It's a Coin Flip for Credit Union Data Plans: Survey

The good news is over 50% of the credit unions have a data plan in place, according to a survey from a pair of credit union strategic advisory companies.

“It’s more than a bit scary that 45% of the credit unions surveyed do not have strategies in place,” revealed Denver-based innovation catalyst Best Innovation Group and its longtime partner data consulting company Plymouth, Minnesota OnApproach, in the extensive survey on data analytics and digital strategy for the credit union industry.

Approximately, 85 credit unions responded to questions on topics ranging from strategies and timelines to budgets and staffing. The results provided a comprehensive look at the state of analytics and digital transformation across credit unions nationwide.

“Credit unions have some advantages in the battle with banks over market share. The ability to cooperate for scale and having the best interest of the member at heart give credit unions a leg up in the contest and represent the heart of the credit union movement. But they are behind the curve in data analytics and need to embrace these concepts and strategies to more effectively compete in the future,” Kirk Kordeleski, Chief Strategy Officer & Senior Managing Partner, Best Innovation Group, said.

More than two-thirds of the credit unions purchased some type of analytic tools in the last 12 months. The priorities of the investments have been in analytic tools, staffing, warehouses and visualization systems (dashboards). The survey suggested credit unions are building the fundamental skills and infrastructure needed to utilize data more effectively. Most investments made in 2017 were in analytic tools, staff skills and warehouses. A lower level of investment appeared in the newer tools of decisioning, fraud and predictive (machine learning and artificial intelligence) technologies.

The research indicated almost all competitors (large banks, regionals, fintechs and big techs) have invested heavily in data, analytics, decisioning and machine learning. “They have strategies, built infrastructure and are culturizing the decision process. Credit Unions are likely behind the curve and falling farther behind each day that they have not articulated a strategy and begun to execute on it.”

Another trend noted: credit unions have strategically committed to using digital services and data analytics to serve members, market and segment to acquire sales/new customers, make credit decisions and are now prioritizing and committing resources to data analytics, decisioning and improving operations. “If credit unions execute on growth (marketing), income creation (lending) and lowering expenses (operational efficiencies) they will gain market share, increase income/capital and enhance their brands.”

“A proper data strategy is imperative for credit unions today. Credit unions need to be thinking about, and actively executing, effective data strategies,” Paul Ablack, CEO, OnApproach said.

Just over half of the credit unions that have budgets for data analytics plan to spend less than $100K in 2018. “This is a relatively small amount compared to the potential impact and overall cost of implementing a successful analytics strategy,” the report suggested. On the other hand, a third of the participants plan on spending over $200K and 15% over $500K.

The biggest challenges to implementing a successful strategy are the lack of integration of disparate systems, staff capabilities/skills and costs. “It appears to BIG that CUSOs that help manage and support analytic operations may be very useful in sharing the costs/risks and acquiring the necessary skills to get the most out of analytics and decisioning,” the report held.

BIG Founder and CEO John Best offered, “This is a critical time for the entire credit union industry.” Best added due to the industry’s consolidation credit unions should invest in technologies that can help them not only survive but thrive.