Analy&cs  -­‐  the  new  differen&ator  June  2015  

Jairam  Sridharan  President,  Retail  Lending  &  Payments  -­‐  Axis  Bank  

2  

Analytics is being used extensively to drive value … applications are widespread - from commerce to banking, arts to politics

Dynamic  Pricing  

Instant  Loans  

Entertainment  content  

3  

Organizations now use analytics as a way of doing business, with an emerging trend of elevating it to the management table

Level  of  Sophis&ca&on        !  

Dep

artm

enta

l O

rgan

izat

iona

l In

stitu

tiona

lized

Ins&tu&o

naliza&

on  of  A

naly&cs      !

 

Spreadsheets Slice & Dice BI

Predictive Analytics Optimization

Machine learning AI

McKinsey  &  Company  

Courtesy:    Fractal  Analy1cs  

Various  organiza;ons  are  at  different  levels  of  analy;cs  maturity  

Chief  Analy;cs  and  Chief  Data  Officer  roles  in  recent  years    

4  

Application of analytics spans the entire range - from aiding business operations to strategic direction setting

A  few  case  studies  

Credit  risk  management:  Banking      Dynamic  pricing:  Uber      Por8olio  alloca:on:  Axis  Bank      New  product  launch:  Asha  Home  Loans  

1  

4  

2  

3  

5  

Retail lending credit risk management 1  

0.0%  

2.0%  

4.0%  

6.0%  

8.0%  

10.0%  

12.0%  

14.0%  

16.0%  

0%  

2%  

4%  

6%  

8%  

10%  

12%  

B1   B2   B3   B4   B5   B6   B7   B8   B9   B10  

Personal  Loan  Risk  Ranking  

#  Ever  60+  delinq  rate  (LeP  axis)  

Applica:ons  distribu:on  (Right  axis)  

Risk  score  decile  

Approve  

Decline  

Score  cutoff  

Most  credit  bureaus  and  many  banks  develop  scorecards  that  

predict  credit  default  risk      

…  which  are  then  used  to  make  scorecard  based  underwri;ng  decisions  

•  Consumer  data  is  collected  on  historical  loan  payments  and  delinquencies/defaults  

•  Risk  predic:on  models  are  built  using  regression  modeling  

0%  

20%  

40%  

60%  

80%  

100%  

0%   20%   40%   60%   80%   100%  

Personal  Loans  -­‐  Gini  &  LiO  Chart  

Model  

No  Model  

6  

Dynamic pricing at Uber 2  

Uber  uses  classical  Economics  101  of  price  elas;city  of  demand  

…  to  set  a  ride  price  that  balances  demand  and  supply    

“Uber’s  most  important  innova;on  isn’t  a  car  service.  It’s  the  pricing  algorithm.”  –  MIT  Technology  Review  

ü  Increases  on-­‐the-­‐road  supply  of  drivers  

ü More  customers  able  to  find  a  ride  

ü More  price  efficiency  and  improved  business  profitability  

 

Mul;ple  benefits  

7  

Axis bank – Lending portfolio allocation 3  

Size  of  bubble  represents  weight  in  por8olio  

We  built  valua;on  models  to  make  efficient  capital  alloca;on  decisions  in  Retail  Lending  

Risk  vs.  return  by  product  

PorTolio  risk/return  efficient  fron&er  

%  NCL

ROE 3

12

4

Now

Recommended  target  portfolio

We  simulated  thousands  of  porTolios  to  develop  a  risk/return  efficient  fron;er,  and  then  recommended  a  

target  porTolio  mix  

8  

Axis bank new product – Asha Home Loan 4  

We  used  data-­‐driven  consumer  insights   …  to  build  a  new  product  strategy  for  affordable  housing  Lack  of  proper  access  to  

credit  and  hence  unable  to  build  or  buy  a  new  home  

“Move  away  from  rent”  without  compromising  other  pleasures  of  life  

Source:  Monitor  Deloibe  Report  on  State  of    LIH  –  Urban  Income  pyramid    

For  30MM  urban  households  with  income  between  Rs.  8-­‐25K,  owning  a  

house  s:ll  an  un-­‐fulfilled  dream  

Source:  Nielsen  Study  

Consumer  survey  of  households  

Asha  home  loans  A  strong  value  proposi:on  for  consumers  with  aspira:on  to  

own  a  modest  home  

9  

So analytics is permeating more and more of your tactics and strategies …

… Does that make you an analytic leader?

10  

11  

Thank you