As financial technologies become more complex, credit unions must design their business and data models around the member.
The internet continues to send waves throughout a once calm financial services industry. Historically, credit unions served members who regularly visited a local branch. Getting to know individual members was the norm. The “good old days” (as those who are uncomfortable with change might see them) are over. Digital banking channels and innovative business systems have changed everything. Now, with gigabytes of data being produced daily by even the smallest credit unions, effective modeling has become vital. Developing business and data models to best serve members has become an essential part of every credit union’s mission.
The following 6 steps should be followed to develop member-centric models:
1) Analyze Membership Demographics
In order to develop any model, the designer must be intimately familiar with its purpose. When building a car model, the designer must understand the purpose of the vehicle being creating. If the car is designed for high gas mileage, the design will be much different than a vehicle that needs to haul heavy items. Learning more about the needs of current (and potential) members is the same concept. Gathering data on age, gender, employment, income, current product portfolio, and other relevant information will allow leaders to visualize their members’ needs. This insight will establish the foundation for the credit union business model.
2) Think Like a Member
In order to develop the best business model to serve members, credit union leaders must empathize with members. They must “walk in their shoes” and use the credit union’s products and services to determine what could be improved. The slang, “eating your own dog food” applies to credit union leaders when designing a business model. By taking out a loan, maintaining an active checking account, and signing up for online banking, leaders will experience the credit union in action. Knowing what the credit union does for members will allow them to construct an excellent business model.
3) Adhere to Cooperative Principles
Following the 7 cooperative principles should guide leaders when developing a business model. Without these guiding principles, credit unions may be influenced by banks and other financial institutions. The cooperative model has clearly been proven to effectively serve members. If these principles are not incorporated into the business model, new employees (who usually come from the banking industry) may slide back into the banking mold. To firmly communicate the cooperative values, these principles should be baked into every credit union’s business model.
4) Study Business Processes
Understanding every business process is essential in developing a business model. Business processes are where business meets data. They put the business model into action. Any discussion about business strategy should include business processes. Thinking about how to improve business processes is the most effective way to build a stronger credit union. Business models should incorporate all business processes to avoid creating departmental silos. A member-centric view of the credit union’s business processes will establish effective analytics for improved decision-making.
5) Establish Business Rules
Business rules determine how any business functions. There must be a clear set of business rules that govern all business processes of the credit union. Documenting these rules and agreeing how each process should be governed is an area where IT and business must communicate clearly. Once the business rules have been documented for each business process, the credit union can begin discussing how to synch the business model with an analytic data model (ADM) which integrates all the business systems. Establishing clear business rules for each process also means that data should be defined by the business. Many credit unions make the mistake in thinking that data should be solely managed by IT. While IT must manage and protect the servers that data resides on, it is the role of the business leaders to clearly define business rules. Without clearly defined business rules, confusion will plague a credit union no matter how much they invest in analytics tools. Clearly defined business rules allow a credit union to focus on members.
6) Build the Analytic Data Model (ADM)
Once the previous five steps have been finished, it is time to develop an ADM that will give decision makers the best analytics. This is where the marriage of the business model and ADM begins. After these models have been established, credit union leaders can begin gathering insights from analytics on all aspects of the business. The business model must lead the ADM. When the business decides to make a strategic shift, it affects the entire credit union. Therefore, the models must continuously change. First, the business model must be altered to reflect the changes of a new strategy. Then, the ADM must be tweaked to reflect these changes. If the two models are not kept in sync, the analytics will lose integrity and larger data silos will erect between departments. Syncing the two models will give credit unions a strong foundation for enterprise big data and analytics.