Data Analysis Improves Relationship Pricing Programs

Business intelligence software can unearth treasure trove of member data.

November 18, 2013

It’s no secret that credit unions are under constant pressure to retain their members and generate revenue. The challenge many face is how to provide members with competitive products that encompass the individualized, one-on-one focus that is the cornerstone of their mission.

The solution to this dilemma is analytics. By using business intelligence/analytics software to mine the treasure trove of member data they already possess, leading credit unions are successfully deploying products combining market-leading features, tailored member benefits, and an attractive revenue model.

How are these credit unions accomplishing this? Let’s look at relationship pricing initiatives as an example.

Tyson Nargassans
Tyson Nargassans

Every financial institution covets primary financial institution relationships. But few analyze their member base to identify the current percentage of single-service members to understand the issue.

By narrowing in on those members, credit unions can further analyze their transaction history, including automated clearinghouse and bill pay activity, to identify incoming deposits or outgoing payments to other financial institutions.

At a minimum, these members are at least tempted by relationships with other financial institutions. And at worst, the exit transition is already underway. Analytics help identify the problem and the severity of it.

In addition to helping identify these who intend to leave, analytics are the basis for developing targeted programs to retain—and hopefully expand—these member relationships.

If a credit union wants to encourage single-service members to broaden their relationship, the solution is not necessarily to offer them a loan or savings product. Instead, it should use the data available to identify the right products for members’ specific life stages and develop a communications program to make sure the institution is at the forefront of members’ minds when they are looking for new products to fulfill their lives.

In the end, a credit union can’t create a member’s need for a new product. But it can identify when the need may be present—and position the credit union to be the first choice when the member seeks to fulfill it.

As a result of a targeted communications program based on analytics, a member may have selected a share certificate or loan with the credit union, expanding the relationship with the institution. But eventually the certificate will mature or the loan will be paid off.

When that happens, the member may not fit the guidelines of the previous relationship. With analytics, credit unions can determine if a member reverts back to being a single-service member, for example, and use that knowledge to adjust pricing accordingly.

Finally, analytics are the key to making member relationships more profitable. Segmentation analysis comparing members with long retention histories versus those who have recently left has identified that high levels of electronic transaction use drive long-term relationship retention and account profitability.

With this information at hand, an institution can develop and implement relationship-pricing programs that allow members to have select fees waived or rebated in exchange for performing a desired type or number of electronic transactions each month.

One of the most effective opportunities a credit union has to create additional value comes from using business intelligence/analytics tools to monetize the data they have available at their fingertips. By leveraging analytics solutions to analyze this untapped wealth of member information, credit unions can gain powerful insights into their members’ behaviors and needs.

Armed with this intelligence, they can create customized relationship expansion and pricing programs that simultaneously create high member satisfaction and drive critical incremental revenue for their organization.

TYSON NARGASSANS is president/CEO of Saylent Technologies Inc.