Today’s credit unions want more account growth, more operational efficiency, and more digital services.¹ Yet, they also want something else. Something that’s equally, if not more, important. 

They want to help improve the financial well-being of their members and the communities they serve. It’s a top-down imperative at the industry association level. Many consumers are struggling with inflation and job insecurity. 

The good news is, these objectives don’t have to collide. Credit unions do all  the above by making a few smart adjustments to their acquisition and decisioning processes. 

The problem: a partial view of members. 

Credit unions access and manage a lot of data about their members. They manage things like credit scores, account balances, transaction history, etc. It’s valuable information that’s essential to managing and growing member relationships. Yet, it only provides a partial view of members that’s mostly focused on their credit union account activity. 

It’s a bit like the iceberg conundrum. You can clearly see what’s on top of the water, but it’s the unknown…the part you can’t see that’s hidden under water posing the biggest risk. 

Let’s say you have two members in good standing. Both have a 680 credit score. It would seem they’re both good candidates for a competitive credit offer. But…not so fast.     

The first member is a recent college graduate with steady employment, increasing income, and a low debt-to-income ratio. Her financial trajectory is steadily improving thanks, in part, to her responsible use of a retail credit card. She also pays her cell phone and utility bills on time each month. She’s a good candidate for a step-up account with incentives and/or a competitive auto loan offer. 

The second member, however, was recently laid off, took a big salary hit, and has since maxed out his credit cards trying to make ends meet. He canceled his cable service and is making partial payments on his utility bill. He has hit a rough patch and needs help, but more credit might not be the right answer in this situation. 

The point is this. You need to know more about your members. It is important to know where they are in their day-to-day lives, and their broader financial journey—because things aren’t always what they seem. 

When you see the bigger picture, you can help members take the best next step toward financial well-being. In turn, this can help your credit union better protect against risk, while also fostering deeper, more financially sound member relationships that pay stronger dividends in the future. 

Here’s how credit unions can perform better.

To optimize your decisions—on behalf of your members and your credit union—and achieve next level performance, here are a couple of data-driven technology enhancements to consider. 

Use alternative data to know more. This  simple tweak can  improve outcomes for both your credit union, and your members. That’s because many people, over 81 million consumers, have no credit or very little credit. This makes them “unscoreable” when using traditional credit risk models alone. Alternative data provides expanded consumer insights to help you score this underserved group.  You can securely offer them membership and access to much-needed financial services. It can also provide valuable financial context for “scoreable” members who are near-prime and above. 

Key types of alternative data for credit unions to consider:
-Account payment data for utilities, cable, and cell phones. Since nearly everybody has at least one of these accounts, it can help you confidently score most members. Plus, it’s highly predictive of future account performance so it’s a good supplement to traditional credit data. 

-Consumer employment, income, wealth, and lifestyle insights. Taken together, this data can reveal the broader financial capacity of members based on spending behaviors, discretionary income, and more, while also highlighting hidden risk and opportunity.  

Augmenting credit union data with alternative sources of consumer data can help you:

• Securely acquire and serve more members, including those who lack credit or have sub-prime credit 
• Better differentiate risk and opportunity regardless of a member’s credit score
• Recognize “financially durable” members who can better withstand economic stress  
• Visualize where individual members are in life, as well as their financial trajectory
• Personalize services and offers to help members move forward in their financial journey

Integrate next-gen technology to automate key processes. Credit unions often rely on in-person engagement; the human touch is a big part of what separates you from big banks. Yet, automating certain processes and touchpoints can benefit all parties involved. Below are a couple of examples. 

-Automated, pre-approved offers. Using today’s digital technology, you can: 
1) augment your credit union data with consumer prescreen data
2) use that combined data to segment members according to preset risk criteria
 3) automatically provide them with personalized, pre-approved lending offers upon logging in to your website. 

Creditworthy members get faster, direct access to services, while your credit union efficiently boosts acceptance rates without any human intervention. 

-Get “right-moment” alerts and notifications. Don’t wait for members to come to you—or worse, go to another financial institution or fintech service.  Nowyou can get automated alerts when members are seeking new credit. This enables you and your members to work together to structure the most competitive credit terms and deepen your banking relationship. 

At the end of the day, when your members do better, your credit union does better. Every step you take toward better understanding them, this includes their everyday financial successes and struggles, better positions your credit union as a trusted financial partner within your community. By taking the time to research and integrate new streams of alternative consumer data and automated technology into your acquisition and decisioning processes, you facilitate healthier financial outcomes for everyone. 

Download the FREE eBook, 5 tips to help credit unions drive member growth, deepen engagement, and manage risk, to explore exciting, new ways credit unions are using data and technology to level up performance. See how one credit union achieved a more than 100 percent lift in deposit, investment, and loan balances.
 

Link in opening statement: Loan Growth, Efficiencies & Digital: Jack Henry Survey Reveals FI Priorities | Credit Union Times (cutimes.com)