5 challenges facing credit unions and their solutions

In today's tech-driven financial landscape, credit unions are facing a myriad of challenges. As traditional banking institutions continue to invest heavily in cutting-edge technologies, credit unions must adapt to remain competitive. The rise of mobile banking, online financial services, and fintech startups has created a significant shift in consumer expectations, leading credit unions to innovate and modernize their services to meet these changing demands. At the same time, credit unions face increased regulatory and budgetary pressures and operational inefficiencies that can hinder their ability to keep up with the pace of technological change. And, while credit unions offer many benefits for their customers, they need to lean on and take advantage of technologies, including consumer-permissioned data, to stay competitive. But before embracing the opportunity of technology, it’s important to understand and acknowledge the biggest challenges facing credit unions today.

1. Competing with larger financial institutions

Large financial institutions have several advantages over credit unions that make them more competitive in the financial industry. Generally speaking, these institutions have a competitive edge in terms of scale, resources, and diversification. This allows them to offer more innovative products and services, reach a wider customer base, and withstand economic fluctuations more effectively.

Because they have larger pools of capital and resources, they are able to invest in the latest technologies, advanced analytics, and cutting-edge software. This means they can offer more innovative and customized products and services to their customers, which credit unions may not be able to match due to their smaller scale. Additionally, large financial institutions can leverage their size to negotiate better rates and terms with suppliers and vendors, thereby lowering their operating costs and passing on the savings to their customers.

Larger financial institutions may also have a wider geographic footprint and/or greater brand recognition, making them more accessible to customers across the country. This allows them to attract a larger customer base and offer a broader range of products and services than credit unions. A well-established reputation and brand name may provide customers with a sense of trust and security, which can be an important factor when choosing a financial institution.

2. Antiquated processes and manual consumer data sourcing

One of the biggest hurdles credit unions face to stay competitive is the reliance on antiquated processes and manual consumer data sourcing. Some credit unions still use paper-based systems to manage member accounts, loan applications, and other transactions, which can lead to errors and delays in processing. These manual systems also make it difficult for credit unions to analyze data quickly and accurately, which can impact their ability to make informed decisions and provide personalized service to their members.

Furthermore, credit unions may not have the resources or expertise to keep up with the latest technological advancements in data collection and analysis. For example, some credit unions still rely on in-person visits or phone calls to gather information about their members, rather than utilizing online or mobile tools. This can be a significant barrier to attracting and retaining younger, tech-savvy members who prefer digital channels.

The use of outdated methods can also impact credit unions' ability to compete with larger financial institutions. Traditional banks have already invested in sophisticated data analytics tools and automated processes, which allow them to process loan applications and account opening requests quickly and efficiently. This puts credit unions at a disadvantage when it comes to serving their members, who expect a seamless and personalized experience.

3. Tight budgets and need for cost savings

Credit unions face the challenge of operating on tight budgets while striving to maintain a competitive edge. They must constantly balance the need to modernize their infrastructure and invest in new technology with the need to control costs. The financial services landscape is evolving rapidly, and credit unions need to keep up with the latest trends and innovations to remain relevant and attractive to members.

The cost of technology and infrastructure investments can be significant, and credit unions often struggle to find ways to fund these initiatives. Additionally, lack of budget developers, engineers, and more talent can make it difficult for credit unions to find the right people to manage these types of projects.

4. Required regulatory compliance

Compliance is indeed a significant challenge for credit unions, given the increasing number of regulations and guidelines they must adhere to in their day-to-day operations. Compliance regulations cover various areas, including data privacy, anti-money laundering, consumer protection, and cybersecurity, to name a few.

For smaller credit unions with limited resources, keeping up with regulatory changes and ensuring compliance can be a daunting task. Failure to comply with regulations can result in hefty fines, reputational damage, and legal consequences, which can severely impact the credit union's operations and its members.

5. Member Engagement

Credit unions need to find ways to engage their members and build lasting relationships. Member engagement is essential for credit unions to grow and remain competitive. However, many credit unions struggle to engage their members effectively.

One of the reasons why credit unions find it challenging to engage their members is because of the increased competition in the financial services industry. Banks, online lenders, and fintech startups offer similar services as credit unions, and they have more resources to invest in member engagement strategies.

Additionally, credit unions often lack the technology and data analytics capabilities that banks and other financial institutions have, making it difficult to understand their members' needs and preferences fully. This makes it challenging for credit unions to tailor their services and communications to members effectively. In fact, as younger generations become more prominent, they have different expectations and preferences when it comes to financial services. They prefer digital experiences, personalized services, and transparency, which many credit unions struggle to provide.

Overcoming challenges by embracing technology and automation solutions

While the challenges faced by credit unions are by no means minor, embracing technology and automation can be a simple, cost-effective way to stay in front of the competition. These tech tools can be used to:

Stay competitive with big banks while keeping costs low

Credit unions can compete with large financial institutions, automate processes, save on costs, and focus on personalized customer service by leveraging technology. While many credit unions already have a loyal customer base, they can strengthen customer relationships by investing in digital platforms that help them to offer convenient and accessible personalized financial services, similar to those offered by large financial institutions. For example, being able to provide in-app or onsite personalized products for customers will keep customers coming back to use credit union services.  Plus, credit unions can consider partnering with technology platforms and software-as-a-service (SaaS) companies, like MeasureOne, and other vendors that can help them access the latest technology without having to build everything in-house like larger institutions may have access to.

Automate processes and engage members

Prioritizing investments in modern data collection and analysis tools, as well as automating as many processes as possible, is one simple way to embrace tech. For example, credit unions can leverage APIs and consumer-permissioned data (CPD) technology to instantly access consumer data for loan processing or machine learning algorithms to analyze data and identify patterns which can then inform their decision-making processes. Additionally, they can use online and mobile banking platforms to provide members with self-service options for managing their accounts and conducting transactions. By embracing these technologies, credit unions can improve their operations, enhance member experience, and remain competitive in the marketplace.

The key to success lies in recognizing the need for change and embracing innovative solutions that prioritize member needs and satisfaction. Ultimately, credit unions that are able to adapt to the changing landscape of the financial industry will be better positioned for long-term growth and success. 

Using CPD to overcome the 5 challenges

For credit unions who want to address one or all of those challenges, taking advantage of consumer-permissioned data is a simple and cost-effective technology to do it. CPD offers the following to combat each challenge:

1. Competing with larger financial institutions: Agile adoption/integration without workflow interruption, benefiting the business and the consumer
2. Antiquated processes and manual consumer data sourcing: Faster, more efficient processes for income and employment and insurance verification
3. Tight budgets and need for cost savings: Expanded access to credit for borrowers from lower costs than traditional or legacy alternatives means more loans can be closed 
4. Regulatory compliance: Fraud-proof, secure verification with consumer privacy and protection in mind
5. Member engagement: Ease of consumer data sharing to understand spending/shopping habits to provide personalized products and services that keep members happy and engaged

And MeasureOne is here to help credit unions take the first (or next) step in embracing technology through consumer-permissioned data.

MeasureOne’s consumer-permissioned data platform for credit unions

With automated workflows and data directly from the consumer (and at a lower cost all around), the decision to take advantage of consumer-permissioned data is simple. MeasureOne is the partner that credit unions need to take advantage of consumer-permissioned data. 

For credit unions, MeasureOne’s product offers:

• One-month, no risk free trial (and 90%+ cost-savings after the trial ends)
• Low cost, automated verification of income, employment, and insurance
• Data straight from primary sources (Payroll systems) ensuring fraud protection and up-to-the-minute accuracy
• 100% market coverage (over 5,000 supported payroll systems) driving industry leading conversion rates

From income to employment to insurance verification, MeasureOne brings secure, transparent data to the table for the benefit of credit unions and their consumers.

Let MeasureOne help streamline your credit union’s operations and continue driving consumer confidence.