The 2020 pandemic has given financial institutions of all sizes some serious challenges. Fintechs, banks, and credit unions alike struggled to serve their customers and stay operational throughout an especially difficult year. Nationwide restrictions have changed the interaction between customers and financial institutions. In the process, the sector’s most pressing pain points came to the surface.
For many CUs, COVID-19 has confirmed a well-known fact: they lag behind when it comes to their digital offerings. Loan, deposit, and member growth strategies were simply not built around digital tools and services. While banks and fintechs are years ahead on their digital transformation roadmap, credit unions needed a global wake-up call to take action.
The COVID-19 challenges made it imperative to shift strategic priorities for the upcoming years. Automation, digitalization, and data-centric infrastructures are the areas in which most development is still needed. Credit unions have a chance to focus on these areas and transform pandemic challenges into development opportunities.
The Untapped Potential of Automation
Automation plays a crucial role in the financial sector and its benefits are essential for the growth strategies of any financial institution. ML-based risk models, loan monitoring tools, and customer service chatbots are popular solutions enabled by automation across the financial sector. However, credit unions have yet to benefit from automation’s full potential.
The COVID-19 pandemic makes it easy to identify opportunities for automation use cases. Unlike fintech companies that could still serve their customers through mobile and online services, some credit unions found their front-line staff overworked and stretched between manual processing tasks and customer interactions. At the same time, loan-seeking businesses and consumers were getting increasingly impatient and wanted shorter turn-around times. The constant decline in loan applications during the COVID-19 pandemic makes it imperative for credit unions to prioritize, automate, and make the best loans possible.
Automation opportunities span across the entire operational landscape. They range from proprietary tools and software to third-party solutions that can easily be deployed and integrated on top of existing infrastructure. Automated tools enable credit unions to keep focusing on what matters in the post-pandemic world: serving their members while still making the right financial and business decisions. Reducing manual processing means spending more time on members that matter, while offloading simple decisions to algorithms and software.
Unused Member and Transaction Data
Credit unions have a variety of data available, originating from both internal and external sources. Marketing, sales, and operations data that the CU itself generates on a daily basis can be combined with member-generated data such as loan data, credit card, member & transaction data. Complementing these data sources is also possible: alternative data sources acquired from third parties make it easy to simply “buy” and integrate relevant data.
Cloud-based storage solutions can aggregate all this data and make it available in a unified location. Instead of analyzing individual, isolated sources of data, cloud-based BI tools make it possible to seamlessly integrate multiple data sources and run analytics queries against a single source of truth. Modern data architectures are also known for their versatility as opposed to legacy, in-house systems.
The Analytics as a Service Era makes analytics available to any institution seeking to make use of their data. Applications such as Member Lifetime Value estimation and membership segmentation become available at the distance of a click. Some of these predictive models can be exposed through intuitive interfaces and triggered without needing to write any code. Advanced algorithms become available to decision-makers, be it employees or executives. All that it takes for credit unions to leverage advanced ML applications is the commitment to strategically use their own data and the basic cloud infrastructure investment.
Analytics comes in different shades. There are multiple stages where data can be turned into insights. Rudimentary types of analytics seek only to understand past patterns in historical data. On the other hand, prescriptive and predictive analytics tackle data analysis in the future. What is going to happen and most importantly: how do we make it happen?
Modern data-centric architectures, the wide availability of cloud services, and the advanced capabilities of predictive analytics make it easier than ever for credit unions to understand and serve their members’ needs.
Focus on Digitalization: Remote Services and Online Banking are Crucial
Over the past decade, digitalization gave fintech startups a huge advantage over traditional financial institutions and increasing market share. Their offer of remote services through online and mobile channels has proven essential to growing their customer base and serving customer needs on the go. While these services were initially only targeted to tech-savvy millennials, the 2020 pandemic has clearly outlined the importance of online services across the population.
Given the restricted capability of visiting physical locations, every customer required remote assistance. Needless to say, financial institutions that were capable of offering these remote services had a less tough ride through the pandemic. The Gartner 2020 Financial Services COVID-19 Pulse Survey found that over half of the surveyed business leaders identified tech infrastructure as their greatest weakness as they responded to the crisis.
If 2020 made something clear, it is that contactless payments and peer to peer payment solutions are not a thing of the future. Customers expect support on the go, offered remotely, via mobile and online channels. Key technology trends are converging: remote access, increased personalization, smart processing, and data analytics.
Digital transformation post COVID19 represents more than eliminating paper and digitizing loan applications. It also should be relegated afterthought or past problem once the vaccine has been widely distributed. Instead, holistic digital transformation should serve as the foundation behind business and member strategies to enhance the member relationship.
Digitalization is what brings together automation and data-centric infrastructures. Together, they create a self-reinforcing ecosystem. Applications and algorithms can be used to automate time-consuming processes. In turn, the data they generate is used to improve, understand, and gain insights through advanced analytics. These digitized services can be customized and built to serve all humans involved: both members and employees. Technology can support the core philosophy behind credit unions: cooperation and people helping people.
Enabled by key technological trends, credit unions have a chance to transform a global challenge into a strategic opportunity. Focusing on data, making use of advanced analytics tools, and embracing an automation-first workplace culture are key strategic directions in the post-pandemic financial world.
Blue Orange Digital is a data transformation and predictive analytics agency that works with credit unions to tackle their data journey. If you want to talk data strategy and analytics possibilities at your CU, you can schedule 15 min with the author here.