Matthias MeulDeutsche Bank

Supporting the branch network using predictive analyticsPredicting first investment behaviour12Dec2013

Deutsche Bank Matthias MeulFirst Investment model

First InvestmentPredictive analytics in Investments

The next 40 minutes

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— Introduction to Deutsche Bank & casestudy

— The First Investment model

— Commercial implementation & results

— Lessons learned

— Q&A

Introduction Model Results Questions

Introduction

Model

Results

Questions

Deutsche Bank Matthias MeulFirst Investment model

Deutsche Bank in Belgium

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— > 315 000 clients

— +-715 employees (of which +-300 with client contact roles)

— 33 Financial Centers

— 3 Contact Centers

— Over 21 billion € AUM

— “Open architecture”, mandates as of 100€

— Retail – DbPersonal – Private

ClientsCapacity

DBP

Private

Retail

300 employees with client contact

33 FCs

First InvestmentPredictive analytics in Investments

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

Casestudy overview

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— Clients with investments are treated very well (maturities, downgrades,…)

— The objective is to convert retail savers-only to investors

A significant number of clients doesn’t have and never had in-vestments!

INDICATION

First InvestmentPredictive analytics in Investments

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

Dependent variable

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First InvestmentPredictive analytics in Investments

— Will the client make a first investment in a strategic product in the year to come? Yes/No

— Timeframe?

Introduction Model Results Questions

T2: The moment when we want to make the prediction

T3: Start of the period in which the behavior will take place

T4: End of the period in which the behavior will take place

Historical data taken into account to make the prediction

Period to execute commercial initiatives based on predictions

Deutsche Bank Matthias MeulFirst Investment model

Modeling technique

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— Linear regression

— Dependent variable between -∞ and +∞

— Easy to explain:

— However, the problem of identifying First Investors is binary

— Made a FI = 1

— Did not make a FI = 0

— The desired outcome of the model are probabilities (between 0% and 100%)

Þ We have to perform a transformation

— Logistic regression

— Model the log odds of the event (=dependent variable), which will be transformed into probabilities

First InvestmentPredictive analytics in Investments

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

Variables retained (high level) using stepwise regression

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— Current AUM & variations

— AUM in the past

— Education level

— Current level of loyalty towards Deutsche Bank (~advanced algorithm)

— Length of relation

— …

First InvestmentPredictive analytics in Investments

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

Evaluation

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First InvestmentPredictive analytics in Investments

— Check model performance… Wait until time goes by…?

T2: The moment when we want to make the prediction

T3: Start of the period in which the behavior will take placeHistorical data taken into account to make the prediction

Period to execute commercial initiatives based on predictions

T4: End of the period in which the behavior will take place30jun2012

31jul2012 31jan2013

Use the model to score, based on 28feb2013

31mar2013 30sep2013Monitor model performance

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

First InvestmentPredictive analytics in Investments

Technical performance measures

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— Lift

— AUC

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

First InvestmentPredictive analytics in Investments

Technical performance measures: Lift

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— Lift

Introduction Model Results Questions

OVERFITTING?

Deutsche Bank Matthias MeulFirst Investment model

Customers

— Area Under the receiver operating Curve

— The probability that a classifier will rank a randomly chosen positive instance higher than a randomly chosen negative one

Technical performance measures: AUC

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A random first investor(score = 10%)

A random “not” first investor (score = 0.005%)

When I compare the scores of the FI and the non-FI, the FI has 70% chance (AUC = 0.70) of having a higher predicted probabilityof churning than the non-FI

First InvestmentPredictive analytics in Investments

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

Operational implementation of the First Investment model

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First InvestmentPredictive analytics in Investments

— Recurrent Tasks, monthly refresh

— Event-driven (e.g. AUM evolution)No ice-cold calling— always at least 1 of 3 potential commercial triggers in Task comment

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

Results of the first roll-out

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Introduction Model Results Questions

First InvestmentPredictive analytics in Investments

+-20% of treated tasks results in a meeting!

Deutsche Bank Matthias MeulFirst Investment model

“Educate” the branch network

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Introduction Model Results Questions

First InvestmentPredictive analytics in Investments

Deutsche Bank Matthias MeulFirst Investment model

Results of the first roll-out (purchases until end of september)

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Introduction Model Results Questions

First InvestmentPredictive analytics in Investments

Deutsche Bank Matthias MeulFirst Investment model

Results of the first roll-out (purchases one month after task injection)

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Introduction Model Results Questions

Sales until October 19th taken into account because of

*tasks being treated as of September 19th

*time between ordering and booking an investment product

First InvestmentPredictive analytics in Investments

Deutsche Bank Matthias MeulFirst Investment model

Is it necessary to contact these clients?

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Introduction Model Results Questions

Won’t they invest “by themselves”?

Do they really need the extra trigger?...Þ Same characteristics as targeted clients & compare!

First InvestmentPredictive analytics in Investments

Deutsche Bank Matthias MeulFirst Investment model

Results of the First Investment model

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First InvestmentPredictive analytics in Investments

Introduction Model Results Questions

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First Investors 2012 vs 2013 (31nov)

Investors_per_month_2012

Investors_per_month_2013

YTDInvestors_2012

Total2012

YTDInvestors_2013

Deutsche Bank Matthias MeulFirst Investment model

First InvestmentPredictive analytics in Investments

Lessons Learned

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— Do not limit yourself to the existing KPIs. Do they match the business problem you’re trying to solve?

— Assure the commercial implementation of the model, put the scores to use & add tangible customer leads.

— Assure the followup of the model & recurrently report results.

— Keep it simple & understandable!

Introduction Model Results Questions

Deutsche Bank Matthias MeulFirst Investment model

Thank you!

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First InvestmentPredictive analytics in Investments

Introduction Model Results Questions