Toyota uses analytics to keep delinquent customers in their cars
Toyota Financial Services' Collection Treatment Optimization (CTO) program helps its collections agents optimize which borrowers to call to help reduce delinquencies and keep customers in their vehicles.
In the wake of the global financial crisis of 2007-2008, Toyota Financial Services (TFS) started seeing record numbers of customers fall delinquent on their auto payments every day. By 2009, TFS, which provides auto financing to more than four million U.S. customers, was hitting a high water mark.
"2009 was the first time there were over 100,000 customers per day who were more than one day behind on their car payments," says Jim Bander, national manager for decision science at Toyota Financial Services.
From the beginning, Bander says, Toyota's goal was to keep as many people in their vehicles as possible. The company needed to get better outcomes for its collection efforts, helping their customers avoid repossession or credit impacts as a result of their delinquencies, while still profitably growing its lending portfolio. To do it, the company had to venture into new waters with regard to analytics.
Toyota is well-known for its eight-step methodology for problem solving:
1. Clarify the problem
2. Breakdown the problem
3. Set the target
4. Analyze the root cause
5. Develop countermeasures
6. Implement countermeasures
7. Monitor results and process
8. Standardize and share success
The problem, Bander says, is that the number of late customers was completely overwhelming the number of collectors TFS could dedicate to help customers get back on track.
In its first year, the CTO program helped more than 6,000 customers stay in their cars and 50,000 customers avoid reaching a stage of delinquency that would affect their credit.
"Working with delinquent customers to keep them in their cars while working out payment options has helped Toyota avoid millions of dollars in losses," Bander says. "It's a win for our customers and a win for Toyota. Furthermore, it reduced our operating expense ratio by allowing Toyota to grow our portfolio by roughly 9 percent without adding collections headcount. This has also enabled us to tie future lending decisions to our collections abilities — putting more customers behind the wheel of a Toyota."