October 15th 2012 12:34 pm

Chase Bank’s Big Win – Predicting Mortgage Risk

Predictive Analytics for Banking and Credit

As an early innovator deploying predictive analytics in the financial industry, Chase Bank got it right. Check out this preview from an article by Eric Siegel coming to The Guardian newspaper in early November:

In the mid-1990s, an entrepreneurial scientist named Dan Steinberg marched into the U.S.'s largest bank, Chase, to deliver prediction unto their management of millions of mortgages. This mammoth enterprise put its faith in Dan's predictive technology, deploying it to drive transactional decisions across a tremendous mortgage portfolio. What did this guy have on his resume?

Dan's technology company delivers predictive analytics. With this capability, businesses secure a killer competitive stronghold by predicting the future destiny and value of individual assets. In this case, by driving mortgage decisions with predictions about the future payment behavior of homeowners, Chase curtailed risk and boosted profit – the bank witnessed a $600 million windfall in one year (adjusted for inflation, over $800 million today).

For technical information behind this case study from Chase, see this Salford Systems Data Mining Conference presentation (2005).

For more information on this business story, pre-order Eric Siegel's forthcoming book, Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie or Die.

The full article, which is an excerpt from the forthcoming book, will appear in a special section of The Guardian (U.K.) entitled "Data Science, Big Data & Analytics," which kicks off a quarterly series from The DataScienceLab Project. This article, which will introduce newcomers to the field of predictive analytics and survey its broad application areas, will be linked upon its publication from the Predictive Analytics World Blog.

For more predictive analytics case studies in financial services:

  1. Attend Predictive Analytics World Düsseldorf (Nov 6-7), with case studies from:
    • AXA Winterthur
    • Capital One
    • HSBC
    • Paychex
    • U.S. Bank
  2. Attend Predictive Analytics World London (Nov 27-28), with case studies from:
    • BNP Paribas Fortis
    • Commerzbank, Lloyds
    • Danish ministry of Taxation,
    • Deutsche Bank (Belgian Branch)
    • MarketPsy Long-Short Fund LP
  3. Attend Predictive Analytics World Toronto (March 2013), San Francisco (April 2013) and Chicago (June 2013) – sign up to receive conference program updates.

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