Credit unions exist to serve their communities, which means they need to continuously respond and adapt to meet members’ needs if they want to survive. Although they are non-profit organizations, they are still subject to the same competitive forces as other financial services businesses and need to keep pace with them if they want to retain and attract new members.
These are not the only pressures credit unions face in sustaining and growing their membership base and product offerings. For some years now, the broader financial services industry has been at the mercy of the so-called Amazon effect. Customers, who have become used to great customer services, quick turnaround times, personalized service and communications and an effortless purchasing and payment service, now expect the same from their financial service companies.
The only way credit unions can meet these challenges and demands is to harness the best of what fintech has to offer and digitalize both front-facing services and back-office operations – and surface-level changes will not suffice.
Digitalization by partnering with a fintech provider is the quickest and most cost-effective way to meet the needs of customers who have become extremely digitally savvy because of the Covid-19 pandemic. This can be done without requiring credit unions to start from scratch and invest huge amounts and time in building new technology systems. Instead of having to completely overhaul credit unions’ existing core technology architecture, fintechs can incorporate a wide range of financial services offerings into credit unions’ existing technology using innovative fintech applications. At the front end, these include digital payments, lending platforms, personal finance management tools and digital banking. At the back end, fintechs can incorporate sophisticated fraud prevention measures and regulatory reporting systems.
Many credit unions have started out on their digitalization journey but often it’s been in a piecemeal fashion. For instance, they build a better website or offer a mobile banking app, but the back end still relies on legacy systems and is labor intensive and prone to errors. Thus, its crucial to approach digitalization comprehensively and strategically with a long-term vision in mind.
Benefits of digital transformation in credit unions
Credit unions can benefit tremendously from digitally transforming their businesses. Some of the main benefits include:
Improving customer service levels. According to Consumer Reports, members of credit unions are already more satisfied with the service offered by credit unions than banks. However, customer service can always get better, and digitalization provides credit unions with the tools to take customers satisfaction to even higher levels. For instance, fintech speeds up processes so that customers get answers to their questions or loan requests far quicker than before. It also allows the customer to engage with the credit union’s services 24/7 rather than waiting for business hours to resolve problems or get access to new products and services.
Operational efficiencies. Digitalizing back-office activities reduces the sheer volume of repetitive activities that have become costly and overwhelming for staff members. Technology is better suited to manage these tasks because it can do so without any errors and in a fraction of the time. With fraud becoming ever more sophisticated and regulatory requirements more burdensome, incorporating robotic process automation, machine learning and AI frees up human resources to focus on other value-adding activities.
Expanded customer base. It’s the youth who are going to be the members of the future for credit unions and they don’t know a world without digital solutions. Thus, if credit unions want to appeal to these generations, they will need to deliver products and services digitally and seamlessly across all touchpoints. Digitalization will also help retain existing members who have also come to expect sophisticated online banking and financial services.
Data and predictive analytics. Arguably the most powerful aspect of digitalizing credit unions is the data captured and predictive analytics generated by the technology. Understanding customer needs better, as well as their pain points and preferences, would allow credit unions to make more informed decisions on product offerings, prices and how to market effectively to their member base. The data captured also improves risk management by allowing credit unions to proactively identify fraud and use the information to manage other business risks that may emerge in the future.
Barriers to digital transformation of credit unions
Change is never easy and credit unions that decide to undergo a digital transformation are bound to experience challenges along the way. These include:
Lack of strategic foresight and oversight. Traditional financial services companies have made many attempts to digitalize aspects of their business but usually these end up being hugely expensive and largely unsuccessful endeavors. A lack of understanding of the scope of change needed and a strategic roadmap could scupper any chance of the business reaping the benefits of digitalization.
A lack of understanding of the importance of data. The usefulness of data is determined by its quality and how well it is governed within the organization. Historically data is siloed, stored in different structures and there are data quality issues. For instance, data is not standardized, which means there’s no single source of truth. If leadership doesn’t understand what the importance of having clean data, it will be difficult to reap the benefits of the business’s available data.
Concerns about job losses. There’s a fear that machines will take over the work of humans, leaving employees without jobs. Thus employees could be resistant to digitalization initiatives if leaders don’t share their vision and put them at ease with the changes by explaining that introducing new technology will open the door for them to be upskilled for more meaningful jobs.
How to choose software for credit unions
The key requirements credit unions need to consider when embarking on the digitalization of their business include the following:
Composability. The digital banking platform needs to be composable so that applications can run independently of each other. Traditionally, credit union technology systems, like other financial services businesses, have been housed on central servers that don’t allow for easy adaptation. Composability gives credit unions the ability to make changes without disturbing other applications. Adding capabilities and scaling up the business also becomes easier and faster.
API orchestration. Digitalization introduces a diverse range of APIs that run a credit union’s various digital offerings. These are written in different languages and reside on different platforms. To manage the ecosystem and ensure all APIs communicate with teach other simultaneously and in the same language, it’s crucial that a company adds a dedicated orchestration layer that ensures that the customer experience is error-free, seamless, and satisfying.
Security and compliance. Credit unions must ensure that their digital offerings offer members state-of-the-art security and that these comply with international data privacy laws and other financial services regulations.
User support. Credit union members need to be taken on the digital transformation journey too, understanding what they stand to benefit from the new digital applications and platforms. Without user support and a change management process, the benefits of digitalization are unlikely to be fully realized for the credit union.
How Velmie can help
Velmie is well-equipped to partner with credit unions in their digital transformation. We have all the expertise to customize users’ journeys and tailor digital services to meet members’ needs. We can help credit unions introduce new digital features and platforms smoothly and within a reasonable timeframe and at an affordable budget.
Velmie uses built-in modular cross-platform integrations to expand product capabilities and its platforms are highly scalable, secure and compliant. Our platform features will unlock all the benefits of digitalizing and include the following:
● White-label mobile and web apps
● Modularity for tailored solutions
● An API orchestration layer
● Security and compliance
● A user interface that fosters smooth engagement and customer experience
● Back office and user support
Conclusion
Digitalization is no longer a nice-to-have for credit unions who serve communities that have become increasingly digitally savvy and now expect the same customer experience they receive from the likes of Amazon.
If they want to retain their existing membership base and attract new, particularly younger members, credit unions need to understand what a digitalization transformation entails. They also need to understand why they need to view it as a strategic journey rather than a process of modernizing certain services and not others.
Innovative digital solutions developed by fintechs have meant that digitalization of traditional financial services companies is not as expensive, disruptive, or time-consuming as in the past. But it is imperative to partner with a fintech company that is reputable and has proven success in future-proofing financial services businesses.
About the author
Paul Shumsky, CMO
Paul Shumsky is the Chief Marketing Officer (CMO) at Velmie, a leading fintech and banking technology solutions provider. With a passion for driving innovation and customer-centric strategies, Paul brings over two decades of expertise in the realm of marketing and technology.
Connect on Linkedin