Big data may be the phrase of the moment in marketing but, for some credit unions, it is already plumping up the bottom line.
Right now, marketers and institutions have access to huge amounts of data that pour in both what some call structured form, which includes completed Web forms, and unstructured form through Twitter Tweets and Facebook postings. All of these types of data fall under the scope of big data.
As good, cheap analytical tools have emerged to sort and analyze the data, this has put big data to more use, experts have noticed.
The $248 million Southwest Airlines Federal Credit Union in Dallas, is among the financial institutions discovering the benefits.
- RELATED: Cloud Computing Meets Credit Union Skeptics
- RELATED: American Eagle FCU's Platform Boosts Online Banking
- RELATED: Guest Opinion: Thwarting Cyber Attacks
- RELATED: Aite Group Says Core Replacements on Uptick: Slide Show
“We are using a lot of data now. We are tapping into data that had been hidden to us and we are using this information to make better strategic plans and to fine-tune our product build,” said Ben Cortez, executive vice president for Southwest Airlines FCU, which serves more than 35,000 members.
Amy Ecker, a vice president of marketing at Southwest Airlines FCU, shared how using big data has produced fruit. For some time, the credit union offered members a savings account that paid 4% up to $25,000 and 1% on additional funds. There were questions about whether the offer was actually a viable deal for the financial institution, Ecker said.
Southwest FCU ran the tallies and discovered that the vast majority of investors in that product had multiple, productive relationships with the institution including share draft accounts, credit cards and car loans. Ecker said the product was doing exactly what it was designed to do, which was to reward good members and also bring in a flow of strong business. The data also showed that few members exceeded the $25,000 cap.
“We decided to lower the rate beyond $25,000 from 1% to 0.5%. There was almost no member protest,” Cortez said.
In years past, an institution might have made all the same decisions. Now, Southwest Airlines FCU lets the data guide it to the next step. The credit union is also digging deep into data as it mulls where and when to possibly open a new branch to better sync with the expanding route map of the airline that serves as the primary field of membership.
“We are still gathering data before we pull this trigger,” said Cortez, but his implication is that when the credit union decides on a location, it will have a high degree of confidence about its choice.
To help make more informed decisions, the credit union is pulling in data from many sources including the airline, federal and state governments and economic forecasts, Cortez noted. Southwest Airways FCU is not alone. Many banks and credit unions are currently wrestling with how to make better use of the data they have.
“If you aren’t efficient you won’t be able to stay in business,” said Ted Luchsinger, financial services industry principal at SAP, an IT company in Waldorf, Germany. “The future is around the flow of data and using it to drive operational responses.”
Luchsinger conceded that financial institutions, including credit unions, oftentimes struggle to mine their own data because of inflexibilities engineered into aging core systems.
“Siloed systems make it very difficult to get a single view of the customer,” Luchsinger said. His point is that transaction-based cores excel at recording every transaction, but they were never designed to present information in the relational ways today’s marketers crave.
Some institutions are stumbling because of that notion as they chase big data. The ones that are steaming forward will be the ones primed to succeed as big data and its analysis lends itself to smarter institutional transformation, Luchsinger said. Still, some banks and credit unions are being quiet with their big data plans.
“Financial services are very competitive. If you are doing cool things, you are not going to broadcast it,” said Joe Nicholson, vice president of marketing and business development at Datameer, an analytics tool developer in San Mateo, Calif. “They are secretive about what they are doing.”
Meanwhile, some financial players are becoming more aggressive about mining data as they hunt for information they consider to be meaningful.
Ankor Rai, global head of analytics at EXL, an IT firm in New York, talked about how financial institutions are attempting to zero in on what he calls life events. They then connect the dots between, for instance, the birth of a child, an auto accident, or a big promotion at work and the financial events that follow, such as the purchase of a bigger home, a new car loan, and larger retirement investments.
“The data leads to new insights,” said Rai, who added that the trick here is learning to blend unstructured data, including Facebook posts about a promotion, for example, with a member-centric viewpoint that lets the institution deliver more targeted offerings.
Experts acknowledge much more may be at stake.
“Deeper analytics into information will help FIs better understand who the customer is and what he wants and what he doesn’t care about,” said Todd Morrissey from LLR Partners, a Philadelphia-based private equity firm that follows the big data space.
While big data can present a big challenge to financial institutions, it might be in the center of the bulls eye for providing better service.
“If you don’t do this, your competitors will,” said Charley Rich, a vice president with Nastel Technologies, an IT firm in Melville, N.Y. "You have to master big data or be buried by it.”