PLYMOUTH, Minn.—Credit unions with low risk tolerance and outdated underwriting models that dampen lending volume may soon find themselves out of the lending game all together – especially in the credit card space – according to one expert.
Rahul Nawab, founder of data analytics firm IQR Consulting, Rohnert Park, Calif., stressed both of those points during the recent Credit Union Big Data & Analytics Conference here. Nawab, a panelist in a session on personalized marketing, offered his thoughts on the power of data to transform credit card line increase campaigns.
Having worked with 10 credit union issuers over the past year to optimize line management strategies, Nawab offered up several examples in which credit unions generated incremental balance increases as high as 15%.
One such issuer was a $3-billion credit union looking for ways to grow outstanding balances without a high marketing expense, Nawab explained.
“Credit union leadership settled on a data-driven credit line increase campaign. What separated this campaign from more traditional ones was a four-step process. The process…segmented the issuer’s cardholders based on their likelihood to react to different offers,” said Nawab. “The data-driven, highly targeted approach ensured the right offer went to the right cardholders at the right time, therefore increasing both the effectiveness and ROI of the campaign. Ultimately, the campaign created $7.7 million in incremental spend, as well as $3.4 million incremental balances in the span of 10 months.”
A cardholder’s balance almost always correlates to his credit limit, continued Nawab.
“Whereas a credit union may offer a member a credit line increase if he makes a special request, there is often no strategy for proactively managing line increases in bulk or by member segments. Doing so is one of the most effective and efficient ways to boost card program revenue – not to mention secure top-of-wallet positioning.”