Credit Union Data Strategies For Better Lending
Credit Unions

Deep Dive: How Credit Unions Use Data To Improve Business Lending

Entrepreneurs and small business owners often turn to local credit unions (CUs) for their financial needs, whether they’re renovating their offices or adding staff members. When compared to traditional banks, CUs often offer loans with lower interest rates and more flexible payment terms.

These reduced rates are likely contributing to an increase in lending activity. The Mortgage Bankers Association recently released a weekly report that found mortgage applications had increased 8.9 percent from the previous week. During the same period, purchase applications rose 6 percent and refinancing grew 12 percent. 

According to the most recent data available from the Biz2Credit Small Business Lending Index, small and mid-sized business (SMB) lending is also on the rise at credit unions. SMB loan approval increased from 40.2 percent in December to 40.3 percent in January. 

This increase is giving CUs the opportunity to improve their lending practices, enabling them to embrace more efficient data management strategies. A recent report found that 45 percent of credit unions do not have data analytics or digital transformation strategies in place, and those that do reported their plans will take three to five years to implement. CUs that fail to embrace data analytics are putting themselves at a disadvantage when it comes to winning over SMBs. 

The following Deep Dive delves into the current state of business lending at credit unions and the strategies they could employ to make lending more secure and efficient. 

Creating a New Data Order 

Credit unions’ top lending features – low interest rates and flexible payments – could be improved with enhanced data tools. It’s common practice for credit unions to silo their data, storing it across various systems. While this is good for security, it results in inefficiencies during the lending process, as key pieces of data may be inaccessible.

Credit unions need to remove the silos from their operations to tap into the full potential of their data. To do so, they should first establish a data task force that includes professionals from their lending, marketing, sales, IT and operations departments. This can help CUs better understand which data is most valuable to the lending process, and what type of data needs to be collected and analyzed. This information can then be used to establish a common data warehouse. 

The data task force should also be responsible for checking the quality and purity of the collected data. Bad or incomplete data does little for credit unions, meaning they should review data purity to determine what is worth storing and what should be removed. It’s also important for the data task force to consider what types of data CUs should capture in the future, such as the time an applicant spent at a previous job or how long they lived at a former place of residence. All of this data can be used to monitor and identify potential risk factors. 

CUs should also focus on developing and enforcing policies and procedures for data management, set mission objectives and agree to important terms and definitions. Each of these steps is essential when it comes to embracing the best data management practices. 

The FinTech Factor  

Improving data flow and management is vital for credit unions looking to take on additional lending business, an area where they face fierce competition. 

According to a Fed report from 2017, SMBs are considerably more likely to turn to banks to secure loans, with 48 percent utilizing large banks and 47 percent turning to small ones. Only 9 percent sought credit unions. 

The availability of FinTech services – mobile apps, bill pay, P2P transfers and digital lending – is also creating more competition for CUs. Borrowers are becoming more interested in loans that can be easily completed and approved digitally, as they enable faster access. 

Alliant Credit Union launched an all-digital lending platform in 2017 to compete with banks and FinTech rivals. Its Consumer Loan Origination System (CLOS) enables consumers to apply for any type of loan that Alliant offers, including new and used vehicle loans, home equity loans and RV loans, among others. The platform digitizes the entire process, from application to approval, and funds are delivered in as few as 30 minutes. 

Jason Osterhage, senior vice president of lending for Alliant, said the push to develop CLOS was driven by FinTechs. Shortly after its launch, Alliant reported that 85 percent of its consumer loan origination volume was initiated on the platform. The smooth functions and streamlined lending process provided by CLOS granted Alliant access to both customer and loan data. 

Data is key for CUs looking to meet customers’ expectations. By digitizing data and implementing rules and regulations that make it more fluid, accessible and secure, CUs will position themselves as solid lending options for their members, delivering on their missions to act as member-facing organizations. 



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