Within credit union’s own data is the answer to many “whats.” Take, for example:
- What are the typical spending patterns?
- What are the incoming and outgoing account flows?
- What are average balances and product mixes?
- What are the preferred engagement channels?
But credit union leaders that are looking for deeper, strategic understandings often find themselves asking “why?”
To answer this, credit unions need more context. Augmenting their own data with additional information sources will provide more meaningful takeaways – a practice credit unions can start today. There is a wealth of free, publicly available information at your disposal; putting it to good use just requires some awareness, curiosity and strategy.
Here are two free public data sources that credit unions should start using now – and why.
US Census Data at census.gov/quickfacts
Most are familiar with census data as the information that tells us about the makeup of our cities, states, and country – but few view it as an important tool for strategic decision-making. It can be a key resource for filling in critical knowledge gaps around credit union performance.
Understand market share. Census data offers the big picture of available opportunities in target markets and your credit union’s penetration. For example, entering a zip code, county, or metropolitan statistical area (MSA) provides the total adult population, against which you can better understand what percentage your membership represents. Analyzing your membership address data against the census population data, refined granularly by location, will reveal which areas present the greatest opportunity to target with new member outreach.
Similarly, credit unions can analyze mortgage data against available households to assess which neighborhoods have been saturated, and which should be targeted with new mortgage or refinance offers.
Contextualize account activity. Census QuickFacts also provide income data by location that is updated annually. Credit unions can use this information to compare the average median income where members reside against inflows and outflows of account funds. If according to census income data, you are only receiving a fraction of a member’s total potential income, credit unions can identify which members there have the most potential to grow their relationship, and how.
Federal Reserve Economic Data (FRED) at fred.stlouisfed.org
The Federal Reserve Economic Data, known as FRED for short, is a vastly under-utilized public resource. Though monetary data is what most think of when it comes to the Federal Reserve, FRED is actually a repository for an array of valuable economic data, amassed from a variety of sources. These layers of macroeconomic data help credit unions better understand the financial environment and risk.
Plan lending policies. FRED’s federal funds rate and interest rate data can help understand how the current environment compares to different points in history. How do current interest rates compare to historic lows or highs? Are local GDP and employment trends predictive of changes in a credit union’s portfolio? Answers to these questions, which require public data, can ultimately lead to more informed institutional policies.
Assess enterprise risk. As mentioned previously, macroeconomic data can help a credit union determine how to balance risk. Whether the risk comes from interest rate volatility or competing organizations, quantifying trends in the economy will help credit unions begin the analytics journey towards proactive scenario planning.
The FRED unemployment data is a useful tool for quantifying the impact of events. A credit union can correlate local unemployment levels to the effect on portfolio performance and better anticipate risk and reward in the future. Monitoring local unemployment data will help a credit union more precisely understand how it may be affected by the current unemployment environment, which can trigger responsive policies that protect both the institution and its members.
The ability for credit unions to accurately assess their risk will only grow in importance as credit unions implement CECL standards. Additionally, several NCUA programs (CDFI, LID, MDI, FoM Expansion), which aim to strengthen the viability of credit unions, call on public data to help determine eligibility and approvals.
Part of credit unions’ growth in data strategy is learning to take advantage of all available data. With this mindset, leveraging public data will play a valuable role in understanding opportunities, risks, and what drives members’ financial behaviors. The examples above are only a few. This fuller view is key to making more deliberate decisions, accurately understanding the impact, and predicting the most advantageous strategies.
Don’t forget to join CUInsight and Trellance for our free webinar titled, “Leveraging Public Data Sources for Credit Union Growth“, on Wednesday, December 15th. Register yourself and a colleague here.