FOCUSREPORT /The Underserved & Unbanked
Every credit union has underserved mem- bers, and data can help credit unionleaders understand how to servicethem better. For a moment, let’sdepart from the more standarddefinitions of “underserved” andconsider the empathetic side ofthis group. A member may be underserved for a variety of reasons– it may be economic, education-related or a choice, just to namea few. By understanding thesereasons through the lens of data,a leader can gain insight on howto meet the needs of their underserved members. This article outlines some approaches.
For purposes of this article,the underserved are thosemembers whom a credit unionshould have a more engagedrelationship with, but does not.
This brings an interesting perspective when the empatheticelement is considered, but it allboils down to the “why.” Eachreason for being underservedwill likely have its own “why,”which should form a hypothesis,and a savvy leader can use theirdata to prove or disprove the hypothesis. A credit union leadercan perform this exercise witha variety of tools ranging fromExcel and pivot charts to a datavisualization platform fueledby a dedicated data warehouse.
Often these hypotheses will lead
to changes in perspective, and
ultimately action that influences
holistic member engagement
rather than products and ser-
The First Why: EconomicConsider the economic reason forbeing an underserved member.What’s the “why” behind this? Isit because the member’s income,credit or account history is below the institution’s serviceablestandard? Or, more commonly,perceived standards? Or are alternative solutions such as paydayloans perceived to be more accessible? To begin the comparison,it is important to have an external context to go along with internal data. Pulling local censusdata, along with a credit union’skey metrics such as average dailybalance as a ratio of direct deposit (from who and how much),overdraft usage (graduating fromwhen to why), and the types ofproducts used versus types ofproducts qualified for, are goodplaces to start. With this data, given context with geographical census data, a credit union can visualize the proportion of memberswho might be underserved foreconomic reasons.
If the member group is disproportional to the community thecredit union serves, this suggeststhere may be an opportunity toserve this group better. By leveraging this information, leadersand product strategists can beginto understand the needs of theunderserved, and map or configure current product offerings tofit the needs of the underserved.
If the member groupis proportional tothe local populace,which should be expected, then a leadermay consider otherproducts that appeal to this membergroup and positionthem more prominently. This can bedone by makingthem more accessible, and facilitating education on thefeatures and benefitsof the credit union’smission and servicescontrasted againstthe rest of the wallet,or lack thereof.
The Second Why: EducationThe education-related reason forbeing an underserved memberis a little more challenging andstems from several underlying inputs. A first look might involve reviewing data for disproportionatedraft versus non-draft balances,which suggests an opportunityto educate on better products forthose members. Other commonratios that can produce extremesto the bell-curve are transactionsby merchant category, standarddeviation of aggregate averagedaily balances, and direct depositamount to product usage or transactions. Once identified, thosemembers can receive marketinginformation about CDs, moneymarkets, lines of credit or other options that can enhance their financial well-being and engagementwith the credit union. Once keyratios and their outliers have beenidentified, a credit union can runan A/B test to test the hypothesis –that a better product improves themember’s life and engagementwith the credit union – as well astest the effectiveness of the marketing. It is also important to measure, in terms of dollars and effort,the cost of educating a member toset realistic ROI expectations.
What about members who are
perpetually using predatory lend-
ers? As with the economically un-
derserved, the data can inform a
leader on which members may be
vulnerable to these lenders. Iden-
tifying transactions with known
predatory lenders and segment-
ing the patterns of behavior of
those members can help identify
those who are likely to use preda-
tory lenders. Examining soft cred-
it pulls can also shed light on the
financial standing of these at-risk
members. These habits of at-risk
members include outliers in the
previously cited ratios and habitu-
al users of overdraft. A leader then
can engage with these members
proactively and offer a thought-
ful series of options ranging from
debt consolidation loans, flexible
lines of credit, savings programs
The Third Why: Choice
Of these three reasons, this is the
most difficult to understand. Why
would a member, who is aware of
all your products and offerings,
choose not to use them? This is the
classic “top of wallet” dilemma,
which data can answer. It starts
with deposits, card transactions
and bill payments. Determining if
a large percentage of a member’s
regular income is being deposited
is the first clue to whether a credit
union is “top of wallet.” Obtain-
ing reliable employer informa-
tion – who to expect direct de-
posits from and how much – can
be difficult if good data collection
practices have not been regularly
sustained, but there are several
options for sourcing this data.
Employment information can be
obtained through examining past
account and loan applications,
simply asking your member, cur-
rent ACH deposit records and a
variety of third-party sources.
Looking at scheduled bill pay-
ments is another option. A mem-
ber who is well served by your
credit union is likely to have sev-
eral scheduled transactions from
their primary transactional ac-
counts going to vital services such
as utilities, government agencies
and other personal accounts.
Card transactions are also very
telling. Compare the attributes
of those members who use your
card to shop at major retailers on
a regular basis to those who don’t
– there are often regional and na-
tional trends of those who go to
your card first when buying some-
thing online or when standing in
line at a particular merchant type.
In the broader market, a leader
who is comfortable with data may
also use other data sources to see
if their credit union is missing out
due to choice. Data from the cen-
sus, NCUA and FDIC will tell a
leader how they are performing on
market share. This can be done at
the city, town, ZIP code or census
tract level, depending on the reso-
lution of truth the leader is looking
for. If a credit union holds a market
share above 6%, it is beating the
average, according to Payments-
Journal. If a credit union is below
this benchmark, the data suggests
there may be opportunities in
marketing or product offerings.
Data helps illuminate the truthand a credit union leader conversant in working with data will outperform any peer that is not. Usingdata to understand your underserved member is a practical firststep; from there, a leader can factually facilitate discussions aboutproduct and market positioning.While the exercises above help aidin an understanding of the humanside of underserved members, thelist is not exhaustive. These exercises will certainly get a leaderstarted on the path of data fluencyas they seek to understand theirunderserved members. n
Using Data to Understand a CU’s Underserved Members
Timothy “Buck”StrasserFounderClear CoreTucson, Ariz.Ray K. RaganCo-FounderClear CoreTucson, Ariz.