What is Term deposits?
A term deposit involves depositing money with a bank or financial institution for a predetermined period. Various time frames are available, typically ranging from 1 month to 5 years. Throughout this fixed term, the funds remain with the bank and cannot be withdrawn. While the notion of keeping money locked away may seem disadvantageous, term deposits often offer higher interest rates compared to regular savings accounts.
This advantage becomes particularly notable when global interest rates are high, making term deposits a more appealing choice for savers seeking greater returns on their investments.
Term deposits provide a predictable and stable return on investment, making them suitable for conservative investors seeking capital preservation and a known rate of return over a fixed period. They can be an effective tool for saving money, achieving financial goals, or diversifying investment portfolios.
What Factor can Affect the Decision of Making a Term Deposits?
In this post, I will focus on some of the variables that can affect the decision to subscribe to a term deposit. To achieve this, I am going to do some data visualization using the Bank Marketing Dataset from the UCI Repository.
For more information regarding the UCI Bank Marketing Data.
To summarize the observation made from the figure below:
- Most people who subscribed are between the age of 25-35
- People with administrative, blue-collar, or technician jobs are more likely to subscribe to term deposits
- People with higher education levels tend to subscribe to term deposits more
- Seems like people like to subscribe to term deposits when interest rates are very high or very low
Age
Below is the age distribution for the clients that were contacted by the bank. As we can see from the figure, the data is slightly right-skewed, meaning most people who are contacted are between 30-50 years old. The red bars in the figure represent the number of people who agreed to a term deposit, and it seems like people who are between 30-35 years old agreed to a term deposit subscription the most.
The figure itself is unimodal, and the median age of the people contacted is 37 years old. From the violin distribution plot, it seems to suggest that people who were contacted after the age of 70 could be potential outliers.
Interest Rate
The interest rates are an interesting one, I was expecting when the interest rates are high, there would be more people to subscribe to a term deposit. Very interesting to note that the distribution of people subscribing to term deposits seems to be on the end of each side. There is almost no one subscribing to the term deposit when the interest rates are between 2-4%.
If we focus on only people who are subscribed to a term deposit, we can see multiple prominent peaks in the histogram. Many people chose to subscribe to a term deposit at lower interest rates compared to a higher interest rate.
Consumer Price Index
The consumer price index is the measure of the cost of goods and services, this number is obtained by comparing the current price of cost to some predetermined time period. As the CPI values increase, it means goods cost more, and fewer people buy them vice versa. Below are the CPI values plotted by month from March to December, the values seem to fluctuates within a 1-2% range.
The figure below shows the interest rate plotted against the CPI values. It seems like when the interest rate increase, CPI values also increase. The only exception was in September when the interest rate plummeted.
Job Type
The people who were contacted the most are people with administrative jobs. The data set did not clarify what kind of jobs are administrative jobs. It seems like people with administrative, blue-collar, and technician jobs are contacted most by the bank.
In terms of term deposits, more people with administrative jobs are subscribing to term deposits. Second place followed by people with technician jobs.
Education Level
Most who were contacted by the bank have a university degree, followed by a high school diploma. It is interesting that there are still quite a big proportion of people without a high school diploma, this is even more than professional courses.
Well, it seems like the highest amount of people who agreed on subscribing to a term deposit have a university degree, next followed by a high school diploma. Although, the proportion of people with basic 4 years and basic 9 years of education agreeing to subscribe to a term deposit compared to professional courses seems to be quite high as well. There seems to be an association between education level and subscribing term deposits.
Outcome
The outcome of the number of people subscribing to term deposits can be found in the figure below. We can see that the number of people who agreed on subscribing to a term deposit is way less than the number of people declining to subscribe to a term deposit.
As with many telemarketing, the majority of the people who were called will most likely decline due to a variety of reasons, this is no exception. From the figure below, we can see many people who were contacted declined to subscribe for a term deposit. In this case, we have an imbalance of outcome, and the next part of the post would be to use some kind of machine learning technique to predict the outcome. To make it so the model has a better prediction, I will have to come up with ways to combat this imbalance.
