How Credit Unions can Leverage Technology to Become Industry Leaders

This article was originally published in CUInsight.

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Credit unions have spent decades establishing a reputation for exceptional member service and community-oriented banking. But to maintain this reputation in an increasingly competitive industry, credit unions have to innovate like never before. This means diversifying their product offerings, providing comprehensive and seamless digital experiences, and continuing to give members the personalized, high-quality service they expect.

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At a time when the entire banking sector is under immense pressure amid persistent inflation and rising interest rates, credit unions are locked in a fierce competition for deposits. But it’s important to remember that deposit growth is downstream from many other aspects of a credit union’s business, such as the lending experience and the ability to provide members with capital when, where, and how they need it. As consumer demands have shifted, adaptability has become critical – credit unions need to offer a full suite of digital services and experiences, and market to potential new members on that basis.

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Credit unions are partnering with fintechs to remain competitive, as this is much more cost-effective than developing technology in-house. For credit unions, the subject of digital transformation is too often discussed in terms of how they can “keep up” with other institutions. It’s time for credit unions to move beyond these discussions and start thinking about how they can lead their industry in this area, as they already do in many others.

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Accelerating the digital transformation

Consumers want their banking experiences to be holistic, accessible, and streamlined, which is why institutions are competing to provide the best digital platforms. Seventy-eight percent of American adults prefer to do their banking digitally, while 87 percent of consumers say they use banking apps at least once per month. The use of mobile banking alone jumped from 15 percent in 2017 to 43 percent in 2021.

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These are just a few of the reasons why it’s no surprise that the proportion of banks and credit unions which regard fintech partnerships as important spiked from 49 percent in 2019 to 89 percent just two years later. While consumers tend to think big financial institutions offer better digital experiences, credit unions are working to change this perception. Fintechs play an integral role in helping credit unions compete with larger institutions because they eliminate the need for costly R&D, allow partners to deploy technology without increasing headcount (in the form of huge IT teams, for example), and handle installation, troubleshooting, etc.

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Credit unions are almost twice as likely as banks to see relationships with fintech companies as a strong driver of growth. This is a sign that credit union leaders are committed to pursuing digital transformation, but they want to do so in a cost-effective way.

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Meeting members where they are

Although credit unions are constantly adapting to new realities, their fundamental mission remains the same: forging lifelong relationships with members by giving them excellent personalized service, smooth experiences across all touchpoints, and all the tools they need to manage their financial lives. When credit unions tie this whole process together with technology, they will improve connections with members while addressing their needs more quickly and comprehensively. By automating workflows and generating efficiencies, credit unions improve the lives of employees, which will have an immediate positive impact on member experiences.

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Credit unions have to meet members where they are – from offering seamless digital experiences to omni-channel marketing that emphasizes these experiences, easy pre-qualifications, fast access to money, and other features consumers want. As credit unions fight to attract and retain deposits, they can’t just focus on interest rates – they have to ensure that the lending experience is quick and user-friendly. If a credit union isn’t capable of closing a home equity loan in a week or less, it will fall behind and miss out on new business.

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One way to improve the speed and efficiency of the loan approval process and all other services is through consolidation on a single digital platform. Ninety percent of banking customers say they prefer to manage their money all in one place – a proportion that rises to 93 percent for millennials. The credit unions in the best position to compete over the next several years will be the ones that offer simplified and holistic digital experiences along with the top-tier customer service that has always set them apart.

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A shift in member demands and services

As mortgage originations and refi volume collapse, tappable home equity remains high. Amid deteriorating economic conditions, a rising number of homeowners are putting this equity to work – for example, the number of HELOCs and other home equity loans surged last year. While the old model of home equity lending generally centered on home improvement, borrowers are now using the value of their homes for a wider range of purposes – such as starting a business.

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This is one of the many ways member needs have shifted, and credit unions should take a fresh look at their policies and processes to meet these needs – by simplifying the home equity lending process, for instance. Credit unions are working with fintechs to analyze their processes, make workflows more efficient, and improve the lending experience. Fintechs aren’t just third-party service providers – they’re strategic partners that can help credit unions collect and review data on member behavior, do more with their existing workforces, drastically reduce time-to-close, increase ROI, and make lending processes easier and less disjointed.

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Members don’t just care about interest rates – they care about experiences, and they’re going to stay with the institutions that provide the greatest convenience, flexibility, and customer service. While outstanding experiences are necessary for deposit growth, credit unions won’t attract new members if they aren’t advertising online. By building a multi-channel digital marketing plan around the core services borrowers want (such as streamlined home equity lending), credit unions will close the gap with fintechs and large banks.

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To lead in a sector that’s becoming more competitive every day, credit unions need to innovate while leveraging what they already excel at – building long-term relationships with members through the best customer service in the industry.