BOSTON-Diving into data analytics for the card base without expertise-whether in-house or a third party--to accurately assess the findings can leave the credit union with a lot of data and few actionable plans.
That is the conclusion of several experts who say data analytics requires much more than an investment in the data tool itself.
"How do you get around the costs of data analytics? You don't. You can't go looking for something for nothing here," said Ron Shevlin, senior analyst at the Aite Group, who among others added that it is difficult to estimate cost for data analytics since it varies significantly by an institution's size and needs.
Shevlin said the HR costs, whether in-house or outsourced, are extremely necessary. "If you use analytics, you have to use the tools well."
Michelle Hillenbrand, director of marketing at Advisors Plus, St. Petersburg, Fla., cautions that if the credit union does not have the right human resources, it will likely not use the data tool well.
"You can end up with lot of different assumptions about data that you can't verify or really understand," said Hillenbrand. "The expertise puts power behind those assumptions and proves them out, and allows you to take action on them, or discard the findings and move onto something else."
The right analysis and direction have such a dramatic impact on the outcome and ROI of marketing campaigns, and ultimately the profitability of the portfolio, explained Hillenbrand. "You want to make the correct assumptions on the pricing of the portfolio and setting up your products right, for instance."
It takes special skills, sources agreed, to analyze the data, a skill not often found within credit unions. The larger CUs are the ones bringing more of the analytical staff on-board, while mid-size and small CUs tend to rely on third parties, analysts stated.
"When you talk about people who have quantitative analysis majors, statisticians, mathematicians . . . This is not the type of employee you find sitting in most credit unions today," said Todd Herren, chief technology officer at The Members Group, Des Moines, Iowa.
Aite's Shevlin said he has seen CUs bring the expertise in-house as well as use an outsourced model, saying both work. But if the organization chooses a third-party relationship, Shevlin said the key is integrating staffs.
"I don't think the FI has to bring the skills in-house. In fact, many large issuers don't have their analytic capabilities in-house," he said. "What makes it work is the right processes between the provider and financial institution."
The Need For A 'Roadmap'
"I used to work for a database marketing company and worked on credit card lines for some very large issuers," Shevlin continued. "In the situations that worked best, you could not tell the difference between the staff of the FI and those of the third-party. It's about finding the best provider that can integrate well and help you deliver a roadmap to where you want to go."
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