The credit union industry is ripe for a Big Data/Analytics harvest. All the member data is ready; it just needs effective analytics strategies to cultivate its value. In a previous blog, I discussed how credit unions must establish standard internal data sets. This is the foundation for excellence in analytics. As credit unions begin establishing their standard data sets, they must then extend these standards across the industry. Sharing best practices in data set design, and the analytics applications developed on top of them, will level the playing field when credit unions compete with big banks
Cooperation is a defining value of credit unions. Sharing best practices among the credit union industry is vital for the future of cooperative finance. One way this can be advanced is through data. Data is the raw material of information. As an industry, credit unions must rally around the data they are collectively gathering. Data is becoming the gold of the information economy and “whoever owns the gold makes the rules.” Credit unions must own their data (gold) and share best practices (rules) around how to most effectively store and share their data within the industry.
Industry Standard Analytic Data Model (ADM)
In order to develop a system to effectively share credit union data for cooperative analytics, there must be a common analytic data model (ADM). Since most credit unions rely on the underlying data structures found in their core and ancillary systems, there can be confusion between systems developed by various vendors. This confusion is multiplied across credit unions attempting to cooperate as an industry. In order to cooperate on analytics, a standard data model must be contrived. CUFX has been developing a system integration platform for the credit union industry, and a large group of credit unions have signed up to support these data standards. A standard ADM will allow credit unions to effectively compete with big banks that have large budgets dedicated to their proprietary analytics programs.
Once an ADM has been adopted across the industry, credit unions must come together to agree on a common semantic layer between raw data and the business processes. According to a 2013 article by the Kimball Group, “The semantic layer provides a translation of the underlying database structures into business user oriented terms and constructs”. This will require coordination on standard definitions for data elements within business processes. For example, the marketing department may classify a member as anyone who has participated in a credit union event. The finance department might classify a member as only those active in the core system and have $10 in their share account. Even with the best analytics software in the industry, finance and marketing will have different versions of the truth because they are not using the same semantics for the data elements in their systems. A common semantic layer will bring unity within a credit union and eventually the entire industry.
Analytics is a powerful way of leveraging data to make better business decisions. Adding cooperation to analytics will increase value exponentially. Cooperating on a common semantic layer will bring the cooperative philosophy to analytics. Analytics is giving credit unions a chance to draw closer together through agreeing on the definition of data elements. There has never been a better time to establish a stronger bond in cooperative finance. The credit union industry is best suited to display the power of cooperation. Since data is the raw material of the credit union industry, data analytics will create the industry’s future.
Common Semantics Build CommunityAs credit unions establish an industry standard ADM and common semantics, they will be able to communicate more clearly across all of their systems. Nothing brings a community together better than a common language. The ability to speak the same language and understand all the meaning behind word usage is an essential aspect of community. A common semantic layer for credit union data will bring the cooperative movement to a new level. Well-defined analytics will give credit unions a competitive advantage by leveraging their data.