The adoption of technology in the financial sector is on a rapid rise. A Fintech report by PricewaterhouseCoopers shows that up to 77% of such institutions are stepping up their efforts to increase innovation. Credit unions are adopting the use of technology to make the member journey smoother and more efficient.
The adoption of technology is also a strategy in a sink or swim environment. The competition is enormous, and only those credit unions that have better loan originations systems can survive. So, what are the essential ways the credit union sector can improve loan operation processes?
How credit unions can improve loan operations
Credit unions have to step up to the demands and needs of the modern member. It requires a delicate balance between cost-saving measures and improving their capabilities for better efficiency. Some strategies to improve loan operations include the following:
- Cloud Deployment
Credit unions need to move away from Legacy learning systems that rely on manual steps for decision making. Cloud-based loan processing systems are efficient, hassle-free, and cost-effective.
Document management, updating, and sharing are also easier. Lenders have access to a broad pool of data sources, which helps in quick decision-making. Cloud deployment allows for scalability without the associated cost of physical expansion or the need to hire more staff.
- Financial Literacy
The credit union sector needs to invest in educating its members on financial issues. Members who have knowledge can evaluate products and make better decisions. By educating members, credit unions will build trust by helping them manage complicated financial situations.
A member, who knows how to handle money well, avoids situations such as defaults, bankruptcy, or foreclosure. For the credit unions, it means higher loan repayments resulting in better or more profitable revenue streams.
- Digital Documentation
Paper transactions in loan processing are cumbersome and time-consuming. A report by Transunion shows that up to 70% of loan applicants abandon the application altogether due to how cumbersome the processes are.
Digital documentation is secure and eliminates errors that may arise from manual inputting. Sharing of documents and receiving feedback via the internet is quick and efficient.
Within minutes, it is possible to process a loan application, instead of days. Compliance and retention requirements are easier without having to store tons of paper documentation.
- Input from IT Departments
The IT Department is the center of digitization. They ensure the proper running of the systems while keeping up to date with the latest technology. Those in the credit union industry must empower the teams appropriately.
Training on the latest technology is critical to maintaining the loan origination systems. The teams must plan to work well with vendors and other team members. Most importantly, they must understand member issues and how best to resolve them.
Other ways to improve efficiencies in the credit union sector
Other than embracing technology, credit unions need to investigate other areas for better efficiency.
- Rethinking business strategies requires a shift from concentrating on areas that have low margins to more cost-effective business lines. It also means getting rid of time-consuming and complex processes that delay loan applications. Credit unions need to pay attention to historical metrics to determine more productive trends.
- Credit unions should take steps to better understand members or economic situations that may contribute to higher default rates.
- Putting in place measures to improve staff productivity. Such include clear expectations and roles, strategies to measure performance, training opportunities, and reward systems.
- Streamlining of operations to avoid time wastage in the execution of duties. Staff members need to engage in a culture of continuous improvement for better results.
- Adopting or integrating technology that has a role. It requires the mapping of processes and seeing which platform or technology can improve operations.
- Credit unions need to optimize the channels members use to interact with them. It requires careful analysis of performance and value additions. Providing convenience to members will improve the overall experience resulting in higher success rates.
- The adoption of web applications allows for scalability because credit unions can access members anywhere there is an internet connection.
- The adoption of mobile applications will allow credit unions to reach members wherever they are. The loan processes are also faster, and credit unions can share information and resolve any issues promptly.
Credit union operations’ process improvement requires attaining operational excellence. It needs credit unions to take an honest look at the current situation and take steps to improve areas of weakness.
The use of data and analytics is a key component because it provides invaluable information. Channel optimization will help credit unions reach members at the point of convenience.
Moving from manual to digital documentation and cloud applications will make loan processing faster and more secure. Investing in financial literacy for members will build trust and better decision-making capabilities.