Mortgage servicers have been slow to adopt loan portfolio management (a technology that supports pattern-based strategy) and continue to suffer heavy losses. Contrasted to this, credit card issuers have been aggressive with adopting loan portfolio management to seek, model and adapt.
For example, credit card issuers are reducing limits on consumers whose risk profile is changing, potentially due to unemployment or other factors. They are monitoring individual consumer spending patterns and can tell when a consumer begins using their credit card in a way that signals distress – for example, if they start using their credit card to pay their mortgage. In this case, the financial institution may shut down the card altogether. Or in some cases, depending on the risk profile of the customer, they may increase the spending limit.
Case studies show that card issuers using loan portfolio management technology that supports pattern-based strategy and seek-model-adapt have reduced bad debt by 25% – 50% and increased revenues by 25% – 30% (by optimizing authorization rates, credit lines and marketing campaigns).
Credit card issuers are already moving this direction as in the examples above – other lenders would benefit from following.