Data analytics.

Two-thirds of credit unions understand they must use data to compete against fintechs, big techs and banks but a third are not prioritizing information use and will struggle to compete.

That is among the findings from Tampa, Fla.-based innovation catalyst Best Innovation Group, Inc., in its Fall 2018 Semi-Annual Credit Union Industry Survey Report. The study, performed in conjunction with Plymouth, Minnesota-based data-consulting company OnApproach, provided a state of the industry update regarding data analytics and its adoption at credit unions.

The original results of the first BIG national survey on data analytics and decisioning trends in the credit union industry were published in early 2018 and the updated survey was open July and August this year. A few key takeaways from the survey responses revealed that:

  • One-third of credit unions have holistically embraced data as strategically important.
  • One-third are moving forward slowly on a more departmental or project-by-project basis.
  • One-third do not view data as important to their business strategy.

Kirk Kordeleski, senior managing partner and chief strategy officer at BIG Consulting, noted these revelations means some organizations are investing in products with no clear path to value. “BIG’s survey revealed that only 10% of credit unions believe they are on an equal playing field with their banking and fintech competition regarding their all-important data strategy. Ninety percent are two or more years behind what they feel is the industry benchmark.”

While more than 60% of respondents indicated they have, or are implementing, data analytics products, 65% admit they have neither a roadmap nor a strategy regarding the use of data analytics in their organizations. BIG maintained, “There’s a need for strategy. Only 35% of CUs have created a roadmap and 60% of credit unions see implementation taking two or more years or do not even have a specific timeline.”

The industry acknowledged that it is two or more years behind their competitors’ use of data as a competitive tool, and BIG’s view is that competitors are likely to be even further ahead. These credit unions understand to better serve members, grow new accounts, add loans and make better decisions, data is a strategic asset: a virtual pot of gold buried underneath their archaic tech architecture and cultures.

BIG believes the trailing third still not prioritizing data as a strategy and not making plans to move forward with data analytics are going against every marketplace trend. Data is a strategy, and to effectively implement it requires a skillset that needs to evolve across the culture. It cannot be implemented overnight.

Credit unions believe data strategies are required to compete in the financial services marketplace. The survey shows over 60% of credit unions have invested in data tools and skills, are moving more quickly to implement analytic strategies, and are investing long-term. “The challenge that remains is that two-thirds of credit unions appear to be either looking at data analytics as short-term projects (analytics used in silos/departments) or are not yet investing in analytics at all.”

Jeremey Sterner, vice president of information technology at the $83 million York, Penn. Heritage Valley Federal Credit Union, a survey respondent, said, “Data analytics is a major part of our strategic discussion. We recognize that we have reached a point where a data warehouse is a necessity. Continuing to build out our own solution does not make sense for us, anymore. We are in the beginning stages of developing a data analytics roadmap that will lay out our journey to become a data-driven organization.”

“The biggest challenge for credit unions is that data analytics ROI can take time to realize,” Sterner added. “Rather than just looking at the ROI, I look at the end game. It’s clear we need to use our data to be competitive. The reality is it is an evolving process, so there really isn’t a finish line. We just need to start.”