This is the second story in Credit Union Journal's ongoing series on strategic planning, which will run throughout the month of July. The first story
Credit unions may finally be embracing data analytics.
While a recent study from Best Innovation Group found a full third of CUs surveyed don’t see data as being important, the remaining two thirds were evenly split between a holistic use of data and using it on a case-by-case basis. And many institutions today have positions that didn’t exist even just a few years ago, such as data architect, data scientist, VP of enterprise analytics, VP of business intelligence and many more.
So with institutions across the movement heading into strategic planning season, experts say any discussion of 2020, 2021 and beyond must include consideration of how data collection and analytics can be ramped up to help the credit union compete.
“It is exciting to see credit unions embrace data,” said Anne Legg, CEO and founder of THRIVE Strategic Services. “Many new roles are being created around the capabilities needed to leverage this asset. As credit unions are looking to build these capabilities, they should be looking for skills that not only are technical and analytical, but also have creative problem solving talents with a solid understanding of the business problems the data is looking to solve.”
Brewster Knowlton, owner and principal consultant at the Knowlton Group LLC, noted that credit unions already have C-suite positions built around lending, marketing, operations and technology, all of which are considered integral to the organization’s success.
“As data becomes seen as integral to the credit union’s success, executive-level resources focused on data naturally will follow,” he said. “This is why we have seen a growing number of chief data officers or chief analytics officers. It is why we are seeing chief digital officers given the ever-increasing importance on digital transformation.”
‘Not doing data for the sake of data’
Redwood Credit Union, a $4.5 billion-asset institution based in Santa Rosa, Calif., is one CU that is embracing this trend. In May, it hired its first-ever market data analytics manager to lead a team in developing predictive analytic models, market research, and campaign performance tracking and reporting. The group aims to provide predictive analysis and insight into business and market performance.
Data became a core strategy for Redwood about three years ago, noted Tony Hildesheim, the credit union’s chief information officer. In 2019, he said, RCU is moving to “data part two,” which includes predictive analysis and integrating data into the entire organization.
“We are not doing data for the sake of data, we are trying to understand the behavior of the member,” Hildesheim explained.
Redwood isn’t just turning to candidates with science, economics and finance backgrounds for these positions, he noted. Some of those who have been hired come from social science backgrounds, including psychology and sociology.
“When we are looking at hiring people, we are looking at a combination of skills,” said Hildesheim. “The engagement experience needs to have a human side, not just numbers. The data needs to be in a format people can understand.”
Redwood has identified three specific focus areas for its data efforts: IT, finance and market data analytics. While the first two might seem obvious, Hildesheim noted the difference between “market” and “marketing.”
“Our market data analytics group is looking beyond the next campaign,” he said. “It is about behavior – behavior of the member, behavior of the product, behavior of a geographical area. Those three elements help drive engagement and meaningful interactions.”
According to Rina Johnson, VP of marketing at Pleasanton, Calif.-based Patelco CU, data has helped the $6.9 billion-asset shop better target and personalize its marketing in order to understand what works and what doesn’t.
Erin Mendez, Patelco's CEO, "increased our budget so we could have more accountability,” Johnson said. “We are still in the infancy of the data revolution, and credit unions are known as not being out front on technology. Everyone knows data is critically important, but how do we do more machine learning, more automation?”
Patelco has hired three new employees in its push toward greater usage of data analytics, including Swathi Annamalai, who holds the newly created position of director of marketing analytics.
“My end goal is to get the right offer at the right time to the right person. To get there, we are using machine learning, I am writing my own programs and we are building data storage,” she said, adding, “Data can empower you, so it should be the backbone of any organization. We need to continue to build higher-level analytics.”
Data needs a goal
If credit unions want their data efforts to be truly successful, though, they’ll need to ensure they’re setting measurable goals around it, such as a particular business outcome the CU is trying to change, such as growth in interchange income, improving net interest margin or reducing member attrition.
“Simply having and visualizing data alone is not enough. The purpose behind what you are using that data for needs to be at the forefront of any discussion around analytics,” advised Knowlton.
He pointed out that too many CUs focus solely on the technology aspect of data, asking what software tools they need to be successful. While technology undoubtedly is a “key part” of the process, he said, it arguably is the easiest aspect of a successful analytics program. That’s where goal-setting comes in.
“Having a focusing on how data can help those specific goals provides a clear line of sight as to the credit union’s success, or failure, in achieving their targets,” he said.
For Redwood CU, part of that means a focus on deepening relationships.
Hildesheim said credit unions have been member-centric since their inception, but other businesses have figured out they need to be customer-centric. “So it is important to put emphasis on engaging with the member and giving a meaningful member experience. How we are using data today is all about building a tight relationship, especially with newer members.”
Legg of THRIVE Strategic Services said in terms of strategic focus, the credit unions that have been most successful in leveraging their data are the ones who have a clear, member-centered use case.
“Specifically the successful credit unions are the ones that are using data to improve the lives of their members,” Legg said.
Patelco’s Johnson said that sentiment has been top of mind in her CU’s strategic planning sessions.
“As a credit union we are supposed to be making our members’ lives better, and the best way to do that is to deliver value back to the membership by being smarter about how we spend the members’ money,” said Johnson. “We want to make sure everything we are doing is improving our members’ financial well-being.”
