Credit unions today are increasingly aware of the mountain of valuable data accumulating in their core and other operational systems. With technology evolving at a rapid pace, opportunities to leverage this data are becoming not only more available but also more affordable than ever before.
The Internet of Things (IoT) has gained a considerable amount of hype as the “Next Big Thing” to change the world as we know it. Applications of IoT are thought by some to be limited only by the human imagination. From simply controlling your home (e.g. - lights, thermostat, etc.) with a smartphone, to life saving medical and healthcare systems, IoT is pervasive and growing rapidly.
The FICO score has a long and well-established history as a key metric in the determination of credit-worthiness. The FICO score has the power to influence whether or not a person will be able to experience significant life events, like the purchase of their first car or their first home. However, as we rapidly enter the age of Big Data and Analytics, does the FICO score utilize enough information to make an accurate determination of a borrower’s ability to pay? As I consider the future of credit unions, I believe the industry’s position on the significance of the FICO score in their underwriting process is an important issue. Is FICO a major determining factor, or is it merely one of many data points that can be used to predict probability of default for a given loan?
“Alone we can do so little; together we can do so much” – Helen Keller
The credit union industry (or credit union movement as it’s often referred to) is probably one of the most collaborative industries in the United States, if not the entire world. Unlike other organizations, credit unions share everything from ideas to secrets. They truly care about the welfare of the industry and its millions of members. It’s great! Collaboration benefits credit unions in several ways – however, in my opinion, one way in particular presents the biggest opportunity.
It’s often easy to overlook the obvious. As a team member of OnApproach, a company that integrates all of the disparate data sources within a credit union into a single source of truth, I have failed to recognize the value of ALL the data available to credit unions. At the 2015 CUNA CFO Council Conference, I attended a session presented by Bill Goedken, President & CEO of Idea5, entitled “Mining Gold – New Trends and Discoveries in ‘Big Data’ That Will Help Your Credit Union Compete.” During Bill’s session, he discussed the ways credit unions can leverage external data to better serve their members. While both internal and external data are extremely valuable, the combination of the two is where the real value lies.
Credit unions are ramping up their adoption of Big Data & Analytics. The frustration with valuable business information being trapped in multiple data silos has boiled over. Projects to integrate these disparate data sources into a single source of truth are being launched every day. Now, many credit unions have the ability to slice and dice their data and drill from individual transactions up to aggregated totals.
During the 2015 NACUSO Conference, Credit Union Industry Disruption and Predictive Analytics drew particular attention from those attending. It was quite clear that significant changes are coming to the credit union industry and those changes will happen quickly. As John Best, Best Innovation Group (http://big-fintech.com ), stated during his presentation, there are several credit union industry disruptive trends on the horizon, which include Lending Clubs, mobile banking applications, and changes in payment technology.
Topics: Big data/analytics
Last week in my blog, Credit Union Industry Disruption: NACUSO 2015 – Part 1, I talked about the pending threat of Big Bang Disruption in the financial services industry and the growing prominence of predictive analytics. In this second and final blog on the learnings from the NACUSO 2015 conference, I will cover what we learned about how credit unions can respond to Big Bang Disruption and the strategic importance of Predictive Analytics.
I had the opportunity to attend NACUSO 2015 in Orlando last week. NACUSO is a great conference to interact with other thought leaders in the credit union industry to make valuable business connections. It is the essence of the “credit union movement”, a group of talented industry leaders looking for ways to collaborate to make the industry stronger.