Artificial Intelligence (AI) is revolutionizing the credit union industry. For years, we have recognized the vast potential of data within our organizations—member data, historical trends, and big data. However, we lacked the means to leverage this information on a larger scale. AI has unlocked these possibilities for credit unions, although it is also accessible to those with less benevolent intentions.
As a lender with over 30 years of experience, I have relied on the 4 Cs of lending—Credit, Capacity, Collateral, and Character—to distinguish good loans from bad ones. While this method has been effective, it is not without its flaws. For instance, assessing a member’s character can be subjective and uncomfortable.
Over the past year, Neighborhood Credit Union has partnered with a fintech company that has transformed the traditional 4 Cs into a powerful decision engine. This collaboration has not only enhanced our decision-making process but also mitigated human biases. Despite my confidence in my lending abilities, I acknowledge that some level of bias is inevitable.
One of the core values that drew me to the credit union industry 15 years ago is the principle of “people helping people.” As a former banker, I have embraced this culture, but I recognize that our industry has not always excelled in providing equitable loan products. Traditional criteria such as minimum credit scores and budget constraints often fail to capture the full story behind a member’s loan request. AI is advancing fair lending practices and reinforcing our commitment to this industry motto.
From a collections standpoint, our journey with AI is still in its preliminary stages, but progress is evident. We are beginning to differentiate between members who are genuinely struggling and those who follow specific payment patterns. Regulatory requirements also play a significant role in this area, balancing our desire to assist members with the need to adhere to rules and processes that protect consumers.
A seamless lending experience is often discussed, but what does it truly mean? It encompasses speed, ease, fairness, and impartiality. As a credit union, we aim to deliver lending services through two primary channels: digital and in-person. The digital path is straightforward—members can apply for and receive loans via their phones, tablets, or desktops without human intervention. AI is paving the way for a world-class experience, potentially enabling members to secure a car loan in under five minutes.
The second path involves personal interactions, whether in physical branches or through virtual consultations. Borrowing large sums can be stressful, and members often seek professional guidance. Younger members, in particular, face challenges in obtaining credit and benefit from expert assistance. While AI can enhance the delivery of this professional experience, it also helps eliminate biases inherent in human interactions, thereby better serving our members and communities.
Cybersecurity remains a critical focus for our industry. We possess valuable information that malicious actors are eager to exploit. AI is instrumental in helping credit unions stay ahead of these threats. Daily, we encounter discussions on defense-in-depth strategies, AI-driven cybersecurity tools, and comprehensive approaches to maintaining safety and security. Although these measures represent a significant budgetary expense, they are non-negotiable. Our members’ security is paramount, and we are dedicated to utilizing all available resources to protect their information while providing an exceptional lending experience.
