How Credit Unions can Enhance Member Service and Loyalty by Leveraging Business Intelligence and Analytics

Getting to the 360° Member View

2 Getting to the 360° Member View

Introduction The competitive landscape for credit unions is often challenging. Many banks and insurance companies have far greater resources, and they are investing in business intelligence and analytics to overcome perceptions of impersonal customer service, irrelevant promotional offers, and inefficient opera-tions. They are investing in 360⁰ views of their customers so that they can offer per-sonalized service, highly-relevant product/service offerings, easy-to-find account status information, and consistent treatment across all channels. These investments are made in order to to differentiate on service, and thereby meet elevated custom-er expectations in today’s multi-channel financial services industry. To keep up, credit unions generally need to be at least as good at personalized and consistent member service as their larger bank and insurance company competitors.

In our experience we’ve found that credit unions and other financial institutions a face common challenge: information about members and their financial dealing is scattered across a number of systems. While each company is different, a common theme is that all these companies have so many members or customers that it is difficult to treat them as individuals who matter. As a result, the senior executives and managers we’ve worked with were firmly fixed on the need to leverage BI and analytics to enhance the member/customer experience, meet competitive threats, and man-age economic results. One example of where this is being done is Spokane Teacher’s Credit Union (STCU). As reported in Busi-ness Intelligence Journal, STCU serves 82,000 members in Washington and Idaho. It leverages a 360⁰ view of its members to ena-ble its front-line employees to serve members in a highly personalized way that anticipates their needs and exceeds their service expectations. By leveraging simple business intelligence and analytics applications, STCU is able to provide the same level of highly personalized services that its larger competitors can – and that its members expect.

In addition to the general challenges posed by larger competitors, many credit unions face a unique set of resource constraints when it comes to investing in information technology and business process change. Fortunately, modern BI and analytics technolo-gies are within the reach of all but the very smallest credit unions. Armed with a practical BI strategy and lower-cost tools, there is no reason credit unions cannot fully capitalize on a wide range of BI and analytics opportunities that span the full spectrum of cred-it union operations. To stimulate your thinking, we‘ll highlight some of these opportunities in the coming pages.

BI and Analytics Opportunities for Credit Unions In the course of our work with credit unions and other financial services companies, we’ve noticed two cross-cutting trends. While each company’s needs and priorities are different, in every case, senior executives, managers, and analysts described a need for better information and analytical capabilities so they could enhance and personalize member (customer) service and improve day-

to-day operations across a range of business functions. Some of the business challenges our clients shared are highlighted below .

How Credit Unions can Enhance Member Service and Loyalty by Leveraging Business Intelligence and Analytics

Getting to the 360° Member View

By Steve Williams

President, DecisionPath Consulting

Investing in 360⁰ views to offer:

Personalized service

Highly relevant product/service

offerings

Easy-to-find account status infor-

mation

Consistent treatment across all

channels.

3 Getting to the 360° Member View

Challenges for Top Executives All of the top executives we’ve engaged with reported that a lack of timely, high-quality business information and business analyses made it a struggle to efficiently measure, man-age, and improve credit union performance. They lacked relevant information and analyses about member retention, membership growth, loan origination performance, branch per-formance, call center performance, web performance, financial metrics, promotional cam-paign performance, product penetration, and so forth.

Having BI in the form of scorecards and dashboards would allow them to quickly review Key Performance Indicators (KPIs) and manage key activities on a daily basis, as opposed to hav-ing to having to wait till after the end of a month to see standard reports that raise more questions than they answer. Scorecards and dashboards also provide a common perfor-mance measurement framework for use across the credit union - and a common language for executive teams to use for problem diagnosis and resolution. Lastly, through automated calculation of KPIs they overcome the common problem of using KPIs simply because they are easily gotten using largely manual methods. Experience has shown that having the right KPIs focuses management attention on the critical business processes and activities that drive overall business performance.

Challenges for Lending Executives, Managers, and Analysts The basic lending task is to make as many good profitable loans as possible given avail-able capital, and to optimize collections when loans are in arrears. The challenge is that the member and market information needed for underwriting, product profitabil-ity analysis, pricing, promotion, and collections is found across numerous internal and external systems. This makes it difficult to bring all relevant information about mem-bers and markets into the lending decision, into pricing decisions, and into collections strategies when needed. Absent such information and appropriate analytical tools, lending decisions may not be fast enough to be competitive, loan offers may be over-priced in relation to the market or underpriced in relation to default risk, promotions may be misdirected and/or ineffective, and collections resources may be less produc-tively deployed.

To overcome their challenges, lending professionals want BI in the form of 360⁰ views of members, product default rates, product profitability, loan originations, credit card offer acceptances, activations, and utilization rates, collections performance, mem-bers’ product holdings, loan origination cycle time, delinquencies, and loan application-to-funded ratios. This information – coupled with advanced statistical methods and predictive analytics – enables active measurement and management of lending perfor-mance, which of course is critical for financial performance. BI and analytics are equal-ly critical for building long-term member relationships based on making more good loans, working with deserving members facing financial challenges, and providing

more of the products and services a member may need over time.

“I need better information to ensure our members are satisfied at what I refer to as ‘key member moments’ - such as when they apply for an auto loan or when they call the call center. I also need a scorecard or dashboard that lets me see at a glance how the credit union is performing the processes that have the biggest impact on customer satisfac-tion.”

Chief Executive Officer

“One of our challenges is match-ing our pricing and promotional offers to members in a way that is fair and relevant to individual members, responsive to market dynamics, and fair to the credit union. Simply put, we don’t want to be making offers to members for loans they don’t qualify for, and we don’t want to be setting prices too low or too high. The underlying challenge here is that the information we need about members is spread across too many systems – it’s hard for us to even know how many of our prod-ucts or services a given member has.”

Executive Vice President, Lending

4 Getting to the 360° Member View

Challenges for Marketing Executives, Managers, and Analysts Across the broad, marketing professionals we’ve engaged reported that it was a major chal-lenge to personalize their credit unions’ interactions with their members. One root cause of that struggle is that member data is contained in different business systems that are not designed to easily share information, thus making it difficult or impossible to see all facets of the member relationship when interacting with a member. The other root cause of the struggle is a lack of visibility into which touch points individual members prefer for which types of interactions.

To overcome these challenges, marketing professionals want comprehensive information about all aspects of the relationship with each member – the so-called 360⁰ view of the member. Having BI based on such member information was seen as a means for more fine-grained segmentation of members, more sophisticated modeling of members’ propensities to need specific credit union products and services, more laser-focused promotional offers delivered via members’ preferred channels, and more personalized service by branches and call centers. Having the 360⁰ view of members allows credit unions to better achieve reve-nue growth, member satisfaction, and member loyalty.

Challenges for Member Service Executives, Managers, and Analysts A fundamental member service challenge for credit union and banks is that relevant member information is stored in multiple systems. For example, a teller in a branch or a customer service representative in a call center may have to access multiple systems to be able to an-swer members’ questions about their accounts or assist them in doing what they need to get done. And, it may be difficult for a member to use to use his or her preferred channel to check account status or transact business. This challenged is compounded by the fact that channel performance information is also fragmented across system. All of these challenges have an impact of perceived service quality, and they are likely to impact member satisfac-tion and member loyalty.

Our interactions with member service professionals were consistent in that better business intelligence and enhanced analytics were seen as key to meeting the challenge of personaliz-ing member service and meeting member expectations across all touch points. Common stated needs were for 360⁰ views of members, branch performance scorecards, call center scorecards, web site performance metrics, member retention trends, product penetration within the membership base, new member acquisition performance, and operational pro-duction metrics. The underlying member data to measure, manage, and improve member service is also the same data needed to personalize every interaction across every touch-point – thereby providing a seamless and unified member experience.

Challenges for Operations Executives, Managers, and Analysts Whether a given credit union is small or large, a large number of financial transactions and member interactions have to be cost-effectively and professionally handled every day. While some of these are handled automatically at ATMs and web sites, others in-volve personal interactions with credit union employees. With transactional data scattered across multiple member-facing and back office systems, operations profession-als are challenged to have the right number of employees in the right place at the right time – which of course has an impact on member service. Essentially, their operations planning processes suffer from a lack of integrated information about key variables such as volumes and costs by time of day, type of transaction or interaction, member service touch point, and other variables of interest.

Faced with such challenges, the operations professionals we engaged with wanted BI in the form of multi-dimensional structured and ad hoc analysis capabilities to assess and

“We use the Radden six seg-ments for member segmenta-tion, and what we’ve found is that we could be much more cost-effective with our mar-keting plans if we could do finer-grained segmentation. A 360⁰ view of each member would be huge because we could use it at every touch point to enhance the member experience.”

Vice President, Marketing

“A key challenge we face as an organization is that our interac-tions with our members are being rapidly transformed by new tech-nologies and new service expecta-tions. Doing business with us needs to be seen by our members as one seamless, unified, and per-sonalized experience – regardless of whether they come into a branch, phone into the call cen-ter, visit our web site, or interact with us via social media.”

Executive Vice President, Member Experience

“Our operations are challenged to opti-mize member service and cost-effectiveness because we don’t have the information and analytical applications we need about members, demand, work-power, and cycle times. This adversely impacts the cost and quality of front-line service and back-office processing. The information gap also impacts our call center service levels and our ability to suggest appropriate products and ser-vices to our members when they phone in.”

Vice President, Operations

5 Getting to the 360° Member View

improve workflow and productivity and for workforce planning and optimization. Variables of interest included turnover rate, time-to-fill positions, labor productivity, loan production, channel workloads and service levels, collections performance, and item pro-cessing – to name a representative sample. Regardless of industry, managing and improving operational performance is about balancing demand, service levels, quality, cost, productivity, and asset utilization. By providing high-quality integrated information and multi-dimensional analyses, business intelligence and analytics are powerful tools for optimizing credit union operational per-formance and thereby enhancing member satisfaction.

Summary: Meeting Credit Union Challenges Credit union management teams want better BI and analytics as a key tool for handling the inherent complexity of managing thou-sands of member relationships, across multiple physical locations, across multiple member interaction channels, and with a frag-mented picture of which members have which products and services. It is difficult to optimize the balance between member ser-vice and profitability when credit unions lack a comprehensive integrated view of the facts of their business. BI and analytics help credit unions overcome such challenges and continue their tradition of personalized member service.

Getting Started with BI and Analytics Depending on how you look at it, BI and analytics have been around for at least 20 years by now. The term “analytics” has been in use for at least a decade, and it simply encompasses the concept of computer-assisted data analysis using statistical and operations research methods that have been used for decades. Further, it is important not to be confused or diverted by the term “big data analytics” – which is basically about storing a bunch of pictures, videos, web logs, text messages, tweets, and cell phone location data so that so-called “data scientists” can try to figure out how to derive actual business value from all this unstructured data. Most of our clients are leaders in their industries, and most have not fully-leveraged the traditional business information they have had for years, and thus investing in “big data analytics” is seen as a more speculative back burner idea.

Because BI and analytics have been around a long time, it is likely that even smaller credit unions have some experience with them – most likely in the form of reports, and potentially with some advanced uses. That said, even the largest credit unions have la-mented the kinds of challenges described above, so there is work to be done. In the table on the next page (Figure 1), you may be able to get a feel for where your credit union stands in its use of BI and analytics.

While many credit unions have pockets of BI and analytics – some quite sophisticated – we have also found that there is a need to take the next steps toward systematically using BI and analytics to improve member service, enhance profitability, and increase dividends.

Achieving these things requires a mix of:

business-driven process change;

IT enablement of BI and analytics; and

cultural change

Of these success factors, the IT part is often the central focus of organizational efforts, which is necessary of course. That said, to get a return on an investment (ROI) in BI and analytics credit unions have to increase revenue, reduce costs, or both. That requires business-driven process changes so that BI and analytics are used as intended within the business unit or units. For example, hav-ing access to a 360⁰ view of members can result in an ROI if marketing changes its propensity models and uses finer-grained seg-mentation for promotional purposes, or if lending uses that information to improve its underwriting decisions. Getting an ROI also requires cultural change to embrace more sophisticated and structured uses of information and analyses to complement – but not replace – business intuition and experience.

For example, a call center manager may be used to scheduling member service representatives based on his or her recollection of past demand patterns and based on wanting to have extra capacity on hand just in case it’s needed to ensure top-rate member service. With BI and analytics that leverage call center automatic call distribution system data, it would be possible to inject more structured demand analysis models into the scheduling process, but that would only succeed if there is a cultural change to em-brace the idea that more precise data can result in better scheduling without sacrificing member service. These ideas may sound obvious, but we have found in practice that companies often struggle with one or more of these dimensions of success.

6 Getting to the 360° Member View

Figure 1: How Various Credit Union Stakeholders can Leverage the Various Forms of Business

Intelligence and Analytics

Standard Pre-

formatted Reports

Scorecards &

Dashboards

Multi-Dimensional

Analysis (OLAP)

User Defined Analyses

& Ad-Hoc Analyses

Advanced Analytics &

Predictive Analytics

Used to present basic high-level information about business performance, revenue growth, and/or oper-

ating performance to detect problems and/or opportunities. Often requires lots of manual data acquisi-

tion and manipulation by analysts to generate such reports.

Analyses performed by others & presented to executives and managers. In some cases, execu-tives and managers do their own analyses be-cause tools are easy to learn. Analyses are part of the process of responding to problems and/or opportunities in business performance, revenue growth, and/or operating performance.

Used to determine root causes of problems in business performance, revenue growth, and/or operating performance. Also used to understand opportunities where performance is much better than expected. Analysts either select parameters of interest to define the analysis or directly access data with tools of their choice.

Performance scorecards and dashboards pre-sent executives with the big picture of business performance, revenue growth, and/or operating performance, highlighting unfavorable variances for prompt attention and identifying opportuni-ties for management consideration.

Analytical scorecards and dashboards are the launching pad for pre-staged multi-dimensional analyses used to determine root causes of prob-lems in business performance, revenue growth, and/or operating performance. Also used to understand opportunities where performance is much better than expected.

Analyses performed by others are presented to executives. In some cases, executives do their own analyses because tools are easy to learn.

Advanced OLAP tools enable users to explore and analyze business performance, revenue growth, and/or operating performance problems and/or opportunities from multiple user-defined per-spectives. For example, examining unfavorable sales variances by customer, product, and distri-bution channel.

Sophisticated analyses of performance problems or opportunities

with respect to business performance, revenue growth, or operating

performance are presented to executives and managers, many of

whom will never perform these kinds of analyses themselves.

These sophisticated analytics are applied in data-intensive environ-ments to develop deeper under-standing of business perfor-mance, such as demand analysis and forecasting, market basket analysis, customer lifetime value predictions, and many more.

How Stakeholders Use BI & Analytics

General Management

Executives

Functional

Executives

Functional Directors & Managers

Analysts

7 Getting to the 360° Member View

In order to overcome the often-complex challenges associated with leveraging BI and analytics, we recommend that credit unions develop a comprehensive BI and analytics strategy and a pragmatic roadmap. The strategy should be based on:

A determination of the strategic importance of BI and analytics by top executives. The geographic areas where credit unions operate vary in competitive intensity, and the number of members varies by credit union. In general, as the complexity and competitiveness of a credit union’s environment increases, so does the strategic importance of BI and analytics.

A clearly-defined mission for BI and analytics based on the strategic importance to your credit union and on the current state of BI and analytics use by your credit union and your competitors. The mission statement needs to go beyond vague generalities by articulating empirically-observable future-state usages of BI and ana-lytics for specific business purposes, such as increasing member retention, or im-proving offer acceptance rates, or any of the many BI and analytics opportunities for credit unions discussed earlier.

A portfolio of business-driven BI and analytics opportunities aligned to specific business processes to be improved and prioritized according to such factors as busi-ness impact, execution risk, competitive urgency, and amount of change required. As examples, it may be important to do a small “easy win” project to get the ball rolling, or it may be important to improve member service by leveraging a 360⁰ view of each individual member relationship.

An empirical analysis of BI and analytics readiness that describes the current state of BI and analytics at your credit union and that identifies any relevant gaps in abil-ity to align and govern a BI and analytics program, in ability to manage business process and cultural change; and in ability to execute the technical tasks that are required for delivering BI and analytics to the business users.

A BI and analytics program plan/roadmap that accounts for all the organizational, management, business, and technical activities that must be aligned and coordinat-ed in order to achieve BI success. Ultimately, BI and analytics strategy comes down to execution, and thus a pragmatic pro-gram plan/roadmap requires a general management perspective that bridges business and IT considerations and that takes account of company-specific readiness factors such as the potential need for cultural change, and/or for training in business process improvement, and/or for investment in new technical tools and skills.

Our experience in the BI and analytics (and now big data) field has confirmed that the above factors are directly related to success-fully leveraging these great tools for enhancing business performance. Accordingly, we recommend that credit unions engage in a systematic process to develop and document a BI and analytics strategy as a preferred way to get started.

Credit Union BI and Analytics – A Big Win for Members The unique relationship between a credit union and its members makes BI and analytics a potential big win for members. Unlike with a bank and its customers, the economic interests of your credit union and its members are perfectly aligned. Growth in membership and enhanced economic performance translates to the potential for increased dividends. BI and analytics can impact the cost-effectiveness of many of the core credit union business processes, and thus it is arguably in members’ interests for their credit unions to invest. And if your credit union’s operational environment is complex and competitive, investing in BI and analytics may well be key to long-term health. Fortunately, the past two decades have allowed time to figure out what works and what is important in the BI and analytics field, and credit unions can leverage those lessons learned to enhance member service and loyalty and to stay competitive in a competitive, multi-product, mul-ti-channel world.

Your BI & Analytics strategy should

be based on:

A determination of the strategic

importance of BI and analytics

A clearly-defined mission for BI

and analytics

A portfolio of business-driven BI

and analytics opportunities

An empirical analysis of BI and

analytics readiness

A BI and analytics program plan/

roadmap

8 Getting to the 360° Member View

About DecisionPath Consulting

DecisionPath Consulting specializes in helping companies use business intelligence, analytics, data warehousing, and business per-formance management systems to achieve their targeted business results. From strategy and program planning through technical execution, we have the experience needed to jump start – or restart – your business intelligence and analytics initiative. Over the past 14 years, we have had the privilege of working with some of the most successful companies in America. In the financial ser-vices industry, we have done BI and analytics strategy engagements with Navy Federal Credit Union, Partners Federal Credit Union, Northwestern Mutual Life Insurance, Principal Financial Group, and Legg Mason. For questions about this white paper, please con-tact Steve Williams at steve.williams@decisionpath.com.

For more information, please visit our web site at www.decisionpath.com