Data Analytics’ Real-World Application for Credit Unions
By Blesson Abraham, Director, AdvantEdge Analytics, CUNA Mutual Group
In a recent survey of 700 credit union leaders, 73% of them viewed data analytics as a game-changing opportunity. However, only 26% of the respondents had a data and analytics initiative underway, 72% had trouble accessing member data, and 9% have a comprehensive plan to share analytics data with front-line employees.
Can data analytics help credit unions grow membership, deliver best in class membership experiences, manage risk, identify new business opportunities? Absolutely! And the best part is that credit unions already have so much information about their members’ financial lives and spending habits.
My colleague, Ani Majumder, a partner in the financial services division of McKinsey & Co., explained that credit unions must focus their approach. He shared a story with me about a credit union in the Midwest that used data analytics to help reduce member churn. The credit union found that of their 15% annual member growth, nearly two-thirds ended up leaving. Of those, a high number lived more than seven miles from a branch.
Further data analysis proved that the situation was actually much worse. Prior to leaving the credit union, these members would stop using other services such as credit cards or ATM withdrawals for months prior to closing their accounts, cutting down on the members’ engagement with the credit union.
To remedy this, the credit union created a plan of action, based on the data with the goal of reversing this trend. Using data on distance from the credit union and credit card and ATM transactions, the credit union wanted to be able to pinpoint six months prior to the member taking action with at least a 50% accuracy rate. This data also provided the credit union with intel to create solutions to combat this issue. By incenting users to adopt services such as direct deposit and bill pay, they were significantly less likely to leave.
Credit unions can use these data to increase productivity, deliver compelling digital interactions, and even move into new opportunities. One Irish bank determined millennial users were not signing up online because the process needed to be cleaner. To resolve this issue, the bank began pulling in information from a photo of millennials’ student ID cards and integrated it into the sign-up process, simplifying the user experience.
Data analytics isn’t a project. It’s a journey – a culture shift. Data help you envision how members use your credit union and why they’re not, as these examples illustrated. Automation of data reports, understanding what the data are telling you, and providing self-service to employees and members so they can act on it will transform your credit union and position the entire industry for the future.
CUNA Mutual Group is the NAFCU Services Preferred Partner for Analytics, TruStage® Auto & Home and Life Insurance Products. More information and educational materials are available at nafcu.org/CUNAMutualGroup