Top Credit Card Banks Choose RMT's RADAR RiskManager; First USA and Advanta to Gain Strategic Advantage Through Better Measurement And Forecasting Of Risk And Profitability

Business Wire, Nov 25, 1996

BERKELEY, Calif.--(BUSINESS WIRE)--Nov. 25, 1996--First USA Inc., and Advanta Corp., two of the nation's largest credit card banks, have installed RADAR RiskManager(TM), the industry-leading risk management system developed by Risk Management Technologies (RMT). RADAR RiskManager performs enterprise-wide risk management and strategic profit optimization using dynamic forecasting and valuation methodologies. At First USA and Advanta, the system will allow accurate assessment of the banks' credit card risk exposure and profitability.

Dallas-based First USA is the fifth largest credit card issuer, with 12.9 million cards issued. Advanta, headquartered in Horsham, PA, is the 10th largest credit card firm, with 5.4 million cards issued.

In addition to RADAR RiskManager, First USA and Advanta have purchased RMT Genesis(TM), a data integration toolset. Using RMT Genesis, the banks will build a central data repository that pools customer account information from a variety of sources, including credit card and trading transactions, data from general ledger systems and information from spreadsheets and other applications. The data is then optimized and fed into RADAR RiskManager to analyze current positions, to run simulations based on different rate environments and market scenarios and to forecast performance and profitability trends.

Using RADAR RiskManager, First USA and Advanta will be able, for example, to determine the value of card portfolios based on a number of variables and to reliably forecast the profitability of card solicitations. They can also get a better understanding of customer behavior through the ability to discern card usage, payment patterns and other factors that affect ongoing profitability.

"With the changes in products and product mixes, volatility in the marketplace and changes in customer behavior, banks have a real need for this type of system," says Jeff Dandridge, RMT vice president, client delivery. "While credit card banks have been leaders in the use of information technology to improve their businesses -- through better marketing and targeting of customers, for example -- they have increasingly begun to employ newer analytical and decision support tools, such as RADAR RiskManager, to gain strategic advantage in the marketplace."

Traditional profitability and performance measurement tools have become inadequate, explains Dandridge, because bank products have become much more complex, with many indexed to changing interest rates and initially offering below-market "teaser rate" incentives. "These embedded parameters, along with customer behavior, can drastically change the cash flow and earning potential of an institution," he says.

For this reason, banks such as First USA and Advanta are employing RADAR RiskManager to do intelligent forecasting and strategic planning. The system takes two traditionally separate analyses -- current performance measurement and risk management projections -- and successfully integrates them to provide a more holistic view of risk and profitability.

RADAR RiskManager delivers analytical results both for specific future economic environments and, by using Monte Carlo simulation, for a wide range of potential environments simultaneously. This allows clients to better manage the "dynamic response" behavior of their product solicitations and portfolios with full regard for future market volatility.

RADAR RiskManager offers the advantage of providing not only excellent analytics, but strong data collection and management functions, which are critical to generating highly accurate forecasts, explains Dandridge.

First USA has completed installation of the system and expects to be in full production by the first quarter of 1997; Advanta is currently integrating the system into its enterprise.

RMT was founded in 1989 specifically to provide comprehensive decision support systems for major financial institutions. Since coming to market in 1993 with a complete asset-liability management product targeted at larger, more complex and sophisticated institutions, RMT has garnered such domestic clients as Chase Manhattan Bank, New York; First Union, Charlotte, NC; Wachovia Corp. Winston-Salem, NC; and Wells Fargo & Co., San Francisco. Lead clients outside the United States include Abbey National in London, ANZ Bank in Melbourne and Sumitomo Bank in Tokyo.

CONTACT: Risk Management Technologies

Alan Tobey, 800/233-2635 or 510/548-7799

atobey@rmtech.com

http://www.rmtech.com

or

The Reference Point

Lynne Winters, 212/496-0400

lewinters@aol.com