Music to My Ears: Credit Union Loan Growth

by Tansley Stearns
Published in Lending
Music to My Ears: Credit Union Loan Growth

I love music. An all time favorite is Dave Matthews Band, but I also sing Meghan Trainor, Rachel Platten, Daya, Lil Mama and Maren Morris as loud as possible in the car with my six-year-old daughter MacKenzie. Because small town roots don’t ever quite let go, you’ll also find Big & Rich, Brett Eldredge, Keith Urban and Florida Georgia Line on several of my playlists. I can lose myself in Joe Cocker, Stevie Wonder, Susan Tedeschi and Ray Charles. Just the first few notes of tunes by the Grateful Dead, John Mayer or Trampled by Turtles send me spinning down memory lane thinking of my husband. My experience in Ireland last year was so moving that I now have about five versions of “Galway Girl” in my library as well. I might be the definition of eclectic taste.

I travel often for work. In the mundane minutes between the required “turn off all portable devices” and the moment we hit 10,000 feet and can sync to the Wi-Fi, I often make playlists. If it’s a Friday and I’m excited to almost be home, my list is typically a very fast-paced mix that will likely become a favorite of my daughter’s. If it’s the middle of the week and my brain is full, it may become a maudlin collection of slow, serious and poetic classics. As much as I love almost every song that I insert into a playlist, within several weeks, I wear out. I’m ready for new songs or a new order or a new amplification of a mood that simply isn’t being stirred by the current selections. Thus, I gleefully pay for a monthly subscription to Spotify.

Hearing a new song for the first time is bliss. Sometimes it’s the lyrics that strike. Other times it’s the way that the pace of the song fits so meaningfully with my own energy level. Often it’s the way the song can turn the gloom of a winter day around and lighten the room. As a working mom with a busy life, I’m not in a position to spend time hunting for new music. Spotify does it for me. It learns from my selections, tastes and listening habits and makes recommendations and new playlists that correspond with my preferences. It leverages data to make my music experience richer, deeper and more expansive.

I frequently hear people talking about big data and the use of data as a very “creepy” invasion of our privacy. However, as practical use cases demonstrate, consumers are willing to trade privacy for solutions that vastly improve their experience. Harvard Business Review shares Disney as a best practice in their May 2015 article by Morey, Forbath and Schoop entitled, “Customer Data: Designing for Transparency and Trust.” “Disney devised electronic wristbands that give park visitors access to attractions and hotel rooms and allow them to charge food. Disney uses the bands to collect data on customers but clearly spells out its practices and privacy policies. The trade-offs are transparent to customers, who find the convenience and other benefits the bands offer worthwhile.”

In Filene research entitled, “Rightsizing Big Data for Credit Unions” by Linda Young, the institute explored a case study of Westerra credit union and the power that analyzing and leveraging big data had on enhancing and growing their loan portfolio. “As the information started to come in, improving Westerra’s credit card portfolio became a real possibility. Westerra began to:

  • Model the rewards and rates that would be most beneficial for the credit union and its members
  • Analyze the benefits (for members and the credit union) of moving all cards from fixed pricing to risk-based pricing
  • Create a profitability model for the credit card portfolio that factored in the APR, cost of funds, net credit loss, turn ratio, interchange income, rewards costs, marketing costs, and operating expense.
  • Identify ways to migrate members with existing cards to cards with features “better suited to their use”

All of this work allowed the credit union to “realize increased card uptake and usage, making its cards “front of wallet” for members.

The world is changing at a rapid pace. Credit unions that want to not just be strong lenders, but create meaningful and deeper relationships with their members will have to master many of the ever-evolving competencies that will ensure success.

At my session at the DRIVE ’17 Lending Conference, May 23-25, entitled, “Fighting for Market Share: The Future of Lending in a Crowded Space,” I’ll explore not only the possibilities to leverage big data to make lending stronger, but also to improve ease of use, and how evolving alternative data might be leveraged in loan decisions and more. You’ll walk away from this session with an understanding of where the market is heading, how you and your credit union can get prepared and food for thought on new ways to meet your members’ needs. I might even share a new song or two for your playlist. See you at DRIVE!

About the Author

Tansley Stearns
As Filene Research Institute’s Chief Impact Officer, Tansley Stearns moves the best of Filene’s research and innovation into action. With more than 14 years of credit union leadership experience across a variety of functional areas, she knows how to help an organization move ideas forward to drive business results.