Business Intelligence Requires Good Accessible Data
Business Intelligence (BI) is becoming increasingly necessary for credit unions, not just for analyzing loan portfolio risks, but for making better strategic decisions. In other words, BI is about more than just reporting delinquency, losses and yields; it can also be about measuring opportunity. Full advantage cannot be taken of key data points if that data is not readily available to credit union leadership.
There are several challenges for credit unions when it comes to collecting and storing key data that can be used for BI. Most core or hosts systems that credit unions are currently using do not store a long history of performance data. It’s therefore difficult to access historic trends from these systems. Credit unions also use a number of third parties to facilitate loan originations and servicing. Often these third parties will provide reports to their credit union clients in a format that they feel is beneficial, but does not always match up with what the credit union wants or needs. And, external data, such as updated credit scores, collateral values, etc. can be expensive and time consuming to collect. As credit unions have realized the benefits of having BI available when making strategic decisions, increasingly we find its necessity to overcome these challenges.
Planning for Business Intelligence
In order to determine what information should be collected, credit union leadership should discuss what it is that they want to gain from their Business Intelligence. Remember, there are origination data and performance data. Origination data that is collected will always give the credit union a point of reference for doing analysis. For example, if a credit union did a marketing campaign last year to generate more auto loans, that data should be tracked, so that four years from now the credit union can establish whether the loans generated from the campaign were worth the financial expenditure and time taken to support the campaign. This is just one example of origination information that should be available for BI. Too often, however, a credit union will want to go back and look at information like this only to find that the information is not available because it was never tracked.
Data Warehousing
Storing origination and performance data is essential to conducting ongoing Business Intelligence analysis. Some credit unions have invested in in-house data warehouses that allow them to customize the data points that are collected and provide flexibility for future additions of data. For credit unions that are not ready to invest in data warehousing technology, simply saving the monthly AIRES file can be a place to start.
Regular Reporting and Analysis
Business Intelligence reporting can break down when it becomes too difficult and time consuming to do on a regular basis. The value of Business Intelligence is that it should inform and allow credit unions to validate their assumptions while looking for opportunities for growth. In order to bring consistency to decision making, regular reporting is required. However, in the absence of specialized software to support BI, credit unions will want to start by using simple, easy to build reports that can be updated each month and analyzed quickly.
Reacting to Analysis
Regular reporting and analysis gives credit unions a better view of what’s going on in the loan portfolio, for example. In the past when significant losses were taken in a particular loan type, credit unions would stop doing that type of loan. But the ongoing analysis of the loan portfolio will allow credit unions to continue to grow the loan portfolio by identifying segments that are not working and eliminating those segments versus stopping all lending in that area. By reacting to BI results with precision, credit unions can continue to grow their loan portfolios, while reducing the risks of loss and burdensome regulatory scrutiny.
