A frequently asked question in the credit union movement is, “what is the data most credit unions have that they should be gathering, monitoring and reporting?”
In short, all of your data can be a critical component in gaining valuable insight into your members and optimizing business practices. The big question is . . . How accessible, comprehensive and useful is the data?
The Most Beneficial Data is Integrated Data
Individuals using the services of credit unions interact with different systems depending on the service they use. For example, they may use a credit card, maintain a checking account and make payments on a loan through the credit union. The problem for the credit union is the data related to the loan, checking account and credit card probably reside in three different systems. Furthermore, information on credit scores, and other data about that customer, may reside in a completely different system (usually outside of the credit union). As a result, trying to get a picture on the total relationship with a member is usually done by extracting data from each disparate system and copying it into a spreadsheet.
This is a far cry from the level of data integration and analytics available at companies at the top of their industry (Amazon, Google and many retailers like Best Buy and Target). As we have learned from companies like these, transaction data is rich in information, and it helps to construct a profile of your customer/member. Both Amazon and Google make the integration of all transaction data seamless to the point that it can be used to predict what a customer is likely to purchase, how many times they have looked at an item, purchasing patterns, their satisfaction level with purchases, and so on. These insights have contributed to the growth and success of these companies.
Integrating Data at Credit Unions
Credit unions live in a world of data silos where the data exists, but cannot be leveraged for any value. To optimize and streamline decision making and risk management, and to maintain loyal, fully-satisfied members ALL transaction data should be integrated into a single repository for analysis. This transaction data should include, but should not be limited to, credit cards, debit cards, checking accounts, savings accounts, loan payments, insurance purchases, credit score migration, and geo codes. The integrated data provides a platform which enables the credit union to gain new insights and make fact-based decisions to drive overall business performance.
How Can Integrated Data Make a Difference for Credit Unions?
Once the data is integrated it can efficiently be used to enhance immeasurable business functions such as:
- Broadening marketing efforts by driving cross sell opportunities to enhance the member relationship.
- Monitoring auto loans to determine when it is likely to payoff and to pro-actively reach out to the member with a pre-approval for their next vehicle thus avoiding competition with dealer financing options.
- Assessing branch performance on a daily basis by using management dashboards covering areas like members losses (who closed an account yesterday and why?), new members that opened an account, the number of new products per member, saving and checking account balances, loan payoff versus funding, average age of the member, loan growth, etc. If there is a question about the data, a branch manager should be able to drill to the detail within 4 to 5 clicks of a mouse.
Integrated Data Enhances Business Management and Decision Making
Great analytics can impact every aspect of the credit union’s performance because, according to management guru Peter Drucker, “what gets measured gets managed”. The impact on the credit union is seen by the ability to:
- Identify cross sell opportunities to increase the product penetration with existing members.
- Track credit score migration at the member level or at the loan portfolio level to help manage risk and to identify potential pricing opportunities and new loan opportunities.
- Analyze checking account transactions to provide insight into ideas for new products.
- Manage branches more effectively on a daily basis.
Big Data/Analytics Paves the Way for Credit Unions to Thrive in the Technologically-Driven Financial Services Industry
More important than all of the above is a belief by the management team in the value of analytics. Studies show the vast majority of today’s credit unions are behind the curve in effectively using analytics. With the advent of mobile banking and innovations in payments (e.g. Apple Pay) things are about to change. Credit unions will now have to think of ways to keep themselves relevant with a member base that is coming into the branches less each day.
Amazon and many others have figured out how to use analytics to keep the customers coming back. Credit unions have a great foundation in that they possess vast troves of financial data about their members not available in the public domain. However, if they do not implement plans to leverage that data they will miss a huge opportunity to better serve their members and remain a key player in the retail financial world.