An Architecture for smarter Decisions · Decision Management is about using predictive analytics,...

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Decision Management is about using predictive analytics, business rules and optimized strategies to make smarter decisions and eliminate the gaps between insight and action.

The FICO Decision Management architecture provides a common service-oriented foundation for rapidly bringing analytics-driven decisioning into more areas of the customer lifecycle—and for connecting decisions across it in ways that create more value for financial institutions and their customers. The new architecture enables IT organizations to help business units precisely balance risk and opportunity in the millions of day-to-day customer decisions and transactions that determine overall performance. It provides IT

with faster project implementations, easier integration of third-party products and more agile ways to help business units respond to competitors and market change.

This white paper presents an overview of the FICO Decision Management Architecture and its benefits to financial services institutions, followed by a detailed tour of the major components. It also discusses the current migration of FICO’s industry-leading decisioning applications and tools onto the architecture. As part of a

new Decision Management application suite, these interoperable solutions will bring clients richer, more powerful originations, customer management, collections & recovery, and fraud management capabilities than ever before, combined with increased configuration flexibility, simpler maintenance and lower total cost of ownership.

Number 15—March 2009

www.fico.com Make every decision countTM

The architecture described in this paper is the foundation for new releases of FICO Decision Management applications, such as FICO™ Falcon® Fraud Manager and FICO® Debt Manager™ solution.

Product roadmaps and similar marketing materials should be considered forward looking and subject to future change at FICO’s discretion. Future functionality, features or enhancements as shown are FICO’s current projections of the product direction but are not specific commitments or obligations.

An Architecture for smarter Decisions A common architecture for all FICO customer Decision Management applications helps financial institutions improve risk management and performance across the customer lifecycle

www.fico.com page 2

An Architecture for Smarter Decisions

insights » insights »

The Need for Software » Architectures to Evolve

The intensity of competition in financial services markets in recent years has put IT organizations

in the spotlight and under pressure. They are seen as the enablers, providing institutions with

the means to outdistance rivals by making smarter decisions, spending less and acting faster in

the face of both risk and opportunity. At the same time, IT organizations are themselves under

pressure to do more with less—to implement technologies that will supply more advantage,

quicker, despite constrained budgets.

The current global financial crisis multiplies these conditions and stakes many times over. While

some institutions are responding to adversity with retrenchment, others know that making

smarter decisions is more important now than ever before. Producing more with less is at the

very core of Decision Management.

Analytics-driven decisioning pinpoints where to focus constrained resources for the biggest

performance and competitive gains. It is the way to create efficiencies and cost savings that both

ease today’s budget pressures and help propel tomorrow’s growth.

For financial services IT organizations to continue moving ahead to meet rising expectations and

challenges, however, software architectures must evolve to facilitate the effort. The monolithic

systems that have so far brought improvements to particular areas of bank operations can’t

provide the agility needed in today’s markets nor the high return on investment from IT now

required. Banks can no longer afford long implementation time frames or constant IT

involvement in executing business responses to market change. IT organizations need the

means to empower business users to make many of these changes themselves, and efficiently

govern that process.

Another imperative for leveraging IT efforts is to reduce the current drain on resources from

maintaining disparate platforms across various areas of customer lifecycle decisioning—

expenditures that deliver limited net business return. IT organizations should be freed from the

necessity of building and maintaining the costly point-to-point interfaces currently required to

overcome lack of interoperability among in-house systems and between them and third-party

systems.

New software architectures based on common, standards-based components are needed to

allow IT to shift its focus from connecting systems to connecting decisions. By providing the

means to connect decisions from originations to collections as well as across business units,

IT will enable banks to decrease the overall risk and increase the overall value of customer

relationships—an expenditure that promises a very large net business return indeed.

“Look for opportunities to turn IT efficiency pressures into ways to improve organizational processes and procedures…Determine elements of competitive advantage and ensure that they are strengthened, not reduced.”

—Gartner 2008, IT Efficiency in Financial Services and Insurance

“The pressure to improve risk management is rising, since most FSIs have yet to implement an integrated approach to risk management across customers, products, and locations.”

—The TowerGroup Top 10 Financial Services, Sept 2008

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FICO is helping financial services IT expand its important role as a competitive enabler in today’s

tough business environment. We are bringing our advanced technologies and industry-leading

applications onto a new Decision Management architecture that allows IT to accelerate the

implementation of data-driven customer decisioning applications and generate more value

from them by connecting decisions across the customer lifecycle. Based on service-oriented

architecture (SOA) principles and adhering to industry standards, the new architecture also helps

IT simplify maintenance, since FICO decisioning applications from originations to collections are

incorporating the same core technologies and sharing common components.

The FICO Decision Management architecture also increases agility by enabling IT—and

designated business users—to modify decision logic quicker and more efficiently than ever

before, without affecting other parts of the applications. In fact, the new architecture advances

FICO’s efforts over the past decade to decouple decision logic from application code. We’ve

increasingly moved FICO’s applications toward increased separation and addressability of

decision logic, while providing the world’s leading business rules management system (BRMS)

to enable financial institutions to build their own decisioning applications.

The FICO » Decision Management Architecture

FICO Decision Management applications are built on the same core technologies, simplifying maintenance tasks and training requirements

The service-oriented approach facilitates integration of third-party products with decisioning applications

State-of-the-art decisioning capabilities can be layered onto existing systems, extending their lifespan and ROI

Policies and other business rules can be shared across Decision Management suite applications; rule updates made in one place are simultaneously propagated across all applicable decision areas

Single logical data model for all Decision Management applications and unified operational, analytic and reporting databases speed implementations, support data sharing and interoperability, and enable records to be updated once from a central location

The Decision Management architecture gives IT the flexibility to swap its own Data Services for those supplied by FICOapplications, and thereby locate data stores at any client-preferred location

A single, standardized interface provides access to more than a thousand financial services data and service providers

Traditional financial services software FICO Decision Management suite applications

Applications in different decision areas are built on disparate core technologies, multiplying maintenance tasks and training requirements

It’s often difficult and time-consuming to integrate third-party products with existing applications

IT has to engage in costly “rip and replace” when legacy systems are unable to meet new decisioning requirements

Policies and other business rules are often coded and maintainedin multiple places, resulting in redundant work and opportunitiesfor inconsistency and error Inconsistent data definitions and separate databases in use across the customer lifecycle slow application implementations, create barriers to data sharing and cause redundant work

Applications often dictate where data has to be managed, preventing IT from locating data stores based on organizational requirements and efficiencies

Point-to-point interfaces must be built and maintained for access to each third-party data or service provider

Financial services IT needs a new approach:

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Now, as FICO applications migrate onto the new architecture and become part of the new

Decision Management suite, they gain the full power and flexibility of this best-in-class BRMS—

completely integrated into interoperable solutions for originations, customer management,

collections and recovery, and fraud management.

Decision strategies in one area may check status and activity in other areas, such as an originations application checking to see if the applicant for a new line of credit has a current delinquency

Predictive models and other analytics can be imported directly into rules-driven decisioning processes for one or more Decision Management applications

Decision logic is decoupled from other application code and managed as business rules, so IT can make quick policy and process changes or empower business users to do it (using controlled Rules Management Applications)

Best-in-class “champion-challenger” facilities are available across all Decision Management applications for systematic testing and continual improvement of decision strategies

Consistent tools and frameworks can be used to facilitate the optimization of decisions across the customer lifecycle

All Decision Management applications share a consistent, automated means of capturing decision outcomes and systematically tracking them against predictions and strategies for performance management

Adaptive technologies can be layered onto existing models to increase their sensitivity to changes in the current production environment and maintain high predictive performance over longer periods

Traditional financial services software FICO Decision Management suite applications

Customer decisions sometimes don’t consider the whole picture, such as when a credit line increase is offered on one account while another account for the same customer is delinquent

Predictive models aren’t being used for decisioning as much as business units would like since deployment usually requires models to be recoded for each application’s operational environment

Responsiveness to competitive, market and regulatory change may lag because decision logic is intertwined with other application code and modifying it therefore requires reprogramming

Improving decision strategies is often a trial-and-error process because systematic methods for simulating, testing and comparing strategies are not available in all areas of the customer lifecycle Optimization could provide large competitive and performance gains, but its impact is limited because of the time and expense involved in applying the technology to decisioning

It’s difficult to evaluate the performance of predictive models and decision strategies since the context in which they were made is usually not recorded and tracking outcomes may requiretime-consuming, unreliable semi-manual methods

In dynamic markets, periodic retraining of predictive models may not be adequate to keep up with rapid changes in the production environment

IT clients need a new approach:

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The FICO Decision Management architecture brings financial institutions the key advantages

typically associated with SOAs:

Quicker response to change• . In general, SOAs accelerate organizational responsiveness

since the individual services making up the software can be modified independently of

each other. In the case of the FICO Decision Management application suite, the

power of this approach is manifest in the ability to quickly modify the logic driving the

Decision Services at the heart of our applications. Because decision logic is managed

separately from other application code and exposed for easy editing, financial institutions

can change their decisioning policies and processes as fast and frequently as necessary.

Managed authoring environments (version control, validation, testing, etc.) enforce

orderly change.

Less costly maintenance• . The ability to make these independent, self-contained changes

in decisioning logic so expediently—or empower business users to make them—reduces

the amount of time IT must devote to application maintenance. In addition, since all Decision

Management suite applications share the same software platform and middleware stack, IT

organizations have less technology to learn, deploy and manage, resulting in additional

efficiencies and cost savings. The Common Data Model and shared operational, analytic

and reporting databases save IT time by eliminating the need for ETL processes to move

data from one decisioning area to another. Customer records no longer have to be updated

in multiple locations; updates made in one location are simultaneously available to all of the

suite’s applications.

Some of the most significant advantages clients gain from the new architecture, however,

uniquely stem from FICO’s decades of leadership in analytics-driven customer decisioning.

Financial institution IT organizations can now help their companies achieve:

Higher performance through connected decisions• . With all FICO applications

sharing a Common Data Model and Decision Services layer, decisions can be coordinated

across the customer lifecycle. By understanding how decisions in one area, such as origina-

tions, affect those in another area, such as collections, financial institutions can create

decisioning strategies that boost the total lifetime value of customer relationships and

improve overall financial performance. (For examples of ROI, see the FICO Insights

white paper, “What’s the Payback on Connected Decisions?”)

Faster, easier introduction of analytics into decisioning processes• . All Decision

Management suite applications will provide design time tools for importing analytic

models directly into rules-driven decisioning processes—without reprogramming—for

rapid deployment in execution time Decision Services. FICO is also offering an expand-

ing range of ready-to-use models from pooled industry data to facilitate greater use of

predictive analytics in all areas of customer lifecycle decisioning. In addition, FICO™

Model Builder works with the application suite’s design time tools, accelerating develop-

ment and deployment of models built by clients or FICO custom analytic services.

More powerful analytics• . Easier analytic deployment enables financial institutions to

update their models more frequently to incorporate data patterns currently being seen in

production as well as the latest modeling techniques. The Common Data Model and shared

analytic databases also make it easier to deploy integrated models that combine customer

insights from multiple decision areas.

Advantages of a » Common Architecture for Customer Decisions

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insights » insights »Accelerated learning cycles• . The new architecture automates the capture of operational

decisions, data and outcomes—a task that has largely been performed outside of normal

application functionality with semi-manual methods. By making “closed-loop” decisioning

a basic feature of all FICO Decision Management suite applications, we speed up the

process of evaluating results and continually improving analytics and strategies.

In addition, the new architecture enables us to provide our clients with:

Even better Decision Management applications• . Innovative technologies and market-

leading features originally introduced for specific FICO applications are being generalized

to enhance functionality, wherever applicable, across all Decision Management suite

applications. For example:

. The advanced champion-challenger facilities of the FICO® TRIAD® adaptive control

system are being extended to originations, collections and fraud management.

. The highly configurable process orchestration of FICO® Capstone® Decision Accelerator for

originations will increase flexibility in collection and recovery to create and manage

decision flows.

. Data bureau and service provider integration capabilities from the FICO® Network will

provide all applications with an installed or hosted single point of connection to a wealth

of financial services resources for better decisions and more efficient operations.

. A recent enhancement to FICO™ Falcon® Fraud Manager incorporates an adaptive

engine for adjusting scoring to fraud instances currently happening in the production

environment. This technique of adding an adaptive engine to an existing model may

be applicable in other decisioning areas. It could enable collections scoring and

strategies, for example, to reflect changes in delinquent account behavior in response to

collection actions.

Accelerated product enhancements and innovations• . With the ability to modify

application service components independently and efficiently, FICO can update

applications more frequently. Our clients gain earlier access to the industry’s most innovative

decisioning technologies.

Smooth, orderly migration to the new architecture• . The compartmentalization of soft-

ware into discrete, callable services means that an entire application need not make the jump

to the Decision Management architecture all at once. Parts of applications can be transitioned

at the right time to ensure the best experience for FICO clients.

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The FICO Decision Management architecture is a services-oriented architecture (SOA). It

consists of interoperable components that have well-defined boundaries, are wrapped in

standards-based interfaces and can be called as services by other application components. More

specifically, these services are logical groupings of operations, whose interfaces and bindings

can be defined, described and discovered (at both design and execution times) by XML artifacts

and support direct interactions with other software applications and services via XML-based

messaging and other standards-based techniques.

At the center of the diagram below, key services are shown in an execution time Services Layer.

FICO applications are typically invoked within a client transaction processing stream

(real time or batch). These invokable application components fall into two major categories:

Decision Services and Software Services.

Decision Services are the parts of an

application that make decisions—about

whether or not to approve a new account

application, about how much to raise

a credit limit, about which delinquent

customers to call, about the likelihood

a transaction is fraudulent. They can be

called by any application component,

including Software Services (see below)

and other Decision Services.

This area of the architecture is where

FICO innovation is focused. These

new Decision Services incorporate our

unmatched expertise in analytics-driven

decisioning for financial institutions.

The technology is based on the FICO™

Blaze Advisor® system, the industry-

leading business rules management

system.

Decision Services are themselves made up

of interoperable services, each with a well-

defined boundary and standard interface.

Performance management services, for

example, can be invoked as part of a

Decision Service that delivers a fraud score

as well as another Decision Service that delivers a loan workout recommendation—providing

a consistent, reliable means to evaluate the effectiveness of analytics and decision strategies on

operational outcomes and improve them over time.

Software Services include the system management and security infrastructure required by all

enterprise-class applications and the middleware enabling interoperation of SOA components

on a global scale. They also include Business Services specific to individual FICO applications—

such as operations that schedule a promise to pay or operations that call a Decision Service for a

credit line assignment, then implement that decision through a customer treatment.

Architectural Overview »

Portal

CallingApplication

Identity Management

System Management

. . .

DESIGN TIME EXECUTION TIME CLIENT ENVIRONMENT

Common Browser-Based GUI

Strategy Design

Services Layer

Common Data Model

ModelManagement

Analytics OLAP/Reporting Operational Data

RuleManagement

Simulation &Optimization

Con�guration & Deployment

Rules &

Analytics

Client Data Store

3rd Party Data

Data Access Layer

Software ServicesDecision Services

OrchestrationBusiness Process

Management

Case Management

Business Services

Security

Enterprise ServicesPerformanceManagement

Learning

Rules ModelsAdaptiveEngines

Service Invocation

Event Management & Monitoring

Provider Access

Enterprise Service Bus

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In Software Services we are building rich application functionality, incorporating FICO IP and domain

expertise, on top of industry-leading middleware platforms and implementing to standards to

ensure compatibility with third-party products. Our first set of product releases will be based on IBM

WebSphere, providing FICO clients with the proven scalability, reliability and manageability of that

platform as well as its integration facilities for linking new services-oriented applications with legacy

systems and into larger business processes. Leveraging WebSphere also means that we are able to

concentrate FICO development resources on innovating decisioning technologies, where we add

the greatest value for our clients.

At the bottom of the diagram is the Common Data Model, encompassing operational, analytic

and reporting databases. FICO has built a single logical data model spanning the financial services

customer lifecycle, from which are generated the Data Services for all Decision Management suite

applications. The data model can be extended through user-definable tables or XML schemas.

The Data Access Layer provides access, through Data Services, to Decision Management suite

application databases. It also provides access, through data federation techniques, to client

databases and, through a common standardized interface, to more than 1,300 third-party financial

industry data sources and service providers.

To the left of the execution time layer stack is the design time environment. It encompasses

Strategy Design tools for modifying the decision logic executed by Decision Services as well as for

configuring other aspects of application functionality, such as workflows and queues. The FICO™

Blaze Advisor® system provides the foundation for this integrated development environment—so

all FICO Decision Management suite applications will incorporate the full power and flexibility of

the world’s leading BRMS. Clients can also add optional tools, such as FICO™ Model Builder, used

by FICO’s own analytic teams, and industry-leading optimization engines, into their design time

tool box.

How do these service components interoperate inside a Decision Management application?

The next page provides an example of originations decisioning. The processing of a new credit

application is depicted in a high-level service diagram, which is mapped to the architectural diagram

to show the key participating services.

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Sample decision process: Credit application approval

Where it’s happening (key participating services):

What’s happening:

Agent or online applicant requests credit line

Originations Case Management

2 Collections Case Management

3

Fraud ScoringDECISION SERVICE 4

5Credit ScoringDECISION SERVICE

Originations ScoringDECISION SERVICE

6

Originations ApprovalDECISION SERVICE 7

Originations Case Management

8

Fraud Case Management

4a

Application Data ValidatorBUSINESS SERVICE

1

Credit Application COMPOSITE BUSINESS SERVICE

Create case

Check for delinquency

Score

Score

Score

Validate data

Publish

Decide/Assign credit limit

Submit application, Deliver decision

Data ValidatorDECISION SERVICE

Credit Application, a composite business service, receives request for new credit line and orchestrates response:

1. Calls the Application Data Validator business service, which submits the application data to the Data Validator decision service. It receives back a successful validation or a failure with reason codes. The Credit Application composite service uses these codes and business rules to generate a request for missing or corrected data back to the application orginator.

2. Calls Originations Case Management to create a new application case.

3. Checks with Collections Case Management (which is Business Process Management driven) to see if the applicant has a currently delinquent account.

4. Calls the Fraud Scoring decision service to see if the applicant has any accounts with recent fraudulent activity. Application Fraud Models and identity theft analytics may also be invoked.

4a. Scores above the client-defined threshold generate a fraud case, which is directed by business rules to the queue of a fraud analyst.

5. Calls the Credit Scoring decision service, which pulls credit bureau scores via the Data Access Layer’s data exchange services.

6. Calls the Originations Scoring decision service, providing it with application data and component scores. Receives back an approval score.

7. Calls the Originations Approval decision service, providing it with the approval score. Based on the score and business rules, the service generates a decision (approve, decline, request more information, approve with conditions, etc.) and assigns an initial credit limit.

8. Publishes the decision event and context, which is received by all interested parties, including Originations Case Management, Performance Management and unified operational, reporting and analytic databases. Also initiates actions, such as generation of approval message to the credit application originator.

Portal

CallingApplication

Identity Management

System Management

. . .

DESIGN TIME EXECUTION TIME CLIENT ENVIRONMENT

Common Browser-Based GUI

Strategy Design

Services Layer

Common Data Model

ModelManagement

Analytics OLAP/Reporting Operational Data

RuleManagement

Simulation &Optimization

Configuration & Deployment

Rules &

Analytics

Client Data Store

3rd Party Data

Data Access Layer

Software ServicesDecision Services

OrchestrationBusiness Process

Management

Case Management

Business Services

Security

Enterprise ServicesPerformanceManagement

Learning

Rules ModelsAdaptiveEngines

Service Invocation

Event Management & Monitoring

Provider Access

Enterprise Service Bus

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Strategy Design

The Strategy Design Layer provides design time tools for modifying the decision logic that

drives Decision Services as well as for configuring Business Services, such as workflows and case

management queues. There are two levels of design time tools:

A complete integrated development environment (IDE) is provided for IT and other technical 1.

users. The IDE is based on the Eclipse open source development platform and the FICO™

Blaze Advisor® system, the world’s leading business rules management system. It provides

extensive control and flexibility for determining how Decision Services operate, and for adding

predictive analytics and optimization to them. It also provides the means to create new

Decision Services.

Prebuilt browser-based Rules Management Applications (RMA) are shipped with each application 2.

to enable nontechnical users to quickly modify business rules and workflows without need for

IT assistance. These RMAs are easily modified and updated, and new RMAs can be created

from the IDE.

Underlying both levels is a complete set of management controls for enforcing the orderly

processes that must balance and support flexible strategy design across large enterprises. These

include an XML-based rule and model repository that performs tracking, version control and release

management as well as tools for testing rules and simulating their impact on decisions.

Model management:The architecture provides a single environment spanning the customer lifecycle for implement- •

ing predictive models and other types of analytics in decisioning processes. It also incorporates

consistent, systematic means for evaluating the accuracy of their insights (see Performance

Management below).

The IDE enables analytic models to be imported directly into rules-driven decisioning processes, •

which can be deployed as Decision Services into virtually any operational environment.

Models imported in PMML (Predictive Model Markup Language) format can be viewed and •

edited in the IDE. This includes custom models produced with FICO™ Model Builder. This

tool, used both by our own analytic teams and by clients developing their own analytics,

provides a comprehensive set of modeling capabilities (linear regression, logistic regression,

neural networks, scorecards, segmentation technology, clustering, automated characteristic

development).

FICO is offering an expanding choice of pooled models that can be readily added to Decision •

Management applications for increased predictive insight.

Rule management:IDE authoring tools include the Blaze Advisor Structured Rule Language (SRL) as well as addition- •

al methods of representing rules and rulesets (tables, decision trees, scorecards). Rule authors

may also use a graphical XML-based tool to construct ruleflows (procedural definitions of rule

execution sequences). Templates and pattern definition (reusing rules based on class member-

ship, set membership, data attributes or a combination of these) increase design efficiency as

well as execution performance. Advanced features include defining “functions” that control

looping, incorporate Java methods or use calls to external processes, and creating rules that fire

based on conditional events and goal-driven (“backward-chaining”) reasoning.

Detailed » Architectural Tour



insights »

Business Model Object Adapters (BOMAs) scan client systems for existing object models and •

other data definitions and create corresponding object/property references to them for

use in rules.

Automated verification and validation tools use algorithms to highlight semantic errors, •

inefficiencies in rule architecture and areas of potential conflict. Tests can be applied selectively

using filters and efficiently reused by saving test instances.

The XML-based rule and model repository supports rule querying, filtering and search-and- •

replace based on user-defined management properties or via Java APIs to match against a wide

variety of attributes.

IDE tools for creating RMAs include templates and a wizard that generates the standalone end- •

user interface. There are also controls for managing concurrent access by multiple users, tracking

instances and propagating updates to all instances.

Rapid deployment into production environments is achieved by automated utilities that create •

and distribute all the necessary files for the J2EE environment. Rules can subsequently be

updated on production systems without interrupting operations.

Simulation and optimization:All Decision Management suite applications will provide a fully integrated capability for running •

“What if?” simulations. These tools enable business users to make quick projections of the

likely outcome from making proposed changes to rules, scoring thresholds and other decision-

ing elements, as well as to compare alternative scenarios.

More advanced levels of simulation capability are available with the optional FICO™ •

Decision Optimizer. This tool, used by FICO analytic teams as well as by client IT and

analytics groups performing their own optimizations, provides the means to pinpoint optimal

individual customer decisions across very large portfolios. It enables users to rapidly simulate

large numbers of optimized strategy alternatives and “stress test” their strategies against

economic and market uncertainties.

A wide range of optimization engines are available through the FICO™ Xpress Optimization •

Suite, which is also compatible with the Decision Management suite IDE. These engines can be

used to address virtually any business problem where there is a need to find the best solution

(a maximum or minimum outcome) within a defined set of constraints among numerous

feasible, difficult to compare options.

Common Browser-based GUI:

A common set of standard Internet technologies are being used to render client-configurable user

interfaces for Decision Management suite applications.

The architecture will incorporate WebSphere Portal Server to enable clients to render composite

application interfaces. IT developers will be able to create integrated user experiences combining

elements from multiple Decision Management suite applications as well as other client applications.



insights »

Services Layer

The Services Layer comprises Decision Services as well as Software Services, both of which are

described in detail below. Underlying IBM WebSphere components orchestrate the interoperation

of services with each other as well as with external applications, and manage events generated

by services.

Service invocation:These technologies are used by application services (or external client systems) to call other

application services (Decision Services, Business Services and other Software Services) and receive

back the results.

Multiple types of invocation are supported:•

. Where a high-performance interface is required, the service performs as an “embedded”

component, invoked through programmatic (Java methods, Cobol procedures, etc.) calls.

. Where looser coupling is desirable, the WebSphere Enterprise Service Bus (ESB) provides an

SOA interface via standards-based (WS-*) web services. The ESB, which has a built-in JMS

(Java Message Service) engine, supports both synchronous and asynchronous execution.

Because the WebSphere ESB can also encompass JMS/MQ delivery mechanisms, it facilitates the •

integration of FICO Decision Management suite applications with client core banking

systems and other systems outside of J2EE environments. WebSphere Process Server, which is

built upon the ESB functionality, provides Adapters (e.g., WebSphere Adapter for SAP) that further

increase integration options for legacy enterprise systems (see Business Process Management

below).

Running on the WebSphere Application Server, which incorporates sophisticated clustering, •

load balancing and a high-availability manager, the Services Layer handles very large production

volumes in both real-time transactional and batch decisioning. (See the scalability discussion

under “Software Services” below.)

Event management and monitoring:These technologies are used by application services (Decision Services, Business Services and •

other Software Services) to publish events.

Published events can be consumed by various performance monitoring components, including •

the Decision Management suite’s unified analytic data mart (see “Common Data Model” below)

for decision performance events and the WebSphere Business Monitor for tracking key

performance indicators and other metrics derived from business processes.



insights »

Decision Services

Decision Services perform execution time decisioning processes. These processes, which generally

occur within a client transaction processing stream, can be performed in real-time or batch mode.

Batch decisioning will usually be assisted by application-specific Business Services (see below)

that manage submissions to and results from Decision Services. As with the Strategy Design Layer,

where decision logic is created and maintained, the Decision Services Layer is based on FICO™ Blaze

Advisor® system, the industry-leading business rules management system.

Orchestration:Orchestration controls the overall set of logic within a Decision Service. •

It coordinates the internal sequencing of and interactions between Decision Service •

components (rules, rulesets and ruleflows, models, thresholds, calculations, optimization

engines, adaptive engines, etc.) based on the decisioning processes defined in Strategy Design.

In the process of invoking rules and models, orchestration checks the Rules and Analytics •

Repository for the correct version of rule definitions and analytic algorithms as required by

each decisioning process.

Learning:Advanced champion-challengers facilities are being extended across all Decision Management •

suite applications. These provide business users with a systematic method of learning through

controlled contests between the current decisioning strategy (“champion”) and alternative

strategies (“challenger”) on statistically significant, randomly sampled production populations.

Business users can immediately promote a winning challenger to champion status, with “push •

button” roll outs across larger production populations.

Rules:The high-performance rules engine can operate in different ways when executing individual •

rulesets within decisioning strategies:

. As an inferencing engine, it determines which rules to execute when based on rapid

condition-matching of tracked patterns of rule interdependencies. Inferencing is performed

by an optimized algorithm, known as Rete III, available only from FICO, which benchmarks

more than 300% faster than competitive engines at the highest levels of complexity.

. As a sequential engine, it executes rules or rulesets one after another. This mode is useful

where a limited number of rules are invoked over and over for large numbers of data

records, and the output from execution of one rule is unlikely to change the conditions for

execution of other rules.

Models:Predictive models—from simple scorecards to advanced neural networks—can be executed as •

part of batch and real-time Decision Services.

FICO’s patented dynamic profiling is used with some types of predictive models to enable •

recognition of typical and aberrant behavior patterns. This flexible technology can be extended

to a wide range of entities interacting in financial systems (cardholders, merchants, ATMs, mobile

phones, point of sale devices, etc.).



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Adaptive engines:FICO is innovating adaptive technologies to increase the responsiveness of predictive •

analytics to changing production environments. These may include an adaptive model layer

added onto an existing model or the ability for a single model to self-calibrate by dynamically

scaling variable values.

Performance management:A basic feature of all Decision Management suite applications will be a consistent, reliable, •

automated means of capturing decisions and the context in which they were made, so that both

immediate and long-term outcomes can be tracked and evaluated against them.

Every time a Decision Service delivers a decision (e.g., score, recommended action, etc.), it binds •

a set of time-stamped data to it. This data includes the decision strategy (rules, predictive

models, optimizations) that produced the decision as well as the values of key decision and/or

predictive variables (e.g., account balance, days outstanding) at the moment the decision

was made. The Decision Service publishes this information as a performance event, which is

consumed by the Decision Management suite’s unified analytic datamart (see “Common Data

Model” below).

As client-specified outcomes (e.g., avg. balance 6 months after credit limit increase decision) •

are captured by the Decision Management application or retrieved from other client systems

via the ESB, they are directed back through the originating Decision Service and published with

the corresponding decision context for consumption by the unified analytic datamart.

In this way the time-history data expands to encompass long-term decision results, and financial

institutions can pull from it a broad range of recordsets for analyzing decision performance.

Software Services

Software Services include application infrastructure, provided by IBM WebSphere Application Server

and other WebSphere platform components. FICO application IP is built on top of this infrastructure

in the form of preconfigured, client-modifiable/extensible business processes, services, workflows

and user interfaces.

WebSphere Application Server Network Deployment provides a secure, reliable SOA runtime

environment that scales easily to handle large transaction volumes. The high-availability framework

distributes workloads across multiple servers through sophisticated load-balancing, clustering

and edge-based caching, and eliminates single points of failure through peer-to-peer failover for

applications and processes.

Business process management:WebSphere Process Server provides a BPEL engine for service-oriented execution of modeled •

business processes. It enables services performed by Decision Management suite applications

to be coordinated with services performed by other systems in comprehensive business

processes aimed at high-level enterprise objectives.

The server supports direct deployment of executable process models from WebSphere •

Integration Developer and WebSphere Business Modeler, as well as imported BPEL processes.

WebSphere Adapters and WebSphere Message Broker extend the flexible connectivity •

infrastructure of the WebSphere ESB to a broad range of legacy enterprise systems.



insights »

Case management:Case Management Services are specific to individual applications but built atop a common set of •

case management functionality.

. Functionality encompasses both intervention case management (e.g., underwriting, identity

authentication interviews, transaction authorization, etc.) and investigative case manage-

ment (e.g., fraud referrals).

This common foundation facilitates the linking of cases across the customer lifecycle. For •

example, first-person credit abuse cases can be shared by or passed between collections and

fraud management operations.

Case Management Services interoperate with Business Process Services to smoothly coordinate •

human tasks with automated ones.

Decision Services are invoked by Case Management Services to support human judgment, •

improve task efficiency and reduce the cost of interventions and investigations.

Business services:FICO has built its extensive financial services IP into Java-based business services. These are •

logical groupings of operations that perform a specific business function, usually for a specific

Decision Management suite application. For example, a service that schedules a promise to pay

from a delinquent customer would: take customer ID, amount to pay and promised date

as input; access the Customer Data Service for the necessary additional information to validate

the request; execute the business rules to create the promise to pay and schedule its follow up;

and access the Payment Data Service to store the information.

. Composite services orchestrate several Business Services to achieve a business objective.

For example, in collections, when a Decision Service assigns a treatment to a delinquent

account, an aggregate Business Service might be initiated. This service could schedule a call

to the customer, invoke another Decision Service to guide the collector in real-time to

obtain the best possible promise to pay, schedule that promise, wait for payment, and then

initiate a follow-up action when the promise is fulfilled or when a time event indicating a

default is triggered.

Security:WebSphere Application Server provides a proven security-rich infrastructure and extensive •

support for open-standards-based Java security standards, including:

. Java Authentication and Authorization Service (JAAS)

. Java 2 Platform Security model

. Java Secure Socket Extensions (JSSE)

. Common Secure Interoperability (CSI), Version 2

A Cryptography Service, based on the Java Cryptography Extension standard, supports •

pluggable cryptographic algorithms (e.g., AES, DES, Triple DES) and key management systems

(e.g., WebSphere Key Management System, Keystore Key Management System).

The pluggable security architecture also enables clients to add their own security features, such •

as third-party authentication software and credential mapping facilities.



insights »

In addition, the architecture supports the full range of WS-* security standards, including:•

. WS-Security 1.1 to encapsulate XML within a SOAP document

. WS-Security Policy 1.2 to define a standard way of securing messages exchanged between

web services and clients

. WS-Secure Conversation 1.3 to implement the policy from WS-Secure Policy

. WS-Trust 1.3 to provide security tokens based on the information from WS-Secure

Conversation

. WS-Federation 1.1 to implement the authentication from WS-Trust

Enterprise services:FICO is using standard interfaces for integrating with enterprise services provided by third- •

party products clients already have installed. These include LDAP (Lightweight Directory

Access Protocol) for directory services, JMX (Java Management Extensions) and JSR 77 for system

management services, and UDDI (Universal Description Discovery and Integration) for web

service discovery services.

For clients that do not have products currently installed, there is an option to use the IBM Tivoli •

and WebSphere products to provide these capabilities.

Data Access Layer

The Data Access Layer consists of the Data Services that manage access to the unified •

operational, analytic and reporting databases for Decision Management suite applications.

The layer also provides access to data stored externally, both in client databases and third-

party sources.

Each Data Service manages a set of logically grouped database tables and/or XML data schemas. •

A Customer Data Service, for example, stores and retrieves information such as customer ID,

name and address. A Payment Data Service stores and retrieves payment and payment history

information. In addition to performing basic CRUD (create-retrieve-update-delete) functions, it

carries out specialized operations to optimize access for a specific business purpose, such

as retrieving only the necessary data for a particular type of collections contact.

Data Services are accessible to all Decision Management suite applications via a standard defined •

interface (“contract” consisting of data definitions and invocation mechanisms).

Clients can configure the Data Access Layer to designate which attributes within the Common •

Data Model are to be encrypted via the integrated Cryptography Service (see “Security” above).

Access to client databases is through SOA federation methods.•

. Clients may choose to replace a supplied Data Service with their own Data Service that

uses their databases. As long as the Data Service contract is adhered to, Decision Services

and other application components using the Data Service are unaware of and unaffected

by where the data actually comes from.

. Data Services can be used with off-the-shelf data federation products (often referred to as

“Information as a Service,” or IaaS) for integrating legacy data sources.



insights »

Access to third-party sources is through FICO data exchange services, a secure, single-point •

of access to a diverse range of data and service providers. The basic exchange infrastructure is

being incorporated into all Decision Management suite applications. Clients select from a menu

of third-party providers those they want to incorporate into their application

decisioning processes.

. The single point of interface is enabled by a Common Data Access Component linking

to some 1,300 networked data sources and service providers for the financial services indus-

try, including credit bureaus and collections agencies. Normalization of data via XML-based

schemas (e.g., credit report, telecom provider data) eliminates the need for clients to be

concerned with each provider’s format and transport method.

. A process engine based on BPEL (Business Process Execution Language) manages requests

for data, including access, parsing and normalization. It supports real-time data access

as well as preconfigured frameworks for batch exchange of job data (e.g., for collections

agency outplacement).

. The Data Exchange is available as an installed service component or as a hosted service

where FICO provides full security and reliability infrastructure. The two implementation

modes have parallel components wrapped in the same SOAP envelopes written in Java.

. In some cases, clients can choose to receive data used for scoring in the form of preloaded

calculated characteristics from FICO’s analytic characteristic libraries. Custom

characteristics built by clients using strategy design tools can also be loaded with third-

party data through FICO data exchange services.

. Templates based on SOA standards such as BPEL, XML and XSLT (Extensible Stylesheet

Language Transformations) are being provided to facilitate the creation of additional third-

party provider “plug in” interfaces.

Common Data Model

The Common Data Model defines the data and data relationships used by the Data Services in

the Data Access Layer. It provides a single logical data model shared by all Decision Management

suite applications. It also comprises the data objects generated from the logical model and their

corresponding database implementations.

A “single source of truth” logical data model spans the customer lifecycle. It enables consistent •

data definitions and unified operational, analytic and reporting databases shared by all Decision

Management suite applications. Common definitions and databases increase efficiency, since

data need be loaded and updated only once for use by multiple applications, and new suite

applications can therefore be brought online quickly. The shared model also supports the

development and deployment of integrated analytics (models that analyze data from more

than one decision area) and reporting that spans the customer lifecycle. It is essential for

connecting decision strategies in originations, customer management, collections and recovery,

and fraud management for better overall results.



insights »

From this single logical model are generated both the Java classes representing Data Objects •

and the DDL (Data Description Language) scripts for all supported database platforms. Because

these artifacts have one common source, there is 100% consistency across Oracle, Microsoft

SQL Server, DB2 UDB (Linux, Unix, Windows), IBM DB2 for Z/OS (mainframes) DB2 for i (midrange)

database implementations.

Clients can extend the Common Data Model through user-definable tables and/or the addition •

of client XML schemas. A single query can retrieve records across both relational database tables

and XML schemas. Once added, these data model extensions are available to all Decision

Management suite applications.

The Common Data Model integrates with a Software Service that manages text localization •

based on ISO country and language codes. It includes utilities for importing and exporting

localized text via standard interchange formats such as XLIFF (XML Localization Interchange

File Format).

Audit control is provided by a logging Software Service, which audit-stamps selected changes to •

the Common Data Model, such as users updating customer records. A history service keeps

track of the sequence of changes to database entities.

The Insights white paper series provides briefings on research findings and product development directions from FICO. To subscribe, go to www.fico.com/insights.


insights »

For more information US toll-free International email web +1 888 342 6336 +44 (0) 207 940 8718 [email protected] www.fico.com

Fair Isaac, FICO, Falcon, Debt Manager, TRIAD, Capstone, ScoreNet, LiquidCredit, Blaze Advisor and “Make every decision count” are trademarks or registered trademarks of Fair Isaac Corporation in the United States and in other countries. Other product and company names herein may be trademarks of their respective owners. © 2009 Fair Isaac Corporation. All rights reserved.2536WP_EN 05/09 PDF

Conclusion » FICO’s Decision Management architecture helps financial services IT organizations meet the

unprecedented challenges they face in today’s economy and credit markets. With a common SOA-

based architecture for decisioning applications across the financial services customer lifecycle, IT can

speed implementations and upgrades, simplify maintenance and training, and gain more efficiency

and value from data, technology and analytic insights. The services-oriented approach makes it

easier to integrate third-party software with Decision Management applications and enables IT to

avoid the costly prospect of “ripping and replacing” legacy systems. Instead, adjunct decisioning

services can be used with these core systems,

enabling them to continue to operate and

produce ROI in today’s world of real-time

analytics-driven customer interactions.

The new architecture offers even more potent

prospects for increasing ROI and competitive

advantage, however. It’s now easier than ever

before to introduce more and more powerful

analytics into customer decisions. As a result,

financial institutions can start to bring

advanced risk management techniques into

every area of the customer lifecycle.

The next step is to connect these risk-

managed decisions across the customer

lifecycle.

Connected decisions create a wide-angle

view of the business, revealing problems

and opportunities invisible from traditional

functional perspectives. Here is where FICO

sees the next frontier of substantial new

productivity, efficiency and profit gains.

Here is where institutions adopting a unified

approach to Decision Management will have

opportunities to outdistance competitors by

leaps and bounds.

The FICO Decision Management application suite:FICO is building a suite of applications on our Decision Management architecture. This

suite promotes better Decision Management across the financial services customer

lifecycle, by bringing our best-in-class solutions for specific decisions onto a common

platform. The applications in this suite include:

Origination solutions, including FiCO® Capstone® Decision Manager, FiCO® » Capstone® Decision Accelerator, FiCO® Capstone® intelligent Data Manager and FiCO® LiquidCredit® decision engine.

Customer management solutions, in particular the FiCO® tRiAD® adaptive » control system used to manage two-thirds of card accounts worldwide.

Collections and recovery solutions, such as FiCO® Debt Manager™ solution » and the FiCO™ Recovery Management system™.

Fraud solutions, including the industry-leading FiCO™ Falcon® » Fraud Manager.

Explore this topic:Read white papers on FiCO’s Connected Decisions approach at »

fico.com/insights

View videos and podcasts at » fico.com/techtalk

Join thought leaders at our FiCO™ World conference—see information at » fico.com/ficoworld

Download a trial version of the FiCO™ Blaze Advisor® business rules » management system at decisions.fico.com

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