Steven Parker Head CRM Consumer Banking Standard Chartered

1. DATA MINING INTHE FINANCIAL SERVICES INDUSTRYPRESENTATION TO KNOWLEDGE DISCOVERY CENTRE(15 FEBRUARY 2001) Steven Parker Head CRM Consumer Banking Standard Chartered

2. STANDARD CHARTERED • World’s leading emerging markets bank - Asia, Sub-Continent, Africa, the Middle East and Latin America • 740+ offices (55 countries); US$90bn in assets • Key business lines: • Consumer Banking - deposits, mutual funds, mortgages, credit cards, personal loans • Commercial Banking - cash management, trade finance, treasury, custody services • Long-term commitment to Hong Kong e.g. note issuer, #1 consumer credit card etc.

3. Business Plan Business Plan KNOWLEDGE - WHY? THE NEW IMPERATIVE Identify Opportunity and Key Success Factors GOAL Focus on a Precise Proposition Build World-Class Talent Amass Actionable Information Gather Purpose-AppropriateInfrastructure Database METHOD + Deliver Best-of-Breed Solutions Earn Customer Loyalty I would like to buy ... RESULT Earn Superior Returns Source: Corporate Executive Board

4. 1 2 3 4 5 6 7 8 9 KNOWLEDGE - WHY? Revenue • It is the customers usage of the product over time which has the potential to create profit • And our ability to cross-sell & up-sell other products which are also used profitably Years ofRelationship 10 Cost

5. Retention Customer New Customer Acquisition Relationship Management Management Re-pricing time 0 6-12 ( months) Acquisition Model Customer Segmentation Retention Model KNOWLEDGE - HOW?

6. KNOWLEDGE OF CUSTOMERS • Customer Retention + • Cross-sell/Utilisation + • Pricing Optimisation + • Customer De-marketing + • Product Re-design + • Channel Management + ___________________________ TAILORED PROGRAMMES AND COMMUNICATION Purchase Behaviour Service Needs Demographics Product Usage Relationship Price Sensitivity etc. TAILORED CUSTOMER SERVICE = HIGHER PROFIT KNOWLEDGE - HOW?

7. Proprietary Knowledge = Competitive Advantage Test & Learn Cycle – Definitive Results KNOWLEDGE - HOW? Learning Today - some learning based on assumptions about “what worked” Time

8. Data Warehouse Customer Profitability/Segmentation Campaign Management Contact Management DATA MINING INTO PRACTICE

9. Taiwan DW DATA MINING INTO PRACTICE Hong Kong DW Campaign Contact India DW Philippines DW Thailand DW Malaysia DW Campaign Contact Singapore DW Campaign Contact Brunei DW Indonesia DW

10. CHALLENGES • Changing the culture - data-driven, product to customer, volume to value • Shortage of skills - analytical, technical, marketing • Immature market e.g. vendor networks, public data, lists etc.

11. SUCCESSES • Building on “early wins” • Learn from developed markets - faster cycle time • No public data = proprietary data even more valuable • Ability to combine emerging markets channels with information capabilities

12. Predict Attrition ContactManagement EXAMPLE: RETENTION Win-Back DataWarehouse CustomerProfitability CampaignManagement

13. Pre-Attrition Attrition Gating Post Attrition Post Post Attrition Attritors EXAMPLE: RETENTION No No Yes Yes Yes Retained No Yes No High Profit High Profit No Low Potential Low Potential

14. EXAMPLE: MIGRATION Customer Segmentation 7.6% 8 9.9% 10.0% 7 14.2% 9.7% 1 17.1% 6 2 15.6% 11.4% 3 5 4 ContactManagement DataWarehouse CustomerProfitability CampaignManagement

15. EXAMPLE: MIGRATION Retain / Grow Maintain 8 7 6 5 4 3 2 1 1 2 ( 3 5 6 ) Segment Focus Mass Market Mid Market Affluent Migration and Relationship Packages Up-sell Re-Package Strategic Importance Profitability/Balance Sheet/Potential Branch Branch Channel Usage Mix Self- service Self- service

16. EXAMPLE: CROSS-SELL Depth of relationship (no. of products held) Intensity of relationship (no. of transactions) DataWarehouse CustomerProfitability CampaignManagement

17. BUILD CUSTOMER VALUE BUILD CUSTOMER VALUE BUILD CUSTOMER VALUE BUILD CUSTOMER VALUE BUILD CUSTOMER VALUE BUILD CUSTOMER VALUE BUILD CUSTOMER VALUE EXAMPLE: CROSS-SELL Business Value Centre Wealth Secured Un-Secured BFS Segment 1 Segment 2 Segment 3 Segment 4 Customer Segments Segment 5 Segment 6 Segment 7

18. Card • bill EXAMPLE: CROSS-SELL Established Loyals Developing Loyals I Share of customers Share of profits 3% 8% Share of customers Share of profits 9% 44% • Multiple account holding is common • Long relationship time • High transaction activities • High phone banking usage • Highest asset balance across segments • 25% of segment has high bank assets • Liabilities low Developing Loyals II Borrowing Potentials Share of customers Share of profits 12% 13% Share of customers Share of profits 10% 12% • Highest level of multiple deposit account holding • Average account balance very high • Mean age is 45 • All hold credit cards • Most have loans in small amounts • Deposit balance low

19. EXAMPLE: CROSS-SELL New Savers Share of customers Share of profits 12% 3% • Dominated by single deposit account holders • Short relationship time • Open accounts in response to promotions • z Low Value Savers Low Activity Savers • z • z Share of customers Share of profits 10% 0% Share of customers Share of profits 15% 2% • Single deposit account holders – mainly saving accounts • Longest relationship time with SCB • Mean age is 50 • Over-represented by females • Mostly customers with one deposit account • Dormant customers over-represented • Highest proportion of static balance

20. TARGET BENEFIT - QUICK WINS RETENTION High MIGRATION Medium/high CROSS-SELL Medium/low

21. FACING THE CHALLENGES • Building competencies • Integrating value concepts into all points of customer contact • Re-engineering processes in marketing, sales and service • Continuing technology investment