The Data Decision Imperative: It’s Time to Move Beyond Indirect Lending
Yes, developing first-party data capabilities takes time, effort and money. And it can seem so much easier to continue to rely on partners for decisioning data. But taking direct control of your data is no longer a luxury; it’s an urgent necessity. The longer you wait, the farther you’ll fall behind.
By Tim Pranger, Founder and CEO, Appli
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"We don’t know how to use data, and we don’t want data."
I heard these words recently from a credit union executive, and they stopped me in my tracks. Not because they were surprising – I’ve heard similar sentiments before – but because they perfectly capture a mindset that holds institutions back while enabling their technology and data-driven competitors.
Let’s be honest: For years, credit unions have thrived as indirect lenders and account holders. We’ve been comfortable letting others gather, analyze, and sell us data about our members. It’s worked well enough so far. But "well enough" won’t cut it anymore, especially as member expectations and competitive pressures continue to rise. The financial institutions that will succeed in the coming years are those that take control of their data destiny.
A December 2024 article in The Financial Brand, referencing a Forbes study, highlighted how financial institutions are being pushed to move away from third-party data sources, with 88% of businesses still overly reliant on external data. The report emphasizes what many of us already know: Banks and credit unions that make better use of their own first-party data see higher conversion rates which in turn improves the impact to their bottom line.
For credit unions, this shift is particularly critical as we move away from indirect lending and toward stronger direct member relationships – because trust isn’t built at the dealership. It is built through direct interactions where your service, transparency, and understanding of community needs stands out.
Read more:
- Why Banks and Credit Unions Should Embrace First-Party Data Now
- Most Financial Institutions Have a Data Problem, Not a Deposit Problem
- Your Bank’s Marketing Budget Isn’t the Problem – Your Strategy Is
Here’s the conundrum: The data you’re not collecting today is worth more than all the second-hand data you’re buying from others. Yet, many credit unions resist building their direct data capabilities, seeing it as unnecessary or overwhelming. In some cases, the data is even blocked from your purview, requiring expensive plugins or addons from vendors to even access the data.
This mindset and industry-wide issue is a recipe for long-term trouble. Every day you delay developing your direct data strategy is a day you fall further behind more proactive competitors.
Consider this: When you rely solely on indirect data, you’re always playing catch-up. You’re making decisions based on what others tell you about your members rather than what your members are telling you directly. It’s like trying to understand a conversation by reading someone else’s notes instead of being in the room. And those notes? They’re often outdated by the time they reach you, missing crucial context about your local market and specific member needs.
The path forward for credit unions isn’t just about collecting more data – it’s about shifting how we think about member relationships. Here’s what that means in practice:
- Recognize that every member interaction, whether through your website, mobile app, or branch, is a data point waiting to be understood. When a member uses your loan calculator, searches your rates, or browses your products, they’re telling you something valuable about their needs and intentions. These direct interactions provide real-time insights that no third-party data source can match.
- Start small but think long-term. You don’t need to revamp your entire operation overnight. Begin by identifying one area where better data could improve member service. Maybe it’s tracking how members interact with your online banking platform, or analyzing patterns in loan applications. The key is to start gathering and using this information systematically. One credit union I worked with began by simply analyzing their website’s calculator usage – within months, they uncovered patterns that helped them discover their most popular lending products, and pinpoint member needs. Which in turn immediately changed their marketing and approach to engaging site visitors.
- Make data-driven decisions part of your culture. This means moving beyond gut feelings and "we’ve always done it this way" thinking. When you’re considering a new product or service, ask yourself: What does our data tell us about member needs? How can we measure success? What patterns are we seeing in member behavior that might inform our strategy?
When credit unions start embracing direct data, remarkable things happen. You can begin serving products to members at exactly the right moment based on their actual behavior. You can run marketing campaigns informed by real member interactions rather than indirect insights. You can adjust your lending approach as you start seeing the clear differences between your current business model and a direct focused one.
The tyranny of the urgent often keeps us focused on immediate needs – this quarter’s numbers, this month’s goals. But credit unions can’t afford to keep postponing this mindset shift. The future belongs to those who can see beyond their current indirect business model and start building direct relationships with members. This isn’t about implementing complex systems or hiring teams of data scientists. It’s about recognizing that the data you’re not collecting today could be your most valuable asset tomorrow.
This isn’t just about staying competitive – it’s about fulfilling our fundamental mission as credit unions. Better data means better service to our members. It means understanding their needs more deeply and responding more effectively. It means being proactive rather than reactive in how we serve our communities. When you understand what your members need before they have to ask, you’re not just a financial institution – you’re a trusted partner in their financial journey.
The data decision conundrum isn’t really about data at all. It’s about choosing between comfort and growth, between the familiar past and the necessary future. It’s about deciding whether you want to truly know your members or just know about them.
The good news is, you don’t have to figure it all out at once. Start small, think strategically, and remember: The best time to start building your data capabilities was yesterday. The second-best time is today.
