“Digital readiness” for credit unions encompasses a wide range of initiatives aimed at enhancing member experience, putting the power of data to use, and integrating AI technologies. For today’s credit union leaders, it starts with understanding where they stand in the digital transformation journey and identifying paths forward.
How can credit unions leverage technology tools and strategic partnerships to meet today’s member expectations and prepare for the future? They can set digital transformation into motion by beginning with the assets they have available, avoiding analysis paralysis, and starting where they are. The most important thing is to start.
Digital, AI, And Data Analytics Readiness — Where Are Credit Unions Today?
Opening an account online, contactless transactions, and digital-native customer experiences have quickly become the norm. However, many credit unions struggle to keep pace with the accelerating move to digital, especially when their digital basics are shaky.
Research shows 66% of credit unions are in the “nascent or developing stage of digital maturity.” Meanwhile, Jeff Rendel, a leading financial services consultant and principal at Rising Above Enterprises, notes 71% of Americans prefer to use a mobile app or online banking for their banking needs, which crosses the generational divide.
As credit unions consider how to align dollars with expectations most effectively, many get stuck on the best starting point for serving members.
“It’s an important question to ask — looking at how members choose to engage with your credit union and then investing accordingly,” Rendel says. “With the number of transactions being done digitally, are you allocating a proportionate amount of resources?”
Using Tools, Data, And Strategic Partnerships To Support Digital Transformation
As member demands around digital experience expand, credit unions can leverage tools such as artificial intelligence to help keep up. For example, underwriters traditionally might look at factors such as debt-to-income ratios or FICO scores for lending decisions, but AI can dig deeper into a credit union’s existing data, considering whether members pay their rent, utilities, and even Netflix bills on time. These additional data points allow credit unions to serve more members but also generate more revenue.
“I worked with a credit union that used AI to evaluate missed opportunities in its lending profile and found roughly 9,000 loans were missed that would have been approved if it had expanded a few additional data points beyond what’s traditionally considered,” Rendel says. “Those 9,000 loans would have generated more than $9 million in interest income over the life of those loans.”
Existing or new partners or vendors can also help credit unions advance their digital capabilities. Service providers specializing in fraud detection, digital banking, insurance tracking, or any number of other areas can help enhance operational efficiency and member service using technology they’ve created. Working closely with companies that focus on serving credit unions can often provide opportunities for adoption of advanced digital tools more quickly than a credit union might be able to do on its own.
Paralysis By Analysis And Creating Minimum Viable Products
When building new applications and products, many credit unions make the mistake of building too much too soon. Rendel encourages credit unions to embrace a business-school-101 concept: Build a minimum viable product.
“You might feel like you need to create the perfect app or product before introducing it to your members, but it’s quite the opposite,” Rendel says. “If you can create a minimum viable product that captures the basics of what members want to accomplish, you can get started, then build enhancements down the road.”
Reframing processes to focus on minimum viable products helps credit unions keep pace with digital transformation, solidify the basics, and go deeper later. Often, that is a great point at which to bring in additional technology tools and partners.
Revisiting The Basics With Journey Mapping
The digital experience can be an unwieldy topic, notes Rendel, mostly because there are so many different areas where a credit union could invest. A good starting point is listing the most common ways members interact and invest.
“Several credit unions I have advised struggle with the sheer scale of the digital experience,” Rendel says. “It’s all about getting the basics down first. Deposits, loans, and payments matter most. Over time, you can add more robust features.”
Journey mapping is one way credit unions can narrow their focus. Rendel suggests mapping out the most common types of member transactions and processes. Then, determine how many steps are involved. Are there 10, 20, 50, or more? How can you reduce the steps involved and create less friction in the process?
Visualizing each transaction’s steps helps credit unions design easier and faster digital experiences for their members.
Members Are Holding Credit Unions To A Retail Standard
A reality credit unions must face is that members are retail customers. They aren’t holding you to a special standard just for credit unions; unfortunately, they’re holding you to what they experience in the retail sector.
“Members’ expectations are reliably high as they engage with your credit union,” Rendel says. “Credit unions are playing a retail game, and the digital experience is a huge part of that.”
Although digital transformation has challenges requiring attention and investment, when credit unions get the digital basics down, they’re in a stronger position to meet members’ expectations. They can then use this digital foundation to expand tools and partnerships strategically, reach more members, generate additional revenue, and provide extra value moving into the future.
State National is a leading specialty provider of property and casualty insurance services operating across the United States. State National specializes in providing portfolio protection solutions that insure autos, mortgages, and other collateral for loans made by credit unions, banks, and specialty finance companies. State National is a division of Markel, a Fortune 500 holding company for insurance, reinsurance, and investment operations. To learn more, please visit statenational.com and connect with us on LinkedIn.
