A new white paper from The Members Group, a card processing CUSO affiliated with the Iowa Credit Union League, seeks to build a case for credit unions and community banks to use more data analysis, so-called Big Data, in their credit and debit card program management.
Written in conjunction with the CUSO data analysis partner, IQR Consulting, the white paper argues that analyzing the payment behavior of card holders can help portfolio managers cut costs, increase the cardholders use of the credit union's card, cross sell cards to non-cardholding members and determine which cardholders would be most likely to respond to a given promotion or incentive.
For example, in one case the white paper discussed a credit union which feared its credit cards were being priced too low and turned to data analysis for additional insight into the question. After analyzing member transaction data, the credit union was convinced to re-evaluate the relatively few non-profitable card accounts and to instead enhance service and marketing to the bulk of cardholders whose accounts were profitable, just not as much as the credit union needed them to be.
This strategy would avoid a risky rate increase which could have eroded the cardholders’ preference for the card and cut costs to the portfolio.
The paper also made the point that even a small card portfolio generates a large amount of cardholder data.
"Take, for example, a credit union credit card portfolio with 4,000 accounts," the authors wrote. "If the average cardholder makes 10 transactions per month, that’s 40,000 transactions – or as a data analyst would see it, 40,000 rows of data. Over a period of a year, this card portfolio generated nearly 500,000 transactions. That’s a tremendous amount of information. "