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Is Your Data Telling You to Make More Bad Loans?

Woman looking confused amidst lots of data

Like every credit union marketer, you’re likely on the hunt for better ways to use your data. You’re sitting on a metaphorical mountain of it, and there’s plenty of evidence to suggest the benefits of using it well. But if you’re facing the same challenges as respondents to CSI’s 2022 Banking Priorities Survey, you might doubt your ability to collect data effectively and use it strategically.

Perhaps your credit union has the data you need, but it’s siloed across teams and difficult to access. Perhaps you’re coming up against compliance regulations with how data can be used, or getting stuck with third-party automation providers that don’t house the data securely. Perhaps your data is incomplete, leading to inaccurate assumptions that hinder your marketing efforts.

These challenges are not insignificant, but at the end of the day, your data is a means to an end. Does your team have a shared understanding of what this end is, exactly? Here are three tips to help you better clarify what you should be tracking and how:

 

1. Use your data to understand your impact, not just to sell products

This first pointer goes back to our provocative headline.

On a recent episode of the Remarkable Credit Union podcast, our guest Laurie Flanders, VP of Client Solutions at Strum Platform, shared a story about her former boss at a credit union. After analyzing member data and learning that the average credit score of their members was 700+, he told the team, “We need to make more bad loans!” It’s not that he wanted the credit union to lose money, but he realized that it wasn’t fulfilling its mission to serve the underserved.

What would an analysis of your credit union’s data tell you if you looked at it through a financial wellness lens? Would it expose opportunities to help vulnerable members? What steps could you take if your transactional data uncovered that members were closing their credit cards to get debt consolidation loans? Or making payments to payday lenders?

In addition to financial wellness, community impact is a critical part of the credit union ethos. But most credit unions don’t do a very good job of capturing what they’re doing in the broader community, and more importantly, why it matters.

When Filene Research Institute released a report about measuring and sharing the impact of credit union philanthropy in August 2020, they found that gaining a better understanding of philanthropic impact in the credit union space was a surprisingly difficult task. This is because credit unions’ filings don’t require philanthropic contributions to be reported as a line item, and even credit unions that share contribution levels seldom measure and report their impact.

In an episode called Measure What Matters: How to Win Loyal Members (Even in a Recession), Dan Osusky, B Lab’s Director of Standards for B Corp Certification, stressed the following key points about impact:

  • It’s important to look at your credit union’s efforts holistically; otherwise, there can be a tendency to move resources from one area to another without fully understanding the impact of your choices.
  • Measuring impact holds us to clear standards and tells us things we don’t already know.
  • There’s a strong business case for measuring impact — your members demand it and it also unleashes the potential of your workforce.

The authors of the Filene report emphatically echo this last point for reasons that include community perceptions, employee attraction and retention, and a strong return on investment.

 

2. Make sure your data is answering the right questions

If you’ve ever found yourself spiraling down a data rabbit hole, you’re not alone. It’s easy to get swept up in the things you could learn about your members. Instead of merely collecting or analyzing data because you can, take a step back and answer these two things first:

  • What question(s) are you hoping to answer with the data?
  • Why are you asking that question in the first place?

The second bullet point here is particularly key. There are dozens of questions your data might be able to answer, but will these answers move you forward when it comes to your credit union’s WHY?

Is the data just about looking good—so-called “vanity metrics” that will impress the executive team? Are you telling the whole story?

Perhaps a rate-driven certificate marketing campaign is successfully bringing in new members. This seems like a good thing, but are you tracking these new members’ engagement over time?  Or, as Laurie Flanders at Strum Platform puts it:

“When you have that five-year CD offer at 5%… you have leased that member for five years. You have five years worth of months to create a situation where that member wants to be in a relationship with you. It’s a lease-to-own. You want them to want to own a piece of the credit union and you want to be able to own a piece of their wallet share.”

Many people look to the data to tell the story, but this approach typically leads to cherry picking positive numbers and trends with no true understanding of whether the story you’re telling is relevant or meaningful.

To help you determine the best questions to ask and answer, keep the following in mind:

  • Be sure you’re looking at the complete picture. If your goal is to attract engaged members through a certificate offer, don’t just look at how many new members are coming in the door, but also how many of them are sticking around and engaging after their certificate matures.
  • Examine multiple sources of data. Are you laser focused on your transactional data but not paying much attention to demographic or behavioral data? All these data points help to inform one another in better understanding members and their needs.
  • Recognize that creating a good data strategy takes time and isn’t set in stoneThe questions you’re asking today might not be the ones you’ll ask tomorrow. As you improve your ability to determine your data needs and learn from the insights you glean, you’ll be better able to identify nuances in member needs and behavior and more effective at crafting marketing campaigns that leverage them.

 

3. Leverage the power of small data

When we think about using data, the focus is typically on “big data”—large volumes of anonymized information that help uncover trends and opportunities.

But we sometimes forget that data doesn’t have to be “big” to be powerful. What can your credit union learn from the “small data” you can glean from simply talking to a handful of members? George Hofheimer, former EVP and Chief Research and Development Officer at Filene and author of Banking on a Human Scale, has found that talking to what he calls the “magic number” of 20-25 people will typically garner 90-95% of the insights you’re looking for.

That’s surprisingly doable, and this method can be particularly effective when trying to develop a more comprehensive and nuanced understanding of your members’ financial health.

You can make these connections through good old-fashioned phone calls (really!), surveys, face-to-face sessions (in person or via Zoom) and personal emails. Not sure what to ask? Consider using Financial Health Network’s FinHealth Score® Toolkit. This will help you uncover where members are struggling financially, track improvements in their financial health over time and uncover insights that will improve their financial well-being—and your credit union’s bottom line.

Collecting small data is a great way to show members they’re more than just a number—and you might be surprised by how many are eager and willing to respond.

In the credit union marketing space, there’s lots of talk about data — and of course, it’s important to track the performance of websites, emails, and campaigns. But if the data stays siloed and no one is stepping back to look at the larger picture, you might start telling yourself inaccurate — or at the very least, incomplete — stories about what makes your credit union tick.

At the end of the day, the data we’re tracking and paying attention to should be illuminating, in some form or fashion, your credit union’s progress toward fulfilling its core purpose. There are thousands of roads we could travel down; it’s up to us to determine which ones will lead us forward.

 

This article originally appeared on CUInsight

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