Segmentation Applications in Banking - Data Mining Techniques in CRM: Inside Customer Segmentation - page 279

Table 6.17 Interpretation of the extracted principal components.

Factor Description

1 Cash advance

This component presents strong positive correlation with the fields that measure the
volume (amount) and frequency (number of) cash advance transactions. Therefore it
appears to be a measure of cash advance usage. Customers with high positive value
on this component are expected to heavily use their credit cards for withdrawals. This
component is also moderately correlated with credit card balance

2 Deposit transactions

This component presents strong positive correlation with the fields that measure the
frequency and volume proportion of credit transactions and deposits in particular.
High positive values on this component indicate customers whose transactions are
mainly deposits

3 Lending vs. assets

A component that is positively correlated with the percentage of lending balances and
negatively correlated with the percentage of assets balances. It denotes a contrast
between assets and lending (liabilities), not necessarily in terms of balance amount
but in terms of balance percentage and share in the total position. This score separates
''lenders'' from ''depositors'' and ''investors.'' Customers with high positive component
scores are expected to be ''lenders'' with increased liabilities. Negative component
scores on the other hand signify ''depositors'' or ''investors'' with increased assets

4 Withdrawal transactions

Like a mirror image of the second component, this fourth component is associated with
the percentage (both frequency and volume) of debit transactions and withdrawals in
particular. Therefore, withdrawals are expected to dominate the transactions of those
customers who score high on this component

5 Frequency of total transactions

In general, the majority of customers make more withdrawals than deposits, therefore
the frequency of total transactions and withdrawals appear correlated. The fifth
component measures the overall number and hence the frequency of total
transactions and withdrawals in particular.

6 Mortgage loans

A component associated with lending and mortgage loans in particular. It presents a
strong positive correlation with mortgage balances and consequently high component
scores indicate customers with increased relevant balances

7 Credit card usage

The seventh component measures credit card usage, including total spending, purchases,
and payments

( continued overleaf )