A groundbreaking study conducted by Serasa Experian, Brazil's first and largest data tech company, showed that retailers can safely expand their credit offerings by up to R$ 200 million to customers in their database who have credit cards, through intelligent management and periodic analysis of their portfolios. The study was conducted based on a customized analysis of the portfolios of four retail players, combining exclusive and market data with Serasa Experian's analytical intelligence.
In financial terms, the study showed that the card limits of customers in the portfolios analyzed have the potential to grow by 60%, an expansion in the credit offer equivalent to R$200 million.
“Understanding the profile, purchasing potential and risk of each customer is essential for customized portfolio management and readjustment of the credit card limit for each CPF. This allows for a more accurate risk assessment by dividing customers into three groups: those who need to have their limit reduced, as they are at risk of defaulting; those who can have their credit increased, as they have low-risk purchasing potential; and those who have an adequate limit. This makes it possible to increase revenue by working with customers who are already in-house – which is much cheaper, less complex and more attractive than searching for new customers in the market. At the same time, it provides visibility into the CPFs that are at higher risk and need to adapt their offer or have a closer monitoring strategy to avoid becoming defaulters,” explains Pedro Braga, Director of Decisioning and Advanced Analytics at Serasa Experian.
The study also identified the portion of the customer base with limits that pose potential default risks. For this group, the analysis suggests a 25% reduction in the limit, which would decrease the total granting from R$ 235 million to R$ 175 million, with a total reduction of R$ 60 million.
Types of cards in retail
The segment typically offers two types of credit cards: branded and private label. The first modality is a conventional credit card, accepted at all establishments that operate with the issuing brand and usually issued through a partnership between the store and the brand. The private label is a model that can only be used in the issuing retailer's stores. And for both, periodic portfolio risk management is not only applicable but also advisable.
For the first group, of branded cards, the data shows that it is possible to increase credit by 63%, from R$ 179 million to R$ 292 million, an increase of R$ 113 million. The same reasoning applies to the risk of default. For this group, the reduction of limits would be around 25%, equivalent to R$ 16 million. With this, the new granted limit would decrease from R$ 65 million to approximately R$ 49 million.
For retailers selling private label cards, the increase in value would be R$ 73 million, or 46%, raising the limits from R$ 159 million to R$ 232 million. Among clients at risk of default, the reduction of limits would be 25%, or R$ 43 million, bringing the total from R$ 170 million to R$ 126 million.
“Defining a robust policy not only for granting but also for maintaining credit, applied to the portfolio profile and based on the combination of the customer’s history with the store, with market data on that CPF, is one of the most important points in the journey of companies that offer cards. This is even more crucial for retail, since the financial history and behavior of consumers is not centralized with them. Our goal is to support our customers with analytical intelligence and end-to-end automation of analysis processes to reduce their risks, expand their opportunities and bring agility and efficiency to business decisions. And, it is also possible, for example, to make personalized offers for new sales and cross-sales for consumers who are already part of the customer base, reducing the companies’ operational costs”, concludes Pedro.
Methodology
The numbers are the result of a study based on results obtained with the integrated Customer Management solution using as a starting point cases from four companies in the retail sector that adopted the solution.
The analysis is conducted through a strategic and individualized assessment of the provided database, combining exclusive and market data with analytical intelligence capabilities, enabling a comprehensive view of your clients' potential by CPF and/or CNPJ. The solution makes it possible to identify the audience with the greatest potential for credit product eligibility, both in terms of risk and propensity, and a credit limit value is indicated according to the customer's financial behavior in the market. Other sectors such as banks and insurance companies, for example, are also already users of the Customer Management solution.
