Rich data insights on borrowers are to credit for the ‘unidentified financial opportunity’ phenomenon.
Despite a significant slowdown in auto sales at certain points in 2020, credit unions held steady with their indirect lending programs. Anticipating that business could turn around at any point, most kept the same number of people focused on the auto loan portfolio.
Now, a funny thing happens when things slow down, especially with credit union people. They get curious. That’s when things get fun for data geeks like my AdvantEdge Digital colleagues and me.
During the summer months of 2020, we had the unprecedented opportunity to dig deep into credit union data to see what we could uncover about the individuals and families who turn to credit unions for help financing a car. What we found was awesome. As it turns out, the indirect loan portfolio is chock full of opportunity.
Of course, it should be acknowledged that those opportunities can be somewhat nebulous. In fact, it’s why we’ve taken to referring to them as “unidentified financial opportunities” or UFOs. The term is apropos, really. In real life, UFOs are shadowy, shapeless and imprecise. However, when people get serious about investigating them, they often find that the unidentifiable is, in fact, quite identifiable (as aircraft, satellites, meteors or even balloons). The same is true for the UFOs hovering around a credit union’s car loan business. If you look closely enough, they start to take shape as actionable insights that can drive real growth.
To help more credit unions positively identify their indirect UFOs, our team created a set of three simple analytics strategies. Give these a try to see if they increase UFO sightings within your shop.
Turn a Critical Eye to Dealer Relationships
It’s not unusual for a credit union to have relationships with an overwhelmingly large number of car sellers. This stems from the idea that more dealer partnerships equals more business. But that is not necessarily true. Consider the 80-20 rule. Most likely, you are getting 80% of your high-performing loans from roughly 20% of your dealers.
While you may have a gut feel for which sellers make up your top 20%, have you verified that intuition?
Identifying your true, backed-by-data, top performers is the first step in freeing up the time you may be devoting to less fruitful contracts. You can achieve this identification in a number of ways: by looking at loan volume by dealer, loan type by dealer, outstanding balances by dealer or something entirely different. The sky’s the limit for options on slicing and dicing the data to align insights with your overall strategic goals around membership and loan growth.
Use Member Data to Predict Risk & Profitability Potential
Most indirect members will have similar customer profiles as your direct members. At the very least, indirect and direct members share a community, perhaps even a neighborhood, and they also share a need for fair and accessible financial services. This circumstance sets you up to apply data insights from current members to your indirect members, illuminating things like the potential risk or profitability you can expect from a particular set of prospects.
Here again, the 80-20 rule is likely in play. After even minimal analysis, you’ll probably uncover that not all indirect members make sense for your conversion strategy. With that information, you can hone in on only those prospects that make the most sense, ultimately coming away with a much stronger return on your investment in conversion.
Scour Those Credit Reports
UFOs often hide in plain sight, namely within an indirect member’s credit file. After identifying those indirect members who present the strongest case for outreach, perform a credit refresh to get an idea of their overall financial pictures.
Do they have another car loan with another lender? Perhaps you can offer a consolidation or a break in rates if they bring both notes under your roof. Maybe there’s a mortgage that could stand a good credit union-driven refi. Are they leaning too heavily on high-interest credit cards? Have they gotten in over their heads with a payday lender?
With account-level detail like the above at their fingertips, your outbound teams will be set up to have highly personal, super-relevant conversations. Intelligence makes it a breeze to turn something that may have been perceived as an unwelcome cold call into an extremely welcome financial lifesaver.
Vicki Potter is senior performance analytics manager with CUESolutions Platinum provider AdvantEdge Digital, Madison, Wisconsin. Potter has a rich background in credit union data, actuary and management. Before joining AdvantEdge, her 30-year CUNA Mutual Group career included such roles as analytics consultant, product senior financial analyst and call center reporting manager. Credit union leaders who want to learn more about spotting the UFOs within their indirect programs can check out “Act on Indirect Insights to Increase Loan Growth.” The 45-minute, on-demand webinar walks through plenty of examples and provides tips for uncovering never-before-seen insights within a credit union’s treasure trove of data.