Lenders are always challenged with finding innovative ways to grow their portfolios. As the appeal of broad-market direct marketing dwindles in our highly competitive marketplace, lending institutions are moving to more-targeted acquisition strategies by leveraging a deeper understanding of a member's lifetime value.

A key component of this effort is defining and quantifying loyalty—a concept that is easy to understand in theory but quite hard to isolate and measure in practice. TransUnion has performed several studies in the past that successfully quantified loyalty as a function of the number of relationships a member has with a given lender—also called on-us relationships. Our most recent study is our broadest yet, using a large sample of both DDA (share draft and savings) and credit data from two contributing lenders. This study is an attempt to further quantify loyalty along a number of distinct dimensions and to explore its value as an incremental risk assessment tool.

As a starting point, we looked at loyalty in terms of the number of relationships between the member and the financial institution. Consistent with earlier studies, we found that there was a positive relationship between credit performance and the number of on-us accounts—credit or deposit—held by a member, even when controlling for credit score. We also found that the inclusion of DDA accounts to derive the total number of on-us relationships validated a broadly accepted and intuitive fact: DDA members generally present less risk than non-DDA members.