Data Analytics: Are Taxicabs the New Polaroid?

Data Analytics: Are Taxicabs the New Polaroid?
Posted: Jul 6, 2017
Comments: 2
Author: Lou Grilli

And what does this have to do with credit unions?

Polaroid is a MBA business school classic case study of a company whose management was blindsided by innovation, even when indicators were present, but ignored. Polaroid’s peak employment was 21,000, and by the late 1990s Polaroid was a top seller of digital cameras; its peak revenue was $3 billion in 1991. But other digital cameras flooded the market, its film sales plummeted, and Polaroid declared bankruptcy in 2001.

Blockbuster is another classic case study of being blind to innovation. Going to a blockbuster store and picking out a rental video was a Friday or Saturday night tradition for many households. But Netflix’s adoption of putting DVDs in the mail, replaced with streaming and on-demand content was what finally put Blockbuster away.

The taxi industry has not made it to business school case study of failures, but its getting close. The taxi industry in the U.S. generates $19 billion annually, employs approximately 409,000 people, and is quickly shrinking. Taxi companies in San Francisco and Bethesda, A DC suburb, have declared bankruptcies. People prefer ride-sharing companies like Uber and Lyft to waiting outdoors in a taxi queue, or trying to hail a moving vehicle with a certain wave of the hand. As a result, many loans secured by taxi medallions which were once worth up to a million dollars, have been written off. 

And this has to do with credit unions how?

All three of these industries are examples of not seeing changes coming. People changed the way they received a service, but the companies providing the service did not change, so the people went elsewhere. The data was there for each company’s leadership teams to see, it just wasn’t looked at, or looked at in the right way.

And this is a valuable lesson for credit unions when delivering services. Applying for a loan on a mobile device, and having the decisioning done real-time using the integration of several data sources, is one example of a service that people expect.  For many, if they can’t get that from their current financial institution, they will go elsewhere.  

There are many use cases for a credit union to integrate data from multiple sources and use the data intelligently:

  • Using core data and transactions to determine which members should be sent a credit card application, and tailoring the credit card offers using data that analyzes which members are making payments to specific issuers, and further tailoring by looking at the amount of monthly payments;
  • Targeting credit line increase programs on an automated basis using payment history and updated CRA data;
  • Looking for members’ payments to, or funding from payday lenders to assist with non-predatory loans together with financial literacy programs to help members;
  • Optimizing branch expansion by looking at census data, market data, heat maps of existing members addresses, and shared branch usage traffic patterns; 
  • Activate existing members whose only relationship is an auto loan using CRM data;
  • Offer loan rate resets to reduce payments using member data and CRA data.

Credit unions who are not accessing and using their data risk the same fate as Polaroid, Blockbuster, and potentially, taxi companies. Conversely, credit unions taking advantage of their own data, combined with available third-party sources, can unlock growth and revenue. Making decision based on “gut” is out, making decisions based on data analytics and computer-based modeling is in. 

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Lou Grilli

Lou GrilliLou Grilli

Lou is the AVP of Product Development & Thought Leadership at Trellance and is responsible for providing leadership to the organization on emerging payments and industry trends, as well as managing the product portfolio.

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2 comments on article "Data Analytics: Are Taxicabs the New Polaroid?"

FELIX SHTAYNER, 7/7/2017 9:20 PM

You're analogy doesn't hold up sir. Admittedly, the taxi industry has lost riders to transportation companies that offer a better customer experience all arround. Yes, this improved experience is entirely due to technological advances that taxis didnt provide. Indeed, just like Polaroid and Blockbuster. However, concluding that taxi, like Poloroid and Blockbuster, lost market share because they were "blindsided" by tech is reach. Taxis were prevented, under threat of medallion revocation from local regulators, to adapt or utilize tech to offer a better ride to customers. The cvery same regulators, mind you, that turned a blind eye to the illegal public transportation activities that these "disrupters" were engaged in during the critical early years of thier development. I dont know of any laws preventing Polaroid or Blockbuster from adapting to the changing marletplace.

Lou Grilli, 7/8/2017 3:25 PM

Thank you for taking the time to comment. Your particular insight into the regulatory environment of medallions is enlightening, and appreciated; I'm sure most people don't realize the restrictions placed on the taxi industry. Your final point is especially relevant - there were no laws preventing those companies that failed from trying to keep from failing; likewise there are no restrictions that keep financial institutions of today from using data to make better decisions.

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