Increasing non-interest income: 3 ways analytics can help

Historically, credit unions’ major focus was on interest income earned from loans. Prior to 2010, it accounted for 80% of overall income and was plentiful enough to push other sources down the list of priorities.

It’s a different environment today. Interest rates have remained low for the last decade, and regulatory changes are squeezing revenue in areas like interchange income. As a result, credit unions’ focus has strategically shifted toward boosting sources of non-interest income.

Regardless of size, most credit unions have increasing non-interest income as a goal in 2020 – and fortunately, there are numerous opportunities for growth. Here are three ways we help credit unions achieve non-interest income growth.

  1. Lift interchange-income through increased credit card usage.

Many credit unions are looking for ways to revive lagging interchange income after regulatory changes such as Dodd-Frank substantially reduced what they earn on debit card transactions. One logical and effective avenue is to increase members’ credit card usage – the interchange income can be more than four times higher for each transaction.

Using data analytics, it’s possible to identity which segments of a CU’s membership are the most likely to migrate from debit to credit card usage. An extensive analysis that incorporates data mining techniques, an examination of spending habits and patterns, and identification of unengaged members can lay the groundwork for a sophisticated marketing strategy. Analytics enables CUs to offer personalized, relevant incentives that members will respond to.

  1. Introduce new and innovative rewards-based checking accounts.

Loan-to-share ratios are increasing, and the financial product landscape is more competitive than ever. Credit unions are looking for ways to improve product offerings to attract attention and deliver superior member experience.

Traditional checking accounts just aren’t producing the right results anymore. But with analytics-driven insights, credit unions can create new suites of fee driven products with the rewards-based structures that members’ want, which will also deliver the non-interest income benefits they need.

CBC, a California based credit union, used data analytics to launch new checking products that were highly popular with members. The analysis enabled them to buck the trend of more no-fee products, and instead roll out a new suite of checking products that provided the freedom to choose services and add-ons for a small recurring fee. CBC doubled the account balances in its premium checking accounts and increased debit card spend by more than 25%.

  1. Offering Courtesy Pay and Overdraft Services

Most credit unions offer features like overdraft protection and debit courtesy pay that allow members to use their debit cards even when they have an insufficient balance. These services provide an immediate value to members – for a fee that’s assessed only when it is used.

Each CU has a segment that’s more likely to benefit from and use these services – but many members may not know it’s even available.  Using data analytics, a credit union identified members with the highest likelihood to opt-into overdraft programs and pay the corresponding fees. The credit union was then able to focus efforts on the 25% of its membership that had three times the probability of usage.

The path to generating more non-interest income is made up of a series of steps. Make sure each step is data-driven, relevant, and impactful.

Suchit Shah

Suchit Shah

Suchit Shah is the Vice President of Professional Services at Trellance. He founded CU Rise in 2018, which would later be acquired by Trellance and become their Talent business line. Web: Details