1. Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. © 2010 Fair Isaac Corporation. 1 Better and Faster Originations November 2, 2010 Rich Dougherty Senior Director, Pre-Sales FICO

2. © 2010 Fair Isaac Corporation. Confidential. 2 2 Topics »Changing times »So what does “better, faster” look like? Roundtable Discussion Areas »How can we more accurately assess ability to pay? »Does understanding customer value really matter? »Where are we on a Best Practices Continuum? »Regulations—what are they, what will be the impact? »If I was to do only one thing, what would it be?

3. © 2010 Fair Isaac Corporation. Confidential. 3 Historically “The Future is Like the Past” Has been a Reasonable Approach With so many changes expect to see 3 am more often… Bank Policies »Underwriting policy—A real “back to basics” approach caused by the upheaval in the economy, Canadian banks outperform others in large part to the fiscal prudence »Marketing policy—As the targeting strategy changes, the applicant population changes Competition »New entrants, as consumers are presented with more attractive offers by the competition, attrition will change behavior scores Economy and responsible consumers »“Good” consumers often withdraw from the credit market in downturns. This can appear to create adverse selection. »Consumers’ ability to repay changes as the economy shifts Legislation, regulations »Voluntary Code of Conduct, Basel III—how painful, more coming?

4. © 2010 Fair Isaac Corporation. Confidential. 4 Two Factors Fundamental To The Challenges Of Today »Peoples approach to finance has changed, forever »PWC found that 80% of Canadians trust the banking system »64% had credit needs met during the recession »Trust and loyalty are different—buying decisions more carefully considered—being thrifty is cool »The competition has sharpened » New entrants such as Walmart’s Reward’s MasterCard » Retooling to compete on price, rewards » Focused on the customer - to enable a superior customer experience across the demographic and psychographic spectrum—activities, interests, and opinions »“The New Normal” requires anticipation, simulation, internal and external data leverage, a finely tuned understanding of customer behavior »Customer intelligence is built around analytics and rules applied to data »Decision management systems require connectivity and ability to learn—on an ongoing basis »Those with the best actionable and executable blend of customer and market insight will emerge as winners

5. © 2010 Fair Isaac Corporation. Confidential. 5 5 So What Does the “The New Normal” Better, Faster Organization Look Like? DEFINE Strategy Objectives DESIGN Solution DEVELOP Models and Strategies IMPLEMENT & VALIDATE MONITOR & ADAPT Acquisition Origination Analytics

6. © 2010 Fair Isaac Corporation. Confidential. 6 6 Learning System DEFINE Strategy Objectives DESIGN Solution DEVELOP Models & Strategies IMPLEMENT & VALIDATE MONITOR & ADAPT »Grow market share »Increase multi-product stickiness »Understand “The New Normal” in credit behavior »Implement an Integrated technology platform »Address bias in data due to legacy differences »Flag “data holes” related to disconnects between historical experience vs. future outlook »Understand local level economic risk drivers »A single platform for Acquisition and Originations »Strategy and Model validation within Integrated Analytic Data Mart »Simulation Sandbox »MSA level economic adjustors »Customer Segmentation for targeting and offer assignment »Acquisition and Origination Strategies »What-if analysis and strategy outcome simulation »Ongoing analysis »Reporting within Integrated Analytic Data Mart »Variances between actual vs. expected »Establish the “new normal” »Update Models and Strategies

7. © 2010 Fair Isaac Corporation. Confidential. 7 7 Roundtable Discussion Areas »How can we more accurately assess ability to pay? »Does understanding customer value really matter? »Where are we on a Best Practices Continuum? »Regulations—what are they, what will be the impact? »If I was to do only one thing, what would it be?

8. © 2010 Fair Isaac Corporation. Confidential. 8 8 Supplementary Materials

9. © 2010 Fair Isaac Corporation. Confidential. 9 9 Roundtable Discussion Areas »How can we more accurately assess ability to pay? »Does understanding customer value really matter? »Where are we on a Best Practices Continuum? »Regulations—what are they, what will be the impact? »If I was to do only one thing, what would it be?

10. © 2010 Fair Isaac Corporation. Confidential. 10 Why Measure Ability to Pay at an Enterprise Level? »Lenders seek to balance growth while managing consumers’ ability to successfully carry incremental debt »Traditional credit risk assessment tools evaluate likelihood of default given no change in credit usage »Consumers with the same risk level can vary in capacity to handle debt increases »Usage challenges »Income used as a proxies for credit capacity - limited coverage, inaccurate or outdated and subject to temporary manipulation »Same income, different cost of living or lifestyle »Loose tie to future behavior Critical for lenders to assess consumers’ ability to handle incremental debt when extending credit.

11. © 2010 Fair Isaac Corporation. Confidential. 11 © 2010 Fair Isaac Corporation. Confidential. 11 Future Default Comparisons—Self-Reported Income

12. © 2010 Fair Isaac Corporation. Confidential. 12 © 2010 Fair Isaac Corporation. Confidential. 12 Estimated Income Performs Like Self-Report

13. © 2010 Fair Isaac Corporation. Confidential. 13 Same FICO Score But Very Different Ability To Take On More Debt Larry, Mary and Harry—Similar FICO ® Score…different capacities…risk impact converges at extreme debt levels *Theoretical example for illustration only

14. © 2010 Fair Isaac Corporation. Confidential. 14 Discussion Areas »How is the customer’s capacity to take on new credit measured »Brand new customer »A cross selling initiative to an existing customer »What internal and external data is used to make the assessment? »Is it measured differently across the organization? »Ability to pay future debt assumes a base calculation of ability to pay current debt »Do you have an ability to pay calculation which can be modified as needed? »Do you have a decision structure which easily allows for ability to pay cut off changes? »Do you have the tracking and reporting in place to assess the impact of this change and continue to improve your decision making process?

15. © 2010 Fair Isaac Corporation. Confidential. 15 © 2010 Fair Isaac Corporation. Confidential. 15 Roundtable Discussion Areas »How can we more accurately assess ability to pay? »Does understanding customer value really matter? »Where are we on a Best Practices Continuum? »Regulations—what are they, what will be the impact? »If I was to do only one thing, what would it be?

16. © 2010 Fair Isaac Corporation. Confidential. 16 -$200 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 -20%0%20%40%60%80%100% Share of Wallet Annual Profitability 1 st Set A Common Definition Of Customer Value »A consensus on value is developed via workshop and composed of multiple metrics »No one metric can define value, although profitability is always included »More powerful strategies can be obtained by considering multiple components Higher Profitability Greater Opportunity

17. © 2010 Fair Isaac Corporation. Confidential. 17 2 nd Measure, Turning Pareto’s Rule 57% measure at account level, 14% at customer level and the rest… 80% of your profits comes from 20% of your customers And 80% of your customer contribute only 20% of your profits! Enterprise strategies that don’t use analytics to drive cross sell strategy will allow your under performers to erode your business’ value Average Customer Profit Profile of All Customers 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% LowHigh Profit Ranges Percent of Customers Upside Down!

18. © 2010 Fair Isaac Corporation. Confidential. 18 Enterprise Level Segmentation Making Pareto Rules Actionable An Enterprise Level Segmentation must »Make Pareto’s Rule actionable by clearly identifying where customer value is concentrated »Work across your pillars of power (Finance, Marketing, Ops, and Risk) by balancing customer value with relevancy »Provide a customer-centric view of your business by creating holistic segments highly differentiated by value An Enterprise Level Segmentation allows you to be more relevant with your customers while building & maintaining profitable relationships.

19. © 2010 Fair Isaac Corporation. Confidential. 19 Customer Segments with 360° Profiles Each segment is defined by a holistic view of customer information to ensure a relevant relationship can be created and maintained Channel preference Call center usage Campaign propensity Price sensitivity Big ticket propensity Trip events Purchase events Rewards junky Reward preferences Loyalty index

20. © 2010 Fair Isaac Corporation. Confidential. 20 Profit Ranges Total Profits Seg 1Seg 2Seg 3 Seg 4Seg 5Seg 6 6% of Customers Erode 12% of Profit 21% of Customers Contribute 100% of Profit Among engaged customers, a small percentage of ‘core’ customers expresses growth, while another percentage erodes growth Highly Differentiated by Value

21. © 2010 Fair Isaac Corporation. Confidential. 21 Where Are You Struggling? The Execution Gap How do I … How do I know where best to invest my next dollar? How do I ensure buy-in across all business units? How do I find and serve the right customers more effectively? How do I incorporate analytics into my strategic planning? Common definition of customer value Customer segments highly differentiated by value Customer segments with 360° profiles Enterprise Level Segmentation

22. © 2010 Fair Isaac Corporation. Confidential. 22 © 2010 Fair Isaac Corporation. Confidential. 22 Roundtable Discussion Areas »How can we more accurately assess ability to pay? »Does understanding customer value really matter? »Where are we on a Best Practices Continuum? »Regulations—what are they, what will be the impact? »If I was to do only one thing, what would it be?

23. © 2010 Fair Isaac Corporation. Confidential. 23 Originations—The Best Practices Continuum A Framework For Identifying Next Steps In “Better, Faster” CharacteristicsWhich Results in… » Macro economic data in credit strategies » Advanced analytics, Learning Loop » Rapid model deployment » Advanced use of social networking »Competitive advantage »Product and channel innovation »Differentiated customer experience »New market definition » Enterprise view » Connect data, analytics, workflow » Self Servicing options »Increase in enterprise-wide credit granting »Increase in customer profitability »Leverage re-usability of technical and operational components » Custom models » Simulation » Effective pricing and product selection »Increases in cross-sell and up-sell application volume »Decreases in loan attrition/early payoffs »Increased share of wallet via cross product sales » Risk based pricing » Segmentation and modeling » Automation of credit policy and decision strategies »Increases in balance outstanding »Increases in net income (from Approvals and Bookings) »Increases in fee revenue (from NSF fees, for example) » Establishing automation » Leverage bureau data and scores » Compartmentalized functions and lines of business »FTE cost reductions »FTE cost avoidance »Increases in labour productivity & application capacity » High human intervention » Labor and time Intensive » Multiple approval levels »Limited standardization »Variable quality of decision »Challenges with compliance »Non-scalable business model Relationship Value Innovators Profit Optimization Operational Effectiveness Operational Efficiency Manual and Judgmental

24. © 2010 Fair Isaac Corporation. Confidential. 24 © 2010 Fair Isaac Corporation. Confidential. 24 Roundtable Discussion Areas »How can we more accurately assess ability to pay? »Does understanding customer value really matter? »Where are we on a Best Practices Continuum? »Regulations—what are they, what will be the impact? »If I was to do only one thing, what would it be?

25. © 2010 Fair Isaac Corporation. Confidential. 25 Regulations What Are They, What Will be the Impact? »What has been the impact of the Voluntary Code of Conduct? »The Task Force For Payment Systems review—what input have you provided? »Do you see more regulations coming, if so in what areas? »Basel III—initial views and thoughts? Is there much to do given current OSFI requirements?

26. © 2010 Fair Isaac Corporation. Confidential. 26 © 2010 Fair Isaac Corporation. Confidential. 26 Roundtable Discussion Areas »How can we more accurately assess ability to pay? »Does understanding customer value really matter? »Where are we on a Best Practices Continuum? »Regulations—what are they, what will be the impact? »If I was to do only one thing, what would it be?

27. © 2010 Fair Isaac Corporation. Confidential. 27 How Do You Make Decisions Today? Fast Intuitive Less Certainty Slower Tested/Proven More Certainty

28. © 2010 Fair Isaac Corporation. Confidential. 28 Getting Started First, Assemble a Simulator… Data Key Decisions Effects Interim Outcomes Impact

29. © 2010 Fair Isaac Corporation. Confidential. 29 © 2010 Fair Isaac Corporation. Confidential. 29 …Which Creates A Decision Framework The decision framework allows for fundamental magnitude changes and distribution changes.

30. © 2010 Fair Isaac Corporation. Confidential. 30 What’s the Impact to the Bottom Line When You Reduce the Late Fee from an Average $39 to $25?

31. © 2010 Fair Isaac Corporation. Confidential. 31 Having a Robust Decision Simulation Framework…. »Reduces effort, time to market and risk »Leverages existing assets (models, data, analytic and business expertise) »Provides visible relationship of action and effect »Accommodates quick evaluation of proposed changes and profit impact »Provides flexibility to expand to new decision areas

32. © 2010 Fair Isaac Corporation. Confidential. 32 Takeaways »The New Normal is here to stay »Customer behavior has changed, leading organizations see this and are acting »No one can be right all the time, but a learning loop allow you to predict the impact of change »Risk Management is a culture and crucial skill set requiring: »Disciplined use of data »Understanding the impact of actions »Operational support for disciplined execution of risk and marketing policies

33. Confidential. This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation's express consent. © 2010 Fair Isaac Corporation. 33 THANK YOU November 2, 2010 Rich Dougherty Phone Email