An Analytical Approach to Restrict Customer Attrition in Commercial Banking

The banking and financial services industry faces an ongoing challenge with customer attrition, which can significantly impact revenue and profitability. Our latest whitepaper explores how commercial banks can use data science and machine learning to predict and prevent customer attrition, offering a comprehensive analytical framework to identify early warning signs of churn and implement strategies to retain high-value clients.

The whitepaper focuses on identifying the key drivers of attrition by analysing various customer segments—small, medium, and large enterprises—that use different banking products, such as business loans, current accounts, trade accounts, and foreign exchange services. By leveraging advanced data analytics, banks can monitor shifts in customer behaviour, allowing them to take proactive measures before attrition occurs.

Key Highlights:

• Defining Attrition: The whitepaper emphasises the importance of defining attrition correctly to assess its true impact on the bank's performance. This includes distinguishing between hard attrition (customers who have left the bank) and soft attrition (customers showing early signs of declining engagement).
• Revenue Leakage: It identifies revenue leakage as a critical metric for measuring attrition, revealing how reductions in transaction volume, count, or frequency often precede customer churn.
• Soft vs. Hard Attrition: By analysing the differences between soft and hard attrition, the paper outlines strategies to intervene early, preventing customers from cutting ties completely.
• Machine Learning Algorithms: The whitepaper delves into the use of machine learning models to develop attrition scores based on historical customer data, helping banks target at-risk customers with retention campaigns.
• Product-Specific Attrition: It addresses how customers may leave a specific product (e.g., closing a loan account but keeping a current account) and how banks should focus on product-level retention strategies.
• Entity vs. Master Group Attrition: The study introduces the concept of entity-level and master group-level attrition for companies operating across multiple geographies, offering banks a multi-layered approach to customer retention.