Successful lending strategies of the future are likely to bebased on a mix of high-level technology along with high-touchservicing, according to lending executives and consultants.

An increase in the use of advanced technology in the lendingspace has been trending for years, as demonstrated by a rise in thenumber of consumers served by both banks and credit unions whochoose to interact with their financial institutions online ratherthan at a branch or through a call center.

However, increasingly, the technology that drives lending maydepend more on data analysis than members' ability to fill out aloan application online or the institution's ability to underwriteloans automatically, according to firms that have begun to explorenew avenues in the lending space.

For example, the St. Petersburg, Fla.-based payments CUSO PSCUrecently added a new data mining element to its Member Insight dataplatform, which the CUSO said credit unions can use to help predicttheir members' borrowing needs ahead of time.

PSCU introduced the new element, DataVue, at its April 2015member forum event, where a CUSO executive reported 42 membercredit unions have begun using the tool in their card portfoliomanagement and marketing programs.

“We built this tool with the goal of flexibility and ease of usein mind,” PSCU Vice President of Enterprise Analytics SuzanneLaProva explained, adding that the CUSO made the tool cloud-basedso credit unions wouldn't have to download data to use it. Inaddition, in contrast to its previous data management programs,DataVue makes it easier to obtain data for cardholders, and theiraccounts and transactions.

For example, LaProva explained that the new tool enables creditunions to approach a business in the community with the news thatits members had spent a given amount of money at the business inthe previous month or weeks. Then, the credit union could suggest apromotion or joint marketing effort, she said.

Using an example of a frozen yogurt shop in a credit union'scommunity, LaProva pointed out that DataVue allows the credit unionto approach the retailer with data that shows how many membersbought frozen yogurt during the summer and suggest a promotion thatmight yield even better results.

Alternatively, when combined with other data, the yogurtpurchase data could suggest some members might respond to a creditline increase for a vacation or another summertime purchase.

PSCU has already helped credit unions find out where theirmembers used their cards, LaProva said, but now credit unions caneasily obtain that information, in addition to how much they spendin a given period, on their own, she added.

Jaqueline Baker, marketing data analyst for the $501 million,45,000-member Harvard University Employees Credit Union, said thenew tool allows her to access much of the same data that she waspreviously able to access – as well as new data – but much morequickly.

Bonny Thomas, vice president for Consumers Credit Union, whichalso uses the tool, added, “Member Insight allows us to providereal-time data that can help forecast our members' financialneeds.” Thomas added that the $611 million, 65,000-member,Kalamazoo, Mich.-based cooperative has broad plans for its use ofthe data mining tool.

“We envision incorporating this tool into many iterations as ourinnovation and outbound programs continue to grow – we have bigideas for this highly functional analytics tool,” she said.

However, while data mining and looking for patterns in memberbehavior will influence future loan marketing, another credit unionclient of PSCU's found that human touch will also be important.

The $1.6 billion, 148,000-member ORNL Credit Union recentlyincreased its credit card portfolio by 63% after appointing oneemployee to oversee the portfolio. However, while Zain Hashmi, thecooperative's credit card program manager, used data to aid in thecredit union's credit card marketing efforts, he also found apersonal touch to be helpful.

Hashmi worked with PSCU to mine data, discovering which memberswould be most likely to respond to a pre-approved credit offer,then had credit union representatives call members who were slatedto receive a pre-approved offer in the mail.

The representatives didn't pitch the card offer to members onthe phone, Hashmi explained – they only alerted the member that thecredit union had sent them an important piece of mail and that theyshould be sure to open and read it.

ORNL CU members loved the extra attention, Hashmi reported, andalthough the extra “touch” had been expensive, he believed itcontributed to the campaign's strong performance.

However, the real driver behind high-touch loan servicing –which refers to using personalized borrower contact – may bemillennials, experts said. Members of the generation came of ageeconomically during the Great Recession and its aftermath, and haveshown a different attitude toward borrowing than precedinggenerations have.

An October 2014 report from the Obama Administration's Councilof Economic Advisors discussed the Great Recession's impact onmillennials, particularly on their willingness and ability to buyhomes, as well as on their earnings prospects and attitudes towardsaving and investing.

“Entering adulthood during the Great Recession and recovery hasnot only affected millennials' schooling and employment decisions,but also their housing and household formation patterns,” thereport read. “In the aftermath of the Great Recession, the share of18- to 34-year-olds living with their parents increased from 28% in2007 to 31% in 2014 – which is a notable increase even if theactual magnitude falls well short of some popular perceptions.Correspondingly, the pace of household formation is low and the'headship rate' among millennials – the rate at which millennialshead their own households – has fallen. With fewer millennials asindependent renters or homeowners, the demand for housing and thepace of residential investment is likely lower than the levelimplied by more typical rates of household formation andheadship.”

An August 2015 data analysis by consumer credit firm Experianfrom found that while millennials had borrowed a bit more instudent loans than Generation X had and were significantly ahead ofGeneration X in car loans, they lagged behind the previousgeneration in credit card account openings.

Experian Vice President of Analytics and Business DevelopmentMichele Raneri said she isn't surprised that millennials have takenout student and auto loans at a higher rate.

“One way to look at auto loans and student loans is that theyboth are necessary to finance things millennials genuinely need,”Raneri said. “The used auto market has tightened and it's difficultto find a good used car you can buy without financing, and studieshave shown that parents hit by the Great Recession have been lessable to help their children with higher education expenses so theyturn to loans.”

By comparison, she noted, millennials don't need credit cards orhome loans as much right now.

Cornerstone Advisors Director Daryl Jones said he isn'tconcerned about millennials' appetite for loans, but said thattheir marked need for a higher level of touch and communication, aswell as their suspicion of traditional financial institutions,should be on credit unions' radar.

Jones observed, for example, that a customer who makes apurchase on Amazon.com expects that the retailer will notify themat every step of the delivery process. Similarly, millennials wantto know when their loan application was received and underwritinghas begun, for example.

“Borrowers today expect engagement in a process that is tied totechnology, much like the alert you get from Amazon when you don'tfollow through on purchasing an item in your shopping cart,” Joneswrote in an email. “So, when the borrower doesn't get an alert oran automated trigger for the next step in the lending process, orsomething to ensure they remain engaged, they often don't.”