Data analysis can act as a looking glass for credit union card teams, giving leaders a crystal clear view into cardholder behaviors. By using data analysis to gain an in-depth understanding of this behavior, credit unions can better identify patterns and crucial insight to manage for portfolio profitability and growth.
Data analysis is not just about access to advanced technology — it’s also about combining industry experience and analytical skill to challenge hunches, assumptions and gut feelings. The questions data analysis can answer are boundless. Card teams can uncover any number of truths, from the quantitative (Are our cards priced right?) to the qualitative (Do cardholders like our card?). Most importantly, data analysis will lead credit unions to an action — guiding the “What next?” of card portfolio management.
Uncover Efficiency Potential
After studying statement and other cardholder-level data, data analysts can provide guidance to credit unions looking for increased profitability. They can model incremental profitability from actions like changes to underwriting guidelines, opening the door to potentially dramatic increases in revenue. Data analysis of past marketing programs can also help card management teams identify which members are most likely to respond to future promotions.
Open Cross-Selling Opportunities
Finding credit card prospects from among an existing membership base is another strong suit of data analysis. By monitoring and examining members’ behavior over time, predictions can be made about a member’s likelihood for opening a credit card account. Take debit cardholders who regularly spend above their checking account balances, for example. By identifying these members, data analysts are then able to provide cross-sell teams with an ideal list of credit card prospects.
Encourage a Change in Behavior
For many credit union card teams, increasing transactions among existing cardholders is a chief goal. The intent is not to encourage members to spend more money. Rather, it’s to become card of choice; encouraging members to consistently use their credit union-issued card. With the help of data analysis, which can identify the triggers that result in increased use of a credit card, credit unions can level the playing field between their card products and other cards in their members’ wallets.
Triggers like credit line increases, for example, can create a dramatic uptick in transactions among cardholders. The resulting increase in card use is due less to the availability of additional credit and more to the “warm fuzzies” members feel when their credit union increases their credit limit. The result is often increased loyalty. And, when additional credit is extended to those cardholders whose bureau data reveals a predilection for high-dollar spending on a competitor’s card, the credit union has a fighting chance at becoming that member’s card of choice.
No Portfolio Too Small
It’s true, issuers with larger card portfolios yield more data points for exploration. Yet, even smaller card portfolios generate lines upon lines of useful data. Credit unions can make great strides simply by examining statement data like transaction history, interest rates and credit lines.
A lot of data can also be obtained from outside the credit union’s card portfolio. Member data not related to card activity can be equally as informative when looking for the “What next?” in the credit union’s portfolio strategy. With data analysis, every member interaction is a transaction, leaving a trail of valuable data.
Management of data is a critical business challenge credit unions need to tackle. When organized and analyzed, data can unlock numerous strategies for credit unions looking to grow their card portfolios and increase cardholder loyalty. Of course, credit unions don’t have to go it alone. Outside experts can provide the expertise, the technology and the guidance to quickly identify ways to improve portfolio performance – generating positive ROI faster and cost effectively.
Todd Herren is chief technology officer at The Members Group in Des Moines, Iowa. The above is an excerpt from the white paper "Data Analysis Points the Way Forward for Card Management Teams."