How credit unions can use data to attract new members, increase engagement, and grow
August 18, 2023
Digitalization is essential to drive engagement in almost every business. All financial institutions acknowledge that digital technology is crucial to stay relevant, become data driven and build sustainable success. With their loyal members and exemplary service, credit unions demonstrate relationship banking at its very best. But to attract and retain younger members, credit unions must also wake up to digitalization and step into the data-driven future.
Every day, we read and hear about big data and its promise to transform humanity for good. One of the most common analogies describes data as the “new oil” – a highly valued commodity, source of wealth and fuel for economic growth. While these attributes are undoubtedly true, the oil analogy also describes another characteristic of data: It is fundamentally useless until refined, transformed and blended. But there are limits to the analogy.
While oil was created by organic processes over millions of years, data is formed by humans in real time and builds a transcript of our digital life, which increasingly mirrors our real life. This not only shows the potential power of data in profiling an individual’s needs and preferences, but also how sensitive data is. It must be held securely, handled with great care, and only processed with the owner’s permission. This is most obvious with financial data.
Many people are happy to exchange personal data in return for a better, bespoke service. In practice, this means banks and other financial institutions can offer unique services based on insight rather than guesswork. With the right approach, data can increase member satisfaction, drive business growth and boost brand loyalty.
Like most financial institutions, credit unions want to capitalize on their data to provide their members tailored services. Regardless of size, credit unions can harness member data for a range of purposes, like accurately assessing loan risks and personalizing lending rates. Data can also be used to make better-informed decisions on lending rather than relying on a small number of metrics, such as traditional credit scores.
Permission is a priority
Most credit union members trust their institution and are willing to give a little more data to receive better service and bespoke solutions. This trust exists because of years – or decades – of successful collaboration between both the credit union and its members, but also the credit union and the community at large. In this respect, credit unions have a competitive advantage over some of the larger banks and are in a stronger position when it comes to the use of member data. So, how can credit unions make data meaningful?
Credit unions have always prioritized service excellence, and their personal touch often distinguishes the member experience from that of customers of national and regional banks. But today’s credit union members have rising expectations. They expect a consistent high-quality experience across all physical and digital channels, and they want bespoke services. This is particularly true of millennials and Gen Z. Data is now a cornerstone of providing that modernized member experience excellence.
Becoming a data-driven credit union may seem daunting, but the investment can be well rewarded. Recent research suggests that 94% of users who have a low-effort member experience show an intention to repurchase.1 By harnessing data, a credit union can answer these common questions:
- What are members doing and how frequently?
- How are they doing it?
- What common issues do members face?
With the answers to these questions, credit unions can quickly design solutions in response. Credit unions can use data to build a detailed picture of individual member’s needs and create ways to reduce friction in their journey. Over time, this can increase member engagement and build loyalty. Credit unions that offer a superior experience might also find it easier to attract new members – especially those who are digital natives with high expectations. So, what are the challenges?
The data and communications challenge
Data must be refined, transformed and blended to add real value. Respondents to a recent survey2, conducted by Corinium, pinpoint siloed data and siloed communication systems as major roadblocks:
- 48% report data accessibility as a major challenge when creating data-driven experiences.
- 56% report that siloed, uncoordinated communications prevent them from delivering seamless digital experiences.
- Only 12% have their communications fully integrated into their CRM system.
Despite these challenges, the same survey found that 65% of respondents have focused on creating digital alternatives to in-person over the last 12 months. The direction of travel is clear: All credit unions must digitalize to become data-driven and stay member-centric.
The days of waiting for new members to walk into a branch are over. Credit unions must seize the power of data to proactively attract new members and retain them with bespoke offers and services based on their preferences, behavior, goals and aspirations.
Much of the required data is already a byproduct of everyday member transactions and interactions, but the data must be carefully harvested, curated and blended to provide actionable insight and to create customized services for members. For example, the data that comes with credit card transactions can help credit unions assist their members with paying their different loans and obligations. By using data and analytics as a tool for foresight, credit unions can measure the member’s ability to pay different loans down the line and rework the loan through consolidation and reworking monthly payments.
Simple insights like this can drive real improvements in a member’s financial health. This helps both the credit union and the member in the loan process, as the data can help paint a more comprehensive picture of who the individual is without solely judging them by a credit score.
Credit unions already have a vast library of member data that can be used to enhance the overall member experience. The age of big data has arrived, and credit unions have everything to play for in this new order.
Starting a digital journey is never easy, but it’s a lot easier with an expert partner. Credit unions should speak to their technical partners and discover how to step into a data-driven future.