Prediction of Customer Churn in Banking Industry

Abstract

With the growing competition in banking industry, banks are required to follow customer retention strategies while they are trying to increase their market share by acquiring new customers. This study compares the performance of six supervised classification techniques to suggest an efficient model to predict customer churn in banking industry, given 10 demographic and personal attributes from 10000 customers of European banks. The effect of feature selection, class imbalance, and outliers will be discussed for ANN and random forest as the two competing models. As shown, unlike random forest, ANN does not reveal any serious concern regarding overfitting and is also robust to noise. Therefore, ANN structure with five nodes in a single hidden layer is recognized as the best performing classifier.