You’ve made the decision—you’re all-in: You are finally going to start using data analytics to achieve your portfolio management goals.
Congratulations! Pull up a chair, you are officially part of the “big data,” “fintech,” 21st century. Nothing will stop you now from taking on the world and blowing your goals out of the water!
Now, back in reality, one problem remains. No matter how many buzz words you learn or hyped-up platitudes you use, you don’t really know how to convert data to strategy, and strategy to value-creation.
So, let’s start with a basic question: What products serve your members best?
It’s hard to know where you are going if you don’t know where you stand. Thus, the first priority for a credit union when jumping into your pool of data is to know your portfolio:
- What products do you offer?
- Which of these products are profitable?
- Which products are a good fit with your membership?
- Are some loan products riskier than others?
This may feel overwhelming, so it is important to start small. Focus on answering basic questions with your data and build from there.
It is also important to convey your findings in a way that is focused and easy to comprehend. Twenty Twenty Analytics has solved hundreds of client problems by simply understanding the question being asked, and letting the data tell the story.
So, great! You have built a model and “know” your portfolio. Now what?
Now is the time to ask a second question: What strategies return the most value to your membership?
Here are some common situations we’ve seen when helping clients answer this question:
• Situation: Portfolio analytics tell you that your portfolio is largely made up of auto loans, and that direct auto lending is more profitable than indirect lending.
• Strategic Response: Here is an opportunity to use data to identify strong candidates for auto loans.
You can pre-screen your members, identifying those who have had their vehicles for a long period of time and meet your credit quality criteria, and proactively market to them.
Proactive marketing keeps members from kicking the tires with other lenders and builds goodwill with members.
• Situation: Many of your credit card members are not using their line. Several of these cardholders have low credit limits on your card despite strong credit and no history of delinquency.
• Strategic Response: Here is an opportunity to increase the credit lines of members exhibiting the ability to pay. Increasing their lines will increase cardholder use, generating value.
• Situation: Portfolio analytics indicate you have a large number of members who have a first mortgage, and many of these properties have appreciated significantly from origination.
• Strategic Response: Here is an opportunity to evaluate members who do not have a home equity product. You can screen for credit worthiness and proactively market a home equity product.
By using analytics to take advantage of what you know about your portfolio and implementing strategy accordingly, you have now earned your seat at the “big data” table. While this may not qualify you for taking on the entire world, it is likely that using your portfolio’s data to affect strategic change will require you to dive back into the water to search for some new goals.