Why analytics is a credit union industry opportunity

Analytics has been a prevalent topic for many years but never more prevalent in the credit union industry than it is today.  Just a few years ago, the topic hardly came up, but in 2017, it’s hard to find a credit union not talking about, or planning and budgeting for a proper analytics solution.  This excitement about analytics has gathered widespread attention, involving industries, companies, and individuals new to the field of analytics.

Now that there is a lot of buzz around the topic, it is important to understand whose challenge, but more importantly, whose opportunity analytics is.  Analytics is the credit unions’ opportunity.  Not just one individual credit union, but all credit unions – the industry or movement.

Credit unions need to understand the value of their data, not just as one credit union’s data, but the value of all credit union data.  Alone, as a single credit union, how do we compete with U.S. Bank, Wells Fargo, and Citi Group, not to mention the FinTechs like SoFi?  We can’t.  The answer to our biggest challenges is something that is inherent to the credit union industry – collaboration.  While we might not be able to fully execute on analytics alone, we can do it together – as ONE.

One of the best things that the credit union industry has ever formed is the Credit Union Service Organization (CUSO).  Doug Petersen, President/CEO of Workers Credit Union says it best:

“[CUSOs] provide a means to an end – allowing credit unions the capability to fulfill the financial needs of their members in a cost effective environment through efficient delivery channels.  Plus, they attract the brightest and most innovative minds to the board table, bringing best practices of credit unions across the country, which is a priceless experience.”

The CUSO model is exactly what the credit union industry needs in order to tackle the analytics challenge and take advantage of the opportunity.  CUSOs leverage the power of collaboration that already exist within the industry to offer several benefits such as:

Economies of Scale

Economies of scale are achieved when a company produces goods and services on a larger scale while simultaneously lowering average input costs.  CUSOs achieve economies of scale by producing goods or services for several credit unions rather than having a single credit union attempt to replicate the same benefit.  By utilizing the power of collaboration, CUSOs can specialize on a given product or service, which enables them to provide higher-value products and services at a much lower cost.

Competitive Advantage

CUSOs offer credit unions the ability to remain competitive by improving efficiencies and producing a wider array of products and services that would be unobtainable without CUSO collaboration.  They enable credit unions to acquire scale and market power along with other resources, such as capital and staff that far exceed their individual sizes.  For example, an analytics solution can take about three years to build and has an initial cost of about $2,000,000 with an additional cost of $200,000 per year to support. With a CUSO; however, credit unions can get the same solution for less than $50,000 upfront and only $40,000 per year to support.

Multiple Credit Union Perspectives

The collaboration of several owners spurs more innovative products and services because there are several different viewpoints, many of which are from the most innovative minds in the industry.  Unlike most other vendors in the credit union space, CUSOs have board members and owners that represent the industry as a whole.  “There can be some overlap with the credit union, but the management team can’t be 100% the same,” says Guy Messick, Attorney/Partner at Messick & Lauer and General Counsel to NACUSO.  This is incredibly beneficial because there are more minds contributing to what’s best for the industry.

For Credit Unions, by Credit Unions

Owners of CUSOs are, themselves, credit unions. Therefore, it is in their best interest to do what is best for credit unions.  Rather than focusing solely on profit, CUSOs also focus on the overall well-being of credit unions and their members.  Credit unions, not shareholders, are in control of the CUSO’s product development roadmap and the CUSOs deliver on the roadmaps by leveraging expertise of credit union executives.  Using ideas from the best and the brightest in the industry, both large and small credit unions, ensures best practices are shared and practiced. This results in the best products and services available for the industry.

Ownership

This is easily the most important aspect of a CUSO, especially as it pertains to data and analytics.  WHO OWNS THE DATA and WHO OWNS THE TECHNOLOGY – it needs to be the credit union industry.   When, or if, credit unions start to give away their data and/or the technology that effectively stores, mines, and utilizes their data, they not only give away the value of their data, but they also give away what makes them who they are – their members.  When we start to give away our member data, we start to give away our members.  This industry must hold onto our most important asset, our members.  Which in 2017 and beyond, is their data and the technology required to leverage that data.

For all of the reasons above, the CUSO is the only way credit unions can successfully execute on analytics.  Credit unions must realize that this is much bigger than one credit union.  This is an industry opportunity and it many ways, analytics, and digital transformation, is the demise, or prosperous future for credit unions – in all hopes, the latter.