in more detail the optimisation opportunities. I invite you to share any thoughts you have on this topic in the comments box below or with me at

The post Persistent Debt – Moving from Prevention to Competing appeared first on FICO.

Leave a Comment

Get the BPI Web Feed

Using the HTML code below, you can display this Business Process Incubator page content with the current filter and sorting inside your web site for FREE.

Copy/Paste this code in your website html code:

<iframe src="" frameborder="0" scrolling="auto" width="100%" height="700">

Customizing your BPI Web Feed

You can click on the Get the BPI Web Feed link on any of our page to create the best possible feed for your site. Here are a few tips to customize your BPI Web Feed.

Customizing the Content Filter
On any page, you can add filter criteria using the MORE FILTERS interface:

Customizing the Content Filter

Customizing the Content Sorting
Clicking on the sorting options will also change the way your BPI Web Feed will be ordered on your site:

Get the BPI Web Feed

Some integration examples