Written by Keith Oelkers, Chief Data Scientist, DecisivEdge™
Data science is revolutionizing business, with analytics solutions opening up previously-unexplored areas of growth and transformation. However, not all credit unions are capitalizing on the power of data science.
According to a CUNA Mutual Group Member Survey, 73 percent of credit unions view analytics through a positive lens, seeing it as a way to change for the new fiscal environment. Unfortunately, that power to transform may be largely untapped.
Based on a survey of 1,800 Credit Unions and Banks by MX, 92 percent of credit unions fail to effectively leverage their available data. This failure not only means that current investments in technology-based solutions are underdeveloped, but it also means that credit unions are not realizing gains in growth and acquiring and retaining members.
The simple solution is to use data science coupled with cloud computing, which would allow credit unions to leverage the insights offered by analytics while still maintaining the security and flexibility they need to protect clients and assets.
Data science: Will it hurt?
Many decision-makers at credit unions have already been exposed to the ins and outs of data science. How analytics can change businesses has been the topic of many an article (and book). It is perhaps not so much that credit unions are not interested in data science and cloud computing, but rather fear the unknown.
Newer technologies and ways to doing business have risen like a phoenix from the ashes. There are now a quite a few trusted data science businesses that make your business’s success their primary goal. They will partner with your credit union to really understand its needs and how you can leverage your data. Cloud providers are making it easier than ever to capitalize on their sheer processing power to uncover new insights about your business without ever owning your own server.
Is it safe?
Security is an ever-present concern, and credit unions have the right to raise red flags over cloud computing. After all, there have been some very big data breaches in the past that not only resulted in the loss of proprietary and customer data, but also damage to the credibility of the company that was victimized by hackers. Since your credit union’s data is one of its critical assets, you want to make sure that every dataset is kept under lock and key.
The best thing about cloud computing is how it has evolved. As the saying goes, science is self-correcting, and the businesses that provide cloud services have been doing quite a bit of work on correcting security issues. For example, providers utilize end-to-end encryption to ensure the safety of all data.
Applications that are used in the cloud can be completely containerized, creating a layer of isolation. Finally, since cloud firms know that your data is critical to your operations, they keep their own security teams up-to-date. Not only does this mean that you can rest easy about security, but it also offloads the hassle of trying to hire your own in-house team.
Flexible, scalable solutions
Credit unions go through cycles just like other businesses, and so their technology needs fluctuate. It might be tempting to put off investments in analytics and data science simply because the perceived need appears to be low. This, however, would be a mistake.
While it’s true that there are peaks and valleys at every business, imagine this: You offer the right product to the right person exactly when they need it. Now imagine doing that for every single member of your credit union and then using that ability to garner new ones.
Unbelievable? Not for credit unions using data science. Many perceptions about customers are based on a traditional understanding of how they view and manage their money. However, new studies have shown that younger generations handle money very differently than how older generations did.
What this means is that your credit union needs flexibility in its technology and analytics needs. There will be times of the year when you will need extra number-crunching. There will also be times when you are simply employing what was learned from your earlier data.
That is part of the beauty of cloud computing. You can easily increase and decrease the amount of processing power according to your needs. Since you do not need to own the equipment (like a vast server farm) or maintain it (everything breaks eventually), cloud computing offers you the best computing value for your technology dollar.
Getting a real competitive edge
Some credit unions may be shying away from the marriage of data science and cloud computing for a variety of other reasons. They may be unwilling to align their current processes with a new paradigm. Or they may be uncomfortable about using analytics results in new ways. These are very human responses to novelty and change, but they can be costly.
Credit unions do not operate in a vacuum. Unfortunately, it seems that they may be measuring themselves only against other credit unions. As noted in an article in Credit Union Times, the actual number of competitors is much larger than that, encompassing banks and a plethora of Fintech startups.
Many credit unions can be overshadowed by the power of big banks, but by tapping into the power of the cloud, they can compete on the same playing field. Powering decision-making with data science to deliver data-driven solutions gives them a leg up on fintech companies.
Remember that example about giving customers what they needed when they needed it? Imagine the power of putting your credit union’s offers into the actual hands of a customer (via smartphone) while she is house hunting. Or expanding your definition of who your “best” customers are through analytics, creating unique marketing campaigns at each branch to get the most local attention.
Pairing data science with the cloud is a critical way to leverage your credit union’s data to improve acquisitions, keep current members happy, and experience growth. Every business must be data-driven, but what gives your business an edge is its own proprietary data. Data-driven transformation can seem a little daunting, but it is rapidly becoming the best way to differentiate your credit union in a crowded marketplace.
If you enjoyed this article, you might also like to learn about our Data Science As A Service offering.
About the Author:
Keith Oelkers brings 20 years of experience in Data Science and Statistical modeling. He understands the power of Data Science and big data and how it can be used to enhance the bottom line. Keith has spent his career building solutions that enable business leaders to make better decisions. He can breakdown complex statistical terminology and provide organizations with a clear vision on how statistical modeling and Data Science should be used.
Keith has been in leadership roles in Data Science/Modeling at Aetna, MBNA/Bank of America, Sigma Marketing Group, and Global Crossing. In each of these roles, he has developed custom solutions to support key business objectives. Keith has a fundamental understanding on how Data Sciences can assist a business in increasing revenues or decreasing costs.
Keith has a MA in Economics from Syracuse University, a MS in Applied Mathematical Statistics, and a BS in Economics from Rochester Institute of Technology.