Successful lending strategies of the future are likely to be based on a mix of high-level technology along with high-touch servicing, according to lending executives and consultants.

An increase in the use of advanced technology in the lending space has been trending for years, as demonstrated by a rise in the number of consumers served by both banks and credit unions who choose to interact with their financial institutions online rather than at a branch or through a call center.

However, increasingly, the technology that drives lending may depend more on data analysis than members' ability to fill out a loan application online or the institution's ability to underwrite loans automatically, according to firms that have begun to explore new avenues in the lending space.

For example, the St. Petersburg, Fla.-based payments CUSO PSCU recently added a new data mining element to its Member Insight data platform, which the CUSO said credit unions can use to help predict their members' borrowing needs ahead of time.

PSCU introduced the new element, DataVue, at its April 2015 member forum event, where a CUSO executive reported 42 member credit unions have begun using the tool in their card portfolio management and marketing programs.

“We built this tool with the goal of flexibility and ease of use in mind,” PSCU Vice President of Enterprise Analytics Suzanne LaProva explained, adding that the CUSO made the tool cloud-based so credit unions wouldn't have to download data to use it. In addition, in contrast to its previous data management programs, DataVue makes it easier to obtain data for cardholders, and their accounts and transactions.

For example, LaProva explained that the new tool enables credit unions to approach a business in the community with the news that its members had spent a given amount of money at the business in the previous month or weeks. Then, the credit union could suggest a promotion or joint marketing effort, she said.

Using an example of a frozen yogurt shop in a credit union's community, LaProva pointed out that DataVue allows the credit union to approach the retailer with data that shows how many members bought frozen yogurt during the summer and suggest a promotion that might yield even better results.

Alternatively, when combined with other data, the yogurt purchase data could suggest some members might respond to a credit line increase for a vacation or another summertime purchase.

PSCU has already helped credit unions find out where their members used their cards, LaProva said, but now credit unions can easily obtain that information, in addition to how much they spend in a given period, on their own, she added.

Jaqueline Baker, marketing data analyst for the $501 million, 45,000-member Harvard University Employees Credit Union, said the new tool allows her to access much of the same data that she was previously able to access – as well as new data – but much more quickly.

Bonny Thomas, vice president for Consumers Credit Union, which also uses the tool, added, “Member Insight allows us to provide real-time data that can help forecast our members' financial needs.” Thomas added that the $611 million, 65,000-member, Kalamazoo, Mich.-based cooperative has broad plans for its use of the data mining tool.

“We envision incorporating this tool into many iterations as our innovation and outbound programs continue to grow – we have big ideas for this highly functional analytics tool,” she said.

However, while data mining and looking for patterns in member behavior will influence future loan marketing, another credit union client of PSCU's found that human touch will also be important.

The $1.6 billion, 148,000-member ORNL Credit Union recently increased its credit card portfolio by 63% after appointing one employee to oversee the portfolio. However, while Zain Hashmi, the cooperative's credit card program manager, used data to aid in the credit union's credit card marketing efforts, he also found a personal touch to be helpful.

Hashmi worked with PSCU to mine data, discovering which members would be most likely to respond to a pre-approved credit offer, then had credit union representatives call members who were slated to receive a pre-approved offer in the mail.

The representatives didn't pitch the card offer to members on the phone, Hashmi explained – they only alerted the member that the credit union had sent them an important piece of mail and that they should be sure to open and read it.

ORNL CU members loved the extra attention, Hashmi reported, and although the extra “touch” had been expensive, he believed it contributed to the campaign's strong performance.

However, the real driver behind high-touch loan servicing – which refers to using personalized borrower contact – may be millennials, experts said. Members of the generation came of age economically during the Great Recession and its aftermath, and have shown a different attitude toward borrowing than preceding generations have.

An October 2014 report from the Obama Administration's Council of Economic Advisors discussed the Great Recession's impact on millennials, particularly on their willingness and ability to buy homes, as well as on their earnings prospects and attitudes toward saving and investing.

“Entering adulthood during the Great Recession and recovery has not only affected millennials' schooling and employment decisions, but also their housing and household formation patterns,” the report read. “In the aftermath of the Great Recession, the share of 18- to 34-year-olds living with their parents increased from 28% in 2007 to 31% in 2014 – which is a notable increase even if the actual magnitude falls well short of some popular perceptions. Correspondingly, the pace of household formation is low and the 'headship rate' among millennials – the rate at which millennials head their own households – has fallen. With fewer millennials as independent renters or homeowners, the demand for housing and the pace of residential investment is likely lower than the level implied by more typical rates of household formation and headship.”

An August 2015 data analysis by consumer credit firm Experian from found that while millennials had borrowed a bit more in student loans than Generation X had and were significantly ahead of Generation X in car loans, they lagged behind the previous generation in credit card account openings.

Experian Vice President of Analytics and Business Development Michele Raneri said she isn't surprised that millennials have taken out student and auto loans at a higher rate.

“One way to look at auto loans and student loans is that they both are necessary to finance things millennials genuinely need,” Raneri said. “The used auto market has tightened and it's difficult to find a good used car you can buy without financing, and studies have shown that parents hit by the Great Recession have been less able to help their children with higher education expenses so they turn to loans.”

By comparison, she noted, millennials don't need credit cards or home loans as much right now.

Cornerstone Advisors Director Daryl Jones said he isn't concerned about millennials' appetite for loans, but said that their marked need for a higher level of touch and communication, as well as their suspicion of traditional financial institutions, should be on credit unions' radar.

Jones observed, for example, that a customer who makes a purchase on Amazon.com expects that the retailer will notify them at every step of the delivery process. Similarly, millennials want to know when their loan application was received and underwriting has begun, for example.

“Borrowers today expect engagement in a process that is tied to technology, much like the alert you get from Amazon when you don't follow through on purchasing an item in your shopping cart,” Jones wrote in an email. “So, when the borrower doesn't get an alert or an automated trigger for the next step in the lending process, or something to ensure they remain engaged, they often don't.”