Zuno has implemented the FICO Capstone Decision Accelerator into its online lending business, aiming to speed up the lending process. Billy Bambrough spoke to Petro Merkulov from Zuno and FICO’s Phillip Sertel about the deal and what it means for Zuno direct bank
Zuno Bank, Raiffeisen’s internet bank which launched in 2010, opted for the FICO Capstone Decision Accelerator (CDA) in an attempt to speed up their new lending strategy.
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Currently only operating in Slovakia and the Czech Republic, the internet bank plans to branch out in to the rest of Eastern Europe where Raiffeisen is already active in the near future.
Petro Merkulov, head of risk management, Zuno told RBI: "We will not be going into these markets independently, would be looking for any kind of synergies so that Zuno and the existing Raiffeisen network can operate together in the same market."
This plan for expansion has come since a large change in strategy for Zuno. Where before it was focused on building deposits, the direct bank has switched to loans after meeting the deposit objectives that were set when the bank was launched.
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By GlobalDataMerkulov says, "Zuno started mainly as a deposit bank. Our focus when the bank launched was just to collect deposits. This would be for Raiffeisen to provide extra liquidity to the group. Initially in the market the interest rate dropped significantly.
"We realised that in only focusing on deposits we wouldn’t be able to make progress in the near future. There was a large shift in Zuno’s strategy. There was a move to allowing lending and we looked at how we could quickly build up a lending book that was significantly higher than the deposit products.
"We wanted to do this quickly and so we wanted to be able to quickly implement the decision engine in the shortest time possible."
This change in strategy required Zuno to make the decision to use FICO’s decision accelerating software quickly, the software taking just three and a half months to be implemented across the banks systems.
The FICO Capstone Decision Accelerator is a risk and value assessment programme used to make decisions on credit requests, deposits, personal loans, refinancing, contactless credit cards and overdrafts.
Philip Sertel, Senior Director at FICO told RBI, "The installation was implemented in a very short time. Particularly for a system which has to speak to so many different systems across the bank. The ease of integration of the software along with the quick time to market is something we are very proud of."
The decision engine is most likely to be used by banks in areas with a large unbanked population, looking to quickly grow their lending book and not wanting to put people off with long wait times.
Sertel says: "Many of the markets across Eastern Europe and the Middle East are high growth markets where you are trying to attract market share for the first time.
"You’re not trying to attract customers from competitors but there are masses of unbanked customers that you are trying to get on board with the bank.
"In these markets we see a lot of demand for products like CDA. For example across central Europe we see a lot of demand, especially across Russia and Turkey. We are also seeing this across the Middle East."
For Zuno the capability for the Capstone Decision Accelerator to be modified in house was a selling point.
Merkulov says: "The importance of being able to manage the system ourselves was quite high. None of our network banks have the same experience as us lending online. We needed a system that would be able to quickly react to the quality of clients that come in. The system will be able to accommodate different products and different markets."
Merkulov is hoping that the decision accelerator can help the bank to expand it’s selection of products.
"We offer currently four products – cash loan, overdraft, credit card, and more recently refinance. We are still getting experience and knowledge from these products, which the CDA is helping us to gather. We have considered mortgages but we’re not sure that offering mortgages via the internet in these Eastern Europe markets would be effective.
"Most probably mortgages would be cross-sold to our clients by our existing network banks."
"Since our strategy at Zuno is to expand to new markets and we want to see how people bank on line and what the trends are it was important for us to be able to re-use CDA for any future markets or products."
Merkulov says: "Excellent service is crucial for us, so the ability to generate automated decisions on credit requests in short period of time, compared with the standard one or two days for manual underwriting will make a big impact on our ability to achieve our goal."
Like any internet bank Zuno have found their customer base is predominantly made up of younger generations, compared to Raifeisen customers in the same region.
Merkulov says: "It’s a different customer segment if you want to see on the deposit product or on the lending. The client who has money to save and those who want to borrow are quite different.
"In general, they are more technologically advanced and they are younger. Also due to this we see higher concentration of customer in larger cities."
The software will be used by Zuno to try and prevent fraud attacks and reduces fraud loses.
FICO Capstone Decision Accelerator will be hosted in Zuno’s data centre in a private cloud.
