With an uncertain economic outlook, credit unions need data to determine what their members are experiencing. Economists are optimistic and pessimistic. Those fearing an economic downturn focus on:
- Lower housing prices
- Decreased investment valuation
- Shrinking savings
- Weaker labor market
They see these factors as the harbinger of a recession.
Analysts on the positive side believe consumers will continue to spend excess cash from stimulus checks and higher wages. Businesses with solid balance sheets will stumble through a period of low economic growth, but the US economy will narrowly escape a recession.
These conflicting outlooks make setting strategies for 2023 more challenging. Credit unions must decide if their credit portfolios are at risk.
They need to determine if their members are following market trends. Only through complete business intelligence (BI) can the banking sector chart a path through 2023.
Here’s what you need to know.
Business intelligence software collects, analyzes, and processes volumes of data. The information may be current or historical. It can be internal or external. The results provide data-based insights to help with decision-making.
Business intelligence tools provide credit unions with visual displays of data, enabling quick and data-driven decisions, without the need for extensive reporting or analysis.
BI applications range from understanding a member's journey to evaluating cybersecurity risks. They can highlight inefficiencies and identify trends. Let's look at ways credit unions can use BI tools in their digital transformations.
The financial sector holds a wealth of information; however, much of the data is inaccessible. It's not stored in databases or fixed-length records that machines can read. The data, such as emails, documents, and presentations, are unstructured and unusable for most financial institutions.
About 80% of the data stored by the banking sector is not utilized. Only 3% of the industry is looking into using unstructured data. Add legacy systems to the mix, and data acquisition becomes a technical challenge.
Business intelligence solutions can extract data from multiple sources, making more data available for analysis. Some can even ingest unstructured data to incorporate into their analysis.
With more data, BI tools can deliver better insights. However, credit unions must have the computing power to deliver those insights. That's why more organizations are looking to the cloud.
BI tools let credit unions schedule and distribute reports to execute without user intervention. Some tools will send the information to a dashboard for viewing.
Automating reports makes getting information to the appropriate people easier and as quickly as possible. For example, weekly reports on new account openings, new loan applications, and loan approvals could be scheduled for late Saturday or early Sunday. Employees could look at the data early Monday morning.
Everyone would have the same information. If one group ran reports on Friday, they might have different data than those running reports on Monday.
Automated reporting is more efficient, takes fewer resources, and reduces errors.
Data collected throughout a member's journey can provide crucial insight into what is and isn't working. Tracking how many members start a loan application but never finish can highlight possible confusion, especially if most members abort the process at the same point. Web designers can adjust the process’s flow to make it less confusing.
Continuing to track the KPI can show whether the correction improved the experience. If not, further analysis may be required to pinpoint the issue. It might be as simple as rewording instructions or changing navigation.
BI can also look at member age and income to determine the demographic applying for loans. The insights could form the basis of a marketing campaign, or they might identify a new strategy to increase loan approvals.
BI software processes data much faster than an employee. It can look at multiple data points in seconds to determine the level of risk in a transaction or a loan application. Comparing new information to historical data can identify anomalies that might indicate potential fraud.
For example, cybercriminals may initiate a minimal-value transaction to determine if a card number is valid. They will use the card for higher-value items if the transaction is authorized. Analyzing transaction data can identify the sequence and flag the card for investigation.
The more data, the better BI delivers insights that may be difficult to see without the ability to quickly assess multiple data points. That ability helps credit unions reduce risk, detect fraud, and improve security.
BI solutions can segment members for personalized marketing campaigns. BI can divide members by age, income, or location.
It can group members according to the banking products they use. These capabilities enable credit unions to develop targeted campaigns that increase conversion rates.
BI can identify members interested in a home equity line of credit. With the BI-provided data, marketing could send emails to those members with much of the application data pre-filled.
This targeted campaign generates recommendations for members most likely to need the product. Completing as much of the application as possible for the member lets them apply with the click of a button.
The technology helps credit unions market the right product to people at the right time. Efficient tracking can reduce overall marketing costs while increasing loan applications.
Automating report generation frees staff to focus on customer-centric tasks. Through segmentation, BI can save sales and marketing costs. Instead of sending a generic email to everyone, credit unions send directed emails to those most likely to respond.
BI solutions can identify possible fraud, saving credit unions the expense of researching questionable transactions. Reducing risk can also save on insurance costs. According to the Federal Trade Commission, online fraud has increased by over 50% since 2021.
Incorporating advanced technologies, such as machine learning, with BI tools enables solutions to deliver actionable insights that can help decision-makers. You can use the software for "what if" analysis that forecasts the most likely outcome of a decision.
Using historical and existing data, BI can reveal what happens when 20 new accounts are opened, or six new loans are added. The tools can predict increased revenue and expenses.
They can indicate when you’d need additional staff. This information provides data-driven results for decision-makers to use.
Microsoft's Power Business Intelligence (BI) and Salesforce’s Tableau are the leading analytic and business intelligence (ABI) platforms. However, knowing which solution to choose can be overwhelming. Here are five factors to consider when looking at a BI platform.
Before looking at a solution, credit unions should identify their existing data. Then, they should look at what they want from their data. This process should highlight additional data sources when looking at a BI solution.
If stored data is in disparate systems, a BI solution with API or data cleansing capabilities may be an appropriate selection. Where it’s stored impacts which resolution to select. A cloud-native application may provide operational synergies if data is in the cloud.
The financial sector is one of the most regulated industries. BI solutions must adhere to those mandates and standards regarding storing and using protected data. They also need strong authentication and authorization capabilities to prevent unauthorized use.
Credit unions should look for solutions that follow a least-privilege and zero-trust model. With these best practices, users (whether human or machine) requesting access are vetted before granting permissions. Strong cybersecurity should be in place, given the volume of data BI applications use.
Data increases exponentially. Once credit unions realize their data's value, they find new ways to leverage it to reveal more insights.
As they add more members, the amount of data increases. Solutions that scale ensure that credit unions can continue to gain BI-generated insights no matter how fast they grow.
If solutions cannot grow, they limit the data that can be accessed and stored. BI needs new and existing data to deliver the best results.
It also needs resources to perform its analysis and calculations. Credit unions need to assess a solution's ability to scale as data volumes increase.
Credit unions should evaluate a provider's customer support.
When a problem occurs after hours, can you contact customer support? Does the provider offer multi-channel support such as email, chat, or phone? Is there a user portal or knowledge base for self-help services?
With economic uncertainty, higher costs of money, and a possible recession looming, budgets will be tight. Credit unions should look at the price of each solution. Subscription services may offer financial terms that do not impact budgets as much as on-premise solutions.
As credit unions face the challenges of an uncertain economic outlook, they must make difficult decisions. Business intelligence solutions, such as Cotribute's cloud-native platform, can help provide the necessary analysis to chart a path through 2023. If you're looking to thrive in the coming year, schedule a demo to see how Cotribute can help.