Data, data everywhere…

In 1798, English poet Samuel Taylor Coleridge penned “The Rime of the Ancient Mariner”, an epic poem perhaps known best for the famous quote, “Water, water everywhere, nor any drop to drink.”

The meaning is that despite being surrounded by something, you cannot benefit from it.

Credit unions are surrounded by data—their own member transactional data, product reports, external credit reporting agency data, community data, census data, and data provided by vendors to help paint a picture of the modern-day member, just to name a few.

Even so, the quest for the “right” data to really understand members’ financial health needs continues to stymie many a credit union. But the effort—and getting it “right”—is critically important. It can help attract and retain caring employees and enthusiastic directors; it can help boost membership growth and build member loyalty; it can advance state and national advocacy efforts—helping to create a more favorable operating environment in which credit unions can thrive.

Not surprisingly, data, where to find it, and how to use it has been a theme at many credit union conferences over the past several years. Many system partners are also working on data projects to help credit unions. America’s Credit Unions has an interesting Credit Union Impact dashboard that highlights the Credit Union Tax Story as well as credit unions’ auto lending. Filene is working with Trellance on the Credit Union Data Exchange (CUDX) to help credit unions reap the benefits of a large, shared data pool and be able to compete with even the largest of banks in terms of data resources. TruStage has a suite of deep dive business insights to help credit unions quickly analyze financial trends, manage operations, and understand members.

But, what can you as a credit union do to simply and effectively understand what members are struggling with financially right now?

As part of the FinHealth Fund’s work, the National Credit Union Foundation held a data convening meeting in January 2023, inviting key credit unions, system partners and vendors to discuss data efforts to date and what could be done to align those efforts. Key takeaways from that meeting include:

• The initial focus of any measurement effort must be member/employee financial health and well-being.
• Follow a “keep it simple” approach.
• A combination of member survey data and transactional data provides a more complete picture of moving the needle on member financial health and credit union impact.
• Use the Financial Health Network’s framework as a starting point for member surveys.
• Use the same framework (Spend, Save, Borrow, Plan) to identify transactional data points.
• Our “north star” as a group is to combine member survey data with transactional data to show impact and movement of member/employee financial health.

A smaller group of practitioners and system partners took these takeaways and worked throughout 2023 to identify indicators from the transactional data to recommend what a credit union can generate within the four categories to objectively measure financial well-being for all. The group focused its efforts on Save ($400) and Borrow (FICO scores) for two primary reasons (1) A person’s capacity to weather an economic shock (save) is key to financial resilience; and (2) A “very good” or “excellent” credit score unlocks better loan rates, products more helpful to long-term financial health, and even better employment and housing opportunities.

Our hypothesis is that credit unions, who actively measure and design strategies to improve member resilience ($400 in savings) and members’ credit scores, will see sustainably higher organic member growth and operating margins.

The three credit unions that participated in the group—Royal CU, Redwood CU, and SchoolsFirst FCU—pulled Save and Borrow data on new (2023) and existing (pre-2023) members. All saw tremendous opportunity in this simple data to plan and act on services and products that reach those struggling with lower credit scores and with saving for emergencies. It should be noted that direct members were included in this effort so that peer-to-peer comparison could be achieved. Indirect members or single service accounts were not included.

The group also explored a slightly expanded method of measuring members’ financial health: credit unions can gauge income and spending patterns using proxies such as cash inflow and outflow from transactional data. This approach will aid credit unions in identifying members who may be struggling to make ends meet, as well as those who manage their finances comfortably. Credit unions equipped with analytical capabilities to study transactional data for estimating spending and income patterns can reach out to the group to learn how they can gain these additional insights about their membership.

The trick to understanding members’ financial health is knowing what they are wrestling with financially. Simple data like Save and Borrow can give big insights to credit unions to focus efforts to build member financial resilience.

So, data, data, is indeed everywhere. It’s up to you to find the links and use them to improve the financial health and well-being of your members.