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By CU Direct
Business Intelligence (BI) is becoming increasingly necessary for credit unions, not only for analyzing loan portfolio risks but also for making better strategic decisions. In other words, BI is about more than reporting delinquency, losses, and yields; it can also be about measuring opportunity. But credit unions cannot take full advantage of key data points if the data is not readily available to leadership.
There are several challenges for credit unions when it comes to collecting and storing key data to 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 frequently 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 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 and collateral values, can be expensive and time consuming to collect. Increasingly, credit unions are finding it necessary to find a solution to these challenges, as they realize the benefits of leveraging BI when making strategic decisions.
There are a number of important factors credit unions need to look at to ensure they have good, accessible data for Business Intelligence.
In order to determine what information it should collect, credit union leadership should discuss and determine what it is it wants to gain from its Business Intelligence. Again, keep in mind there is origination data and performance data to consider. Origination data will always give the credit union a point of reference for doing analysis. For example, if a credit union did a marketing campaign in 2012 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 data like this only to find the information is not available because it was never tracked.
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 data points 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 good starting point.
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. In order to bring consistency to decision making, regular reporting is required. However, in the absence of specialized software to support BI, credit unions should start by using simple, easy-to-build reports they can update each month and analyze quickly.
Regular reporting and analysis gives credit unions a better view of what’s going on, for example, in the loan portfolio. In the past, when credit unions had to take a significant loss in a particular loan type, they would stop doing that type of loan. But 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.
This sponsored content article is provided to the credit union community for shared insights and knowledge from a recognized solutions provider in the industry. Please note that the views and opinions offered here do not reflect those of Callahan & Associates, and Callahan does not endorse vendors or the solutions they offer.
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October 28, 2013
12/11/2013 04:02 PM
Great article about an important topic throughout the Credit Union Movement. Having an effective Business Intelligence strategy will not make a difference if the Credit Union does not make decisions based off of this data. Getting a business intelligence plan and strategy is one thing, implementing and acting on this intelligence is another.
Putting the analysis into practice will allow credit unions to move quicker than their opponents and provide a better experience for their members. This will allow them to be competitive enough to keep the momentum going, while also focusing on their core philosophy of serving their members.
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