Extensively mining member card data can help credit unions better tailor a wide variety of programs and products to meet member needs, according to consultants working with two different payment CUSOs and associations.
Both The Members Group, a card processing CUSO affiliated with the Iowa Credit Union League, and Card Services for Credit Unions, an association of credit unions which process payments with FIS, have authored white papers in conjunction with consultants which urge credit unions to begin using so-called Big Data to help manage their card portfolios as well as other products and services.
Written in conjunction with the its data analysis partner, IQR Consulting, the TMG white paper, Data Analysis Points the Way Forward for Card Management Teams, argued that analyzing the payment behavior of card holders can help portfolio managers cut costs, increase 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 white paper argued.
The Card Services for Credit Unions paper, Member Segmentation Improves Your Bottom Line, said using data to segment member bases can help a credit union target members with the best products and services.
“There are plenty of ways to use segmentation analytics to find members that will respond to new opportunities and cross-selling efforts. For example, consider high-usage cardholders,” the association wrote.
“'Notice their spend patterns,'” the paper quoted Dean Knudtson, senior consultant for CSCU. “'Can you offer them a business card and realize a higher level of interchange? Or look at the spend patterns with your rewards cardholders. Can you shift their spend patterns to higher interchange merchants by segmenting them, and offering bonus points to shop at higher interchange merchants?'”
Knudtson also suggested breaking out lower FICO score members.
“It might make sense to offer these members a secured card with limits equal to a deposit, thereby reducing your risk exposure while offering a great product to members who may be rebuilding credit, or establishing credit for the first time,” he added. “This is also a perfect way to stay true to the industry’s mission of people helping people.”