© 2014 Fair Isaac Corporation. Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. Analytics in Debt Manager 9 Reports, Dashboards, Scores, Models David Lightfoot Vice President, Product Management FICO Joe Milligan Lead Engineer, Product Support FICO Martin Germanis Vice President, Sales FICO FICO ™ Forum: Debt Manager ™ 9 User Group Fairfax, VA | June 4–5, 2014 Doug Thompson Principal Consultant, Pre-Sales FICO

© 2014 Fair Isaac Corporation. Confidential. Agenda 2 ► Taxonomy ► Reports and Dashboards ► Predictive Analytics ► Prescriptive Analytics

3 © 2014 Fair Isaac Corporation. Confidential. Three Types of Analytics…

© 2014 Fair Isaac Corporation. Confidential. 4 Reports and Dashboards

5 © 2014 Fair Isaac Corporation. Confidential. Reports Overview ► Analysis Reports (Spindown, History) ► Note Perspective param, doc map on left ► List-type Reports (Account Status, List of Pending Pmts) ► Note drilldown/drillthroughs ► Dashboards (Agent Collection Effort) ► Note gauges/chart functionality ► Creating subscriptions ► Report Builder ► Explain model vs. replicated data

© 2014 Fair Isaac Corporation. Confidential. 6 Reports and Dashboards What else would you like to see in Debt Manager 9?

© 2014 Fair Isaac Corporation. Confidential. 7 Predictive Analytics

8 © 2014 Fair Isaac Corporation. Confidential. Business Challenges ► Inherent debtor differences ► Insufficient strategy differentiation

9 © 2014 Fair Isaac Corporation. Confidential. Collections Predictive Models & Scores Overview ► Determine customer debt likelihood ► Increase productivity ► Target and treat different customers & strategies The Model is the thing that produces the Score

10 © 2014 Fair Isaac Corporation. Confidential. Off-the-Shelf Models in Debt Manager 9.5 Roll Rate Models - Predict probability that customer is going to increase in delinquency Payment Projection Models - Predict the amount of payments from certain account holders

11 © 2014 Fair Isaac Corporation. Confidential. Roll-Rate Scores in Debt Manager 9.5 Early Stage 1 Cycle - Rank-orders accounts based on probability of rolling from cycle one to cycle two Early Stage 2 Cycle - Rank-orders accounts based on probability of rolling from cycle two to cycle three

12 © 2014 Fair Isaac Corporation. Confidential. Payment Projection Scores in Debt Manager 9.5 ► Rank-orders accounts based on expected collection amount for accounts that go to cycle three & beyond

13 © 2014 Fair Isaac Corporation. Confidential. Custom Models Overview ► Different collections & recovery models for different industries ► Target customers most effectively Industry Specific Model Customer Bankruptcy Model ► Understand the likelihood of a customer going bankrupt ► Adjust collections strategies Account Type Model Different models for different product types

14 © 2014 Fair Isaac Corporation. Confidential. Collections Scores Business Value ► % better account segmentation ► Improved customer service ► Improved resource utilization ► Get up-and-running quickly ► No model development data requirements ► Deployed with your system

© 2014 Fair Isaac Corporation. Confidential. 15 Predictive Analytics What else would you like to see in Debt Manager 9?

© 2014 Fair Isaac Corporation. Confidential. 16 Prescriptive Analytics

17 © 2014 Fair Isaac Corporation. Confidential. Strategy Challenges ► “Mature” portfolios with diminishing returns from current strategy ► High levels of delinquent customers ► Same or lower capacity

© 2014 Fair Isaac Corporation. Confidential. 18 Prescriptive Analytics is the process of modeling and improving (optimizing) decisions and treatments using data and predictive models

© 2014 Fair Isaac Corporation. Confidential. 19 Maximize Value at Every Stage Channel Management

20 © 2014 Fair Isaac Corporation. Confidential. SOLUTION AND BENEFITS Decision Modeling and Optimization for Early Stage Collections FICO ® Decision Optimizer 3-month KPI: Bucket 1-Bucket 2 roll-rate reduced by 3% 6-month KPI: Bucket 1-Writeoff roll-rate reduced by 10% 3-year ROI expected to be 24:1 BUSINESS CHALLENGE Improve performance of early stage collections strategies on unsecured portfolios Reduce roll rates Achieve all this without increasing expenses or headcounts Case Study – European Bank

21 © 2014 Fair Isaac Corporation. Confidential. Unlocking value from prescriptive analytics – Four key steps DECISION OPTIMIZATION Solves for profit-improvement risk management strategies Allows users to apply robust constraints Allows users to stress-test results SCENARIO ANALYSIS Uses permutations on key constraints to evaluate alternatives Explores range of what’s possible DECISION MODELING Evaluates and monitors data that would impact decisioning Builds a graphical model for one or more decisions Establishes mathematical relationships within key variables DECISION DEPLOYMENT Incorporates optimized strategies into core processing solutions immediately Manages and maintains the decisioning strategies to efficiently respond to market demands and changes

22 © 2014 Fair Isaac Corporation. Confidential. Step 1: Model Customers’ Reactions to Your Actions CustomerActionReaction Delayed Call E(Roll) = 5% E(Pay) = $250 E(Attr) = 3% E(Roll) = 5% E(Pay) = $250 E(Attr) = 3% Option 1 E(Roll) = 4.7% E(Pay) = $260 E(Attr) = 3.8% E(Roll) = 4.7% E(Pay) = $260 E(Attr) = 3.8% Gentle Call Option 2 Urgent Call E(Roll) = 4.4% E(Pay) = $290 E(Attr) = 4.8% E(Roll) = 4.4% E(Pay) = $290 E(Attr) = 4.8% Option 3 Risk score = 680 Rev Balance = $12,250 Rev Util = 61% Time in File = 132 Segment = A Risk score = 680 Rev Balance = $12,250 Rev Util = 61% Time in File = 132 Segment = A

23 © 2014 Fair Isaac Corporation. Confidential. Step 2: Simultaneously Consider All Possible Actions with Constraints Decision Model Delayed Call E(Pay)=$175, P(Attr)=2% Gentle Call Urgent Call E(Pay)=$180, P(Attr)=2.4% E(Pay)=$187, P(Attr)=3.4% CustomerActionReaction Solver Min Roll Rates; Same Staff Min Attrition; Less Staff Balanced Approach $5 BB Annual Profitability $5.2 BB Annual Profitability $5.32 BB Annual Profitability PortfolioActionReaction

24 © 2014 Fair Isaac Corporation. Confidential. Step 3: Consider Multiple Scenarios and Select Best Operating Point Projected CHANGE IN RESOURCE over "Baseline" Projected PROFIT per Account % -10%0%5%10% Efficient Frontier – Early Stage Collections Choosing the optimal operating point from multiple choices Efficient Frontier I H G F E D C B J A Scenario G Increase profitability by $10 per account, without incurring additional expense Scenario G Increase profitability by $10 per account, without incurring additional expense Current Operating Point Where you are today Current Operating Point Where you are today Scenario B Maintain profitability per account and decrease expense by 6% Scenario B Maintain profitability per account and decrease expense by 6% FICO Optimization helps you understand all options

25 © 2014 Fair Isaac Corporation. Confidential. Step 4: Operationalize Benefits »Optimized treatments can be converted into filters, jobs and strategies in Debt Manager in order to execute consistent decisions every month, week, day, etc. »Datasets with optimized treatments can be loaded directly into collection system if optimization is run every month, week, day, etc.

26 © 2014 Fair Isaac Corporation. Confidential. Examples of where FICO has applied Prescriptive Analytics in Collections and Recovery AreaPredictionExample Objective Pre-delinquencyPotential for customer to become delinquent Minimize collection expense Early stage collectionsPriority and treatment of accountsMaximize profit Mortgage workoutsRestructure termsMaximize NPV Minimize loss Credit card settlementsWhich accounts to settle pre-charge off Minimize loss Settlement after charge-offWho is the most likely candidate for a settlement and for what $ amount Maximize money collected Maximize profit Agency placementWhich accounts to place with which agency Maximize profit Maximize money collected Collections optimizationWhat is the overall potential impactMinimizing costs Maximizing return

27 © 2014 Fair Isaac Corporation. Confidential. Prescriptive Models Summary ► Better assess & target customers ► Optimize strategies ► Efficiently allocate resources

© 2014 Fair Isaac Corporation. Confidential. 28 Prescriptive Analytics What else would you like to see in Debt Manager 9?

© 2014 Fair Isaac Corporation. Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. Thank You FICO ™ Forum: Debt Manager ™ 9 User Group Fairfax, VA | June 4–5, 2014 David Lightfoot Doug Thompson Martin Germanis Joe Milligan