It’s a harsh reality.  Many U.S. consumers are struggling financially.  According to the Federal Reserve Board, four in ten Americans can’t cover a $400 emergency expense.  As consumer debt rises and savings rates decline, credit unions are facing a growing issue and opportunity: how to quickly address financial wellness among members.

Consider these staggering stats: (2)

  • 70% of Americans live paycheck to paycheck
  • 24% of pay is spent on non-mortgage debt such as credit cards
  • 42% are living with no retirement savings

Data & Financial Health
Managing finances is one of the greatest areas of concern for many Americans. Fortunately, there is a significant opportunity for credit unions to develop analytics-driven programs that can spot those at-risk members and help provide solutions through financial education and special arrangements.  The first step begins with the credit union analyzing member data to recognize those members encountering financial hardships and then provide temporary assistance to help.

Here are some ways credit unions can maximize data analytics to guide members to better financial health:

1. Create data-driven profiles and member segmentation. In order to best determine who each individual member is, what their needs are, and how to best engage them, leveraging and analyzing member data is the first step. A combination of demographic data along with financial behavior-driven patterns that can be segmented from financial account and transaction data (like income, spending patterns, direct deposit data, and loan debt) will ultimately be the most helpful when segmenting members and compiling profiles. By profiling high-risk members, the credit union can know who specifically needs financial education tools and guidance.

2. Tracking FICO Score Migration. FICO Scores can reveal much about members and borrowers financial wellness. Many credit unions do not track the migration of credit scores for a given individual.  By saving each members’ FICO score with a date stamp, the credit union can extrapolate a potential financial wellness concern.  Factors that are considered in making FICO scores are changing. There is more emphasis on trends in someone’s credit history than before. Now consumers will be rewarded for making larger payments and getting rid of debt, but those who are accumulating more debt will be penalized (even if they are making the minimum payments).

3. Spot and track behavioral changes. Changes in deposit and ACH patterns are another tell-tale sign of a change in individual’s cash flow. Whether faced with unemployment, or a business is struggling and on the verge of bankruptcy, these deposit trends and spending changes can be analyzed through your CU’s analytics program. If the trend persists, this is an opportunity for the credit union to reach out and offer financial wellness tools and support before the situation becomes more dire.

4. Understand members’ debt-to-income ratio. According to Smart Assets, any debt to income ratio higher than 43% suggests a risky borrower or someone in need of financial wellness education. For those members who use the credit union as their primary checking account, the CU has an opportunity to monitor ACH payroll income, utility, cell phone, loan payments and other expenditures. Analyzing members’ debt-to-income ratio the credit union can determine how well certain members manage monthly debts and who could potentially struggle to repay loans.

Using Data for Good

Thanks to today’s data analytics and AI capabilities, credit unions not only have the potential to get an instant snapshot of members’ financial health, but they can offer personalized advice or guidance on how specific members can improve their spending and savings.

The credit union can then create special arrangements to help those at-risk members such as:

  • Postponed payments
  • Loan restructuring or change in interest rate
  • Temporary overdrafts or line of credit
  • Debt consolidation
  • Access to term deposit accounts
  • Refinance options

Make it a goal to explore members’ attitudes toward financial matters, determining their awareness of financial management, and their willingness to use financial wellness tools.  This creates a tremendous opportunity for the credit union to become a trusted advisor and to create services centered on helping members achieve financial peace.  As member-owned community cooperatives, credit unions are perfectly positioned to use analytics for good and improve the financial wellness of all their members.

If your credit union needs assistance on utilizing data analytics to help those members in need of financial wellness support, contact the Knowlton Group.


1. CNN Money: 40% of Americans can’t cover a $400 emergency expense

2. Top Money Statistics 

3.  Fortune: Why Your Credit Score Could Soon Go Up

4. Smart Asset