Today at FICO® World, the industry's leading analytic and AI event, FICO announced that HSBC, one of the world’s largest banking and financial services organizations, has used AI-powered mathematical optimization technology to grow its credit card portfolio. The project saw a 15% uplift in monthly spending by customers on their cards, as well as improvements in active card use and share of wallet, without increasing bad debt. HSBC has won a 2024 FICO Decisions Award for AI, Machine Learning, and Optimization.

“With FICO optimization, we can adjust credit limits to each customer’s risk, reward and engagement levels, and manage them with scientific precision, at speed, as our strategy and the economic climate change,” said Mike Roberts, head of unsecured retail risk, HSBC UK.

The retail banking sector in the UK is particularly competitive, and customers have fractured wallets, with three financial relationships on average. As part of its digital journey, HSBC has been focused on creating easy-to-use, tailored customer experiences, whilst delivering long-term revenue growth. The HSBC credit card portfolio was one of the areas targeted for sustainable and responsible growth by providing tailored credit line increase offers to customers.

“Setting new credit limits through testing programs is inefficient, and could damage customer relationships,” said Roberts. “By using FICO’s mathematical optimization, we were able to simulate responses to customer engagement, levels of spend, activations, loss rates, profitability and customer outcomes, whilst factoring in changes in economic and regulatory conditions. We were also able to better meet customer needs by targeting offers to customers that wanted and would use a credit line increase.”

HSBC worked closely with FICO to design the decision influence process that captured their credit line increase business. Eight action-effect models were created to forecast the impact of the existing credit line increase strategy. These models were configured within FICO® Platform, together with HSBC's own profit calculations, and a suite of around 40 scenarios was developed to find the best solution.

When COVID-19 hit in 2020, HSBC rapidly redeveloped its strategies to deal with the new economic climate. Despite reduced demand for credit during the lockdown, the optimized strategy proved to be more effective than its previous strategy at generating card use.

In July 2023, the UK passed Consumer Duty regulations, aimed at ensuring banks delivered products and services that are tailored to individual’s needs, deliver fair value, and do not put consumers at risk of unaffordable debt. By using FICO® Decision Optimizer’s precise mathematical techniques, HSBC is well-equipped to determine the best outcomes and assist its customers in dealing with this regulatory change.

“The ability to test vast decision strategy possibilities, inter-relationships and subsequent permutations in volumes and scenarios is way beyond the capacity of the human brain to calculate,” said Roberts. “At the same time, we are executing explainable decision strategies that provide the visibility and certainty to know that we are doing the right thing for customers.”

“Decision optimization is one of the most advanced tools a lender has,” said Nikhil Behl, chief marketing officer at FICO. “HSBC has again shown its leadership in the market with this project.”

“To get an advantage in one of the world’s most competitive credit markets is an outstanding achievement,” said Paul Robinson, VP credit management at Canadian Tire Bank and one of the FICO Decisions Awards judges. “The judges were impressed by HSBC’s savvy use of optimization and its ability to balance numerous objectives and constraints to find more successful options for its customers.”