Analytics are an important asset to any size financial institution, but are especially critical for smaller credit unions because they have to keep up with the big players in the credit union industry. They are expected to absorb the same costs, provide comparable credit risk reports, and manage to satisfy the same examiner’s expectations. Without the help of analytics, smaller sized credit unions would struggle in these categories.
Data is constantly changing, and we are expected to have a thorough understanding of the credit risk in our portfolio at any given point in time. “Knowledge is power” is an understatement when it comes to preparing for exams. With the help of static pools, concentration risk, and trending reports, credit unions are able to provide their examiners with substantial data to support their decisions and/or reasoning for changes to their policies and procedures. The NCUA doesn’t distinguish between the size of credit unions to allow for flexible guidelines. At the end of the day, they all follow equivalent rules and regulations, whether their asset size be $50 million or $500 million.
Along with being treated equally among our larger colleagues, we are also expected to manage the costs involved with analyzing our loan portfolio. This isn’t something that smaller credit unions can necessarily afford, yet in order to keep up with the constant changes and new regulations, we really don’t have a choice.
Many institutions that are small in size, don’t see their future as always being that way. They strive to grow and become a dominant player in the credit union industry. Analytic programs like Visible Equity assist credit unions by empowering them with the data knowledge they need in order to succeed. If an institution understands where its strengths and weaknesses are in its loan portfolio, they can better accommodate for current and future risk and also discover what may be impacting their income. For smaller credit unions, this is especially important since their sources of income can be very limited.
Smaller credit unions may work towards becoming a larger financial institution in their future, but they also have another very important reason for their operation – member service. Credit unions are built around their membership, and their primary goal is to always deliver their personal best service to their members. Though it may not be obvious, analytics play an important role in a credit union’s member service. Because profits get invested back into the membership to help better serve the community, it is important for management to know effective strategies to maximize income, therefore maximizing the member’s benefit. To achieve this, a great resource for credit unions to use are profitability reports supplied by analytic companies, such as Visible Equity.
In the current financial industry, analytics are becoming more of a neccesity rather than a fancy add-on product. Their ability to assist smaller credit unions in numerous objectives has made them a priority in many institutions. Not only can they help enhance member service, increase profitability, and uncover potential portfolio risk, but they can accomplish the one task that financial institutions struggle to predict each year – satisfying the NCUA.