And the election winner is…Big Data!

November 6, 2012 at 7:37 am 1 comment

It’s Tuesday morning and the biggest election winner has already been decided:  Big Data.  Why?  This is the first election in which both campaigns have used cutting-edge data analysis from disparate data bases to figure out who’s going to vote for whom and how they can get him or her to actually vote.  This means that the winner of Ohio will  have as much to do with who hired the best social science researchers as who actually had the best ideas to lead the country.

“Interesting thought,” you say, but what does it have to do with my credit union?  Because as much as the concept of “Big Data” personally gives me the creeps, its impact on virtually every aspect of business is large and getting larger.  Your credit union will be shaped by it in the coming years whether or not you realize it.

For example, from reviewing debit and credit card information, and cross-referencing it with other databases, marketers can tell you which of your members spends hundreds of dollars a month shopping but hasn’t visited a competitor for six months.  The competitor uses this information to provide a rebate to your member and similarly situated online bankers as she does her online banking. The member accepts the rebate and it is automatically credited to her credit union account.  It’s a win-win:  the member has a better shopping experience and the credit union gets paid for the placement, providing a useful alternative to the charging of fees.  This isn’t science fiction but an example of the type of services that have been provided by Cardlytics, a private marketing firm started in 2008.

How do you make decisions and what decisions do you come to?  One of  the most important tasks facing the executive today is deciding what information to use when making  decisions. As a paper in the April Harvard Business Review opined:  “For all the breathless promises about the return on investment in Big Data, however, companies face a challenge. Investments in analytics can be useless, even harmful, unless employees can incorporate that data into complex decision making.”  To me it’s analogous to baseball.  If you look at today’s general managers, increasingly they are not grizzled veterans who spent years around the game.  Instead they are Ivy League educated whiz kids who find manipulating numbers to make baseball decisions more interesting than manipulating numbers to make financial ones.  You have more access now to information about where to place branches, what products to offer, and at which members to direct your marketing efforts than you ever have before, and this type information is only going to increase.   Can you justify relying solely on “gut instinct” anymore?  Do you have the ability to analyze the numbers?  These are the type of questions that Big Data forces us to ask.

A third issue has to do with privacy. It’s possible that most people are willing to give up their privacy in return for a bargain the next time they go shopping, but I hope not.  My guess is that we may someday see a backlash against the extent to which we have allowed business to create avatars of ourselves in return for better marketing opportunities.  If I am right, then maybe there will be credit unions out there that maximize the potentialities of big data not simply by slicing and dicing their members’ buying habits and lifestyle choices into commodities to be bartered with, but actually go beyond existing legal requirements so that members who truly want their privacy protected can have it protected.





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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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