Increasing competition from fintech companies in the traditional lending arena, decreasing profit margins and rapidly changing member preferences are driving credit unions into the digital lending space to stay relevant. Depending on where you are in your digital transformation and because the digital landscape is quickly changing, you may be facing an overwhelming frontier.
Credit union professionals can gain a lot from observing how fintech companies are disrupting traditional lending processes and services and apply this knowledge when planning for their own digital transformation. Here are a few examples of current fintech industry disrupters:
- Gamifying online lending tools
- Adding customer service chat bots to websites
- Using data mining to assess risk and creditworthiness
In order to compete with so many cutting-edge digital solutions offered by fintech companies, start by focusing on their alternative lending models. They are lean, agile and offer faster approvals and funding than traditional legacy processes used by many credit unions. Traditional credit union legacy processes and systems are not as responsive, and many members are subjected to a longer lending processing timeframe.
If you’re ready to start streamlining lending at your credit union, take a comprehensive approach by looking at both your front and back end processes. This includes:
- Data input
- Workflow routing
- Member communications
The challenges you’ll face with digitizing traditional lending services revolve around interpreting regulatory requirements for the digital space to keep your credit union compliant. The easiest adjustments to your lending practices that you can make include lower risk credit-line renewals while the hardest services will be mortgages given stricter regulations. Mortgage lending remains a vital part of credit union loan portfolios, so investing in digitizing mortgage lending at your credit union is worth considering.
While fintech companies may be leading the way in incorporating technology to serve its customers, credit unions have a long-term regulatory advantage. By upholding the strict NCUA and Consumer Financial Protection Bureau (CFPB) regulatory requirements that fintech companies currently skirt, credit unions gain a more comprehensive understanding of proper risk management and can offer stronger member protection. Considering the heightened national attention on cybersecurity in the wake of several high-profile data breaches, stronger data security protections may be a compelling angle, especially if you can combine it with nimble lending options like e-mortgages.
If you’re looking for a deeper understanding of digitizing lending and current industry regulations to help you with your digital transformation, you can join industry peers and experts at the 25th Annual CUNA Lending Council Conference, November 3-6, 2019 in New Orleans. You’ll cover today’s lending hot topics including a session on digitizing the mortgage process and panel discussion on where digital mortgage lending is heading in 2020. You’ll also get an economic outlook and opportunities to collaborate with your peers to discover new ways of incorporating the latest industry insights into your lending strategy.