Financial institutions that have embraced data analytics as a critical business tool are reaping tangible rewards. As a result, they are increasing their investment in these programs while other organizations are following their lead and implementing programs of their own. But in both cases, there are always other business investments competing for limited resources. Therefore, when formulating a business case for your institution, it is essential to outline and align the benefits across the entire organization.

Why Invest in Data?

The key benefits that organizations see from the investment typically fall in these categories.

• Grow revenue:  Successful data analytics programs help organizations drive growth to the existing revenue streams, create competitive advantage and explore and unlock new revenue streams. For example, various credit unions use data to say "Yes" to more members. They use a combination of internal customer transaction data, engagement data, and advanced analysis to develop alternative offers for customers whose loan applications would otherwise be rejected based on traditional credit scores. Such initiatives provide revenue growth and a competitive edge to the organization in the marketplace.
• Contain Costs: Data modeling allows credit unions to analyze their end-to-end processes better. There are many opportunities across products (lending, deposits, investments, insurance, etc.), back-office ( marketing, finance, operations, etc.), and channels (branches, digital, call center, etc.) to improve efficiencies and reduce organizational costs. For example, a mid-size credit union in Oregon uses data to optimize its staffing model. They have discovered areas where outsourcing is more beneficial and cost-effective and identified areas they should not staff outside the organization. In addition, they optimize department sizing while considering the impact on member engagement and experience.
• Drive Efficiencies: Organizations monitor and collect data on each step of critical processes to identify the friction points, opportunities for automation, elimination of redundant steps, etc. Then they redesign the processes to scale better and to do more with fewer resources which can ultimately be reinvested back in the business or returned to the members.

Along with these tangible benefits, organizations also achieve some intangible benefits.

• Higher Member Satisfaction: Data typically helps organizations rethink their engagements with the member with better targeted and personalized products and services. Typically, these organizations see higher NPS scores from their members.
• Higher Member Retention: Improved member engagement and satisfaction leads to higher retention and lower churn.

Building a Business Case

It is important to note that these are broad business benefits that span the institution. A successful data analytics practice is not a standalone project under IT. The goal, therefore, should be to take an organization-wide approach to understand the impact of the data initiative on the processes, workflows, and engagements with the staff and members across departments.

Here is the recommended five-step approach for credit unions to create a business case for data initiatives.

1. Evaluate the opportunities across business functions - Work with the leadership team of the following key business functions and list the initiatives where data can help. Many case studies on CULytics Transformation Center can help you get ideas and brainstorm with your leadership team.

• Channels - Branches, Call Center, Digital, etc.
• Products - Lending, Deposits, Mortgage, Investments, Insurance, etc.
• Back Office - Marketing, Finance, Collections, Risk, etc.

Identify benefits, both tangible and intangible, and quantify the ROI. Do a high-level analysis of the opportunities identified earlier and outline the tangible benefits such as revenue growth, cost savings, efficiencies, etc. Also, outline the intangible benefits such as customer experience and retention, staff experience, market positioning, etc. Try to link these benefits to the organizational priorities. Map these opportunities on the prioritization quadrant of effort/feasibility vs. impact to identify the first set of initiatives that you want to work on. Define a roadmap and people, process, technology requirements, and set a realistic timeline to achieve the goals. Define performance metrics that you will use to measure the success of the data initiative and communicate to the stakeholders and the leadership team. 

Conclusion

Data analytics should not be seen as a siloed initiative as it can impact the entire enterprise. Credit unions should resist the temptation to invest in technology without having a business case. This will lead to frustration, costs, and a longer time to value. You may be surprised to see that some of the low-hanging initiatives discovered through this approach may not require any technology purchase to start seeing the results. Credit unions can improve their ROI and time to value with their data analytics investments when they first put together a comprehensive business case to understand the cost and benefits and obtain appropriate internal leadership commitment and alignment.

Follow-Up

If you have additional questions on how to best approach investing in a data analytics program, please visit the CULytics Content Library for more information. You can also contact directly to Naveen Jain to explore how to get assistance tailored to your specific requirements.

Naveen Jain
President & Founder, CULytics
Cell – 650-269-6041

Schedule 1:1 by going to https://bookings.culytics.com/#/customer/naveen