Credit Cards Risk Based Pricing Strategy Qorus Banking Innovation Awards 2021

Mashreq Bank is the oldest bank in the UAE and was founded in 1967 with its head office in Dubai. Today, Mashreq celebrates over five decades of excellence, and has emerge as one of the leading financial institutions in UAE, with strong presence through its international offices spanning Europe, Asia, Africa and the US, as well as financial capitals of the world. The creativity and unsurpassed reputation of the bank to provide innovative solutions has garnered the bank with several awards over the years. Mashreq constantly creates value-added products and services for its customers. Mashreq has always been a first mover and has prided itself on its innovative, pioneering spirit to deliver products that meet customers ‘ever-changing needs. From its very beginnings, Mashreq led the development of new products and services. While a lot has changed in UAE banking industry in recent years, but the credit card pricing strategies have remained remarkably consistent which neither benefits the banks nor its customers. But with a perfect storm of technology, artificial intelligence and economic trends, Mashreq launched the Risk Based Pricing Strategy in Q4 2020 which is poised to challenge long-established practices and be a win-win alternative for both Mashreq and its customers. Below is the overview of this strategy: - Concept: Credit card interest rates linked directly to the borrower’s risk profile and past credit behaviour, would allow us to optimize revenues from lending, and reward deserving, financially disciplined customers. This will be a ground shifting strategy for the bank and will lead to positive social and economic growth in the region - Implementation methodology: Mashreq’s Risk behaviour scoring model is used to rate each customer every month. This score acts as one of the key inputs apart from customer related information like length of relationship, customer segment and recent payment pattern to assign a particular interest rate to each customer. The assignment happens on a real time basis using a cloud and microservices based platform named ‘Xelerate’ to deliver this agile customer first strategy. - Pre implementation Customer Communication: Customers were sent an SMS and an email with the details of how Risk based pricing will work and may impact them with a 60-day prior notice. A detailed FAQ was prepared and here is the link of the same. Visit www.mashreq.com/dapr for details on Risk based Pricing. - Post implementation Customer Communication: The interest rate applicable for each customer is clearly printed on the credit card statement every month