Members have never had more options when it comes to financial products, and that’s pushing some credit unions to rethink where product strategy lives in the organizational chart.

In Iowa, Premier Credit Union ($355.2M, Des Moines, IA)  sought to be proactive by introducing a dedicated products department. The organization realized it did not have a consistent, enterprise-wide method for evaluating and prioritizing product ideas, and alignment was limited when executing complex initiatives.

Leah Oneyear, director of project management and product development, says the organization’s core conversion last year was a key driver.

“It pushed us to think beyond implementation and focus on how we would best leverage our new technology going forward,” she explains.

Premier realized implementation alone wasn’t enough. The bigger challenge was how to intentionally leverage new technology after that.

Don’t stop here. Looking for another perspective on product management and development? Bay Federal Credit Union recently added a chief product officer to its executive team. Read more today.

A New Strategy Requires New Structure

Today, the products department is a lean team of Oneyear and a project specialist who report to COO Jill Matthew. This design was intentional and is intended to scale over time.

Despite its name, the team does not “own” products. Instead, it relies heavily on partnerships with subject-matter experts across the organization, from lending and operations to marketing and IT.

“Rather than leading projects or products outright, the team provides structure, governance, and coordination,” Oneyear says. “Previously, we often evaluated product ideas and enhancements within individual departments, which could lead to competing priorities or a more reactive approach.”

In this new enterprise framework, the credit union no longer evaluates product ideas in silos, which helps leadership and other teams stay aligned on what the organization is working on, when, and why. Premier can sequence work based on impact, capacity, and timing. Oneyear says Premier’s current areas of focus include business member support and communications, Spanish-speaking access initiatives, and a formalized referral program.

“To determine what product work to prioritize, we work collaboratively across the organization to gather ideas and incorporate member feedback,” she says. “We evaluate those ideas using a consistent scoring approach that considers both implementation effort and overall impact — for the credit union and for our members.”

Measuring Success Today And Beyond

If there’s a strategy, there are metrics to track. Oneyear says these goalposts tend to evolve as products mature, but at the end of the day, it’s about the members.

“Our goal is to solve real, meaningful needs, not just introduce new products for the sake of change,” she says.

At the most basic level, that means focusing on adoption.

“If we launch a product or program that looks good on paper but isn’t being used by members, then we haven’t been successful,” Oneyear says. “Members come to us at different points in their lives and with different financial realities, so products should feel relevant, practical, and clearly helpful.”

According to the director, when the credit union engages with and supports members in ways that fit their preferences, it reinforces trust and helps the credit union ensure its products deliver the financial benefits they’re intended to.

Now that Premier has a foundation to build on, Oneyear says the credit union is prioritizing momentum around alignment and visibility.

“As with any organization refining its approach, there will be some growing pains, but the goal is to make the work feel more coordinated and scalable over time, not more rigid,” she says. “If priorities feel clearer, execution feels smoother, and teams have greater confidence in how work moves from concept to delivery, that would represent meaningful progress.”

The post A New Product Playbook Is Driving Change At Premier Credit Union appeared first on CreditUnions.com.

Read on for insights and strategies from Atomic Credit Union, Coastal FCU, Dupaco Community Credit Union, GECU Credit Union, Golden 1 Credit Union, and Greater Texas FCU. Read “Innovation At The Speed Of Payments (Part 2)” to hear from Lake Trust Credit Union, Rogue Credit Union, Royal Credit Union, Texas Trust Credit Union, and YOLO FCU.

Trust Through Education

Taylor Stapleton has been vice president of funds management at Atomic Credit Union ($749.5M, Piketon, OH) since February 2024. She joined the rural Ohio cooperative in 2018 and moved into funds management in March 2021.

Which emerging technologies will drive the biggest changes in payments and at your credit union?

Taylor Stapleton: AI and blockchain will drive major innovation in payment systems and how credit unions serve members. Blockchain’s ability to detect fraud and streamline operations helps us offer faster, more secure payments.

At Atomic Credit Union, we grow by embracing technologies that fit our members’ needs. Maintaining personal relationships while adopting tools that enhance convenience and protection allows us to modernize and expand. Blockchain boosts transaction speed, access, and security across our membership.

How is your credit union upgrading payment systems for speed and convenience while managing risks? What are the biggest challenges you face in adapting to this new environment?

TS: We’re enhancing our core and digital platforms using new technologies while staying true to our values. Members benefit from faster payments and improved fraud protection, with compliance intact.

Internally, the biggest challenge is balancing risk with convenience. AI and blockchain require strong data protection amid cyber threats. Externally, we face pressure to compete and keep pace with trends. We build trust by educating members on products and warning them about security threats to help reduce payment system risks.

Digital Debit And More

Daniel Rathfelder has been with Coastal Federal Credit Union ($5.7B, Raleigh, NC) for four years, first as vice president as card services and for the past two years as vice president of loan operations. In that role, he oversees mortgage and loan servicing and card services for the Research Triangle credit union.

Which emerging technologies will drive the biggest changes in payments and at your credit union?

Daniel Rathfelder: At Coastal, AI is already reshaping member services — from credit decisioning and chatbots to analytics that anticipate needs. We’re now exploring voice bots and automation to further enhance the member experience.

We also see stablecoin as a key emerging force, especially with the GENIUS Act paving the way for broader adoption. Stablecoins promise fast, low-cost, borderless payments, and we’re actively evaluating their future role.

Our members have always embraced innovation — we led with ITMs in 2006 — and they expect forward-thinking solutions. We’re committed to delivering exactly that.

How is your credit union upgrading payment systems for speed and convenience while managing risks? What are the biggest challenges you face in adapting to this new environment?

DR: Coastal continues to modernize payments for speed, convenience, and security. We offer digital wallets, contactless cards, and as of January 2025, full digital issuance for credit and debit cards.

We’re rolling out Zelle soon, and we’ve enabled FedNow and RTP receive capabilities to support real-time payments. Stablecoin integration is also part of our long-term vision as digital currencies gain ground.

Fast-changing regulations pose the biggest challenge. Internally, it’s ensuring innovation aligns with security, compliance, and operational readiness.

Bullish On Agentic AI

Dupaco Community Credit Union ($3.5B, Dubuque, IA) named Todd Link its first chief member services officer this past February. He joined Dupaco in 2014 and has served as chief risk officer and senior vice president of risk management and remote delivery before assuming his current role at the Iowa credit union.

Which emerging technologies will drive the biggest changes in payments and at your credit union?

Todd Link: I’m quite bullish — in fact bullish would be an understatement — on the future of agentic AI using operator connections rather than traditional APIs. Large financials are investing heavily here. That’s not just for common tasks, like underwriting or fraud detection, but to automate entire back-office operations, like preparing and filing paperwork, working alerts, reviewing exception reports, and flagging real risks for human review.

With rising costs and margin compression, operational efficiency through agentic AI will be essential. Credit unions that embrace it can redirect staff toward front-line member engagement. Those that don’t risk falling too far behind to compete.

How is your credit union upgrading payment systems for speed and convenience while managing risks? What are the biggest challenges you face in adapting to this new environment?

TL: Dupaco has and continues to invest heavily in both payment technology and digital banking offerings and, of course, fraud prevention, detection, and intervention tools. To me the three elements run parallel to one another. A successful payments program needs strong digital banking tools as well as the latest and most advanced fraud tools to protect against loss.

When we do all three correctly, most members not only willingly engage in innovative technology but actively seek it out. RTP [real-time payments] is a bit unique due to the risks associated with sending but over time I believe RTP will also be a valuable and heavily used tool in money movement.

Don’t Stop Here. Todd Link is redefining member service at Dupaco Community Credit Union, blending risk expertise with operational leadership to deliver secure, seamless, member-focused experiences. Read more in “What’s In A Name: Chief Member Services Officer.”

It’s Only Just Begun

Amanda Willians is a 28-year employee of GECU Credit Union ($4.4B, El Paso, TX). She’s been senior vice president for payment and remote services since 2022 and has 10 years of payments industry experience with the west Texas shop.

Which emerging technologies will drive the biggest changes in payments and at your credit union?

Amanda Williams: AI and open banking are redefining payments and we’re only beginning to realize their potential. AI is evolving from a support tool to a strategic driver, enabling real-time fraud detection, predictive risk modeling, and hyper-personalized member engagement. By harnessing its ability to learn and adapt, we can move from reactive responses to anticipatory service — identifying risks before they appear and delivering tailored solutions when they’re needed most.

Open banking accelerates the shift to a fully connected ecosystem. Secure, consent-driven data sharing between institutions and trusted third parties empowers members to manage finances seamlessly across platforms. This cross-functionality drives new business models, faster innovation, and deeply integrated payment experiences beyond traditional banking.

How is your credit union upgrading payment systems for speed and convenience while managing risks? What are the biggest challenges you face in adapting to this new environment?

AW: GECU is working with third-party vendors to provide our members with the next generation of payments where speed, security, and convenience work in harmony. We deliver an experience where payments are more than transactions — they’re trusted, intelligent interactions.

We’re expanding real-time capabilities through modern P2P solutions and mobile-first digital banking experiences. We’re advancing our API ecosystem, embedding real-time analytics, and deploying adaptive fraud-prevention tools that strengthen security effortlessly.

Internally, our biggest challenge is innovating at the speed of technology while aligning resources, skills, and culture. Externally, members expect instant, seamless payment experiences.

We’re constantly adapting to evolving expectations and regulatory demands. Our approach is intentional evolution — innovating responsibly, anticipating market shifts, and designing a payments environment ready for today’s demands and tomorrow’s opportunities.

Emerging Technology Aligned With Mission

Blair Braud has served as executive vice president and head of operations at Golden 1 Credit Union ($20.3B, Sacramento, CA) since April 2024. She came to the big cooperative with a quarter century of corporate banking experience, including senior positions in risk and operations.

Which emerging technologies will drive the biggest changes in payments and at your credit union?

Blair Braud: Emerging technologies like instant fund transfers between parties and open banking will shape the future through greater convenience, speed, and security, but we must align them with our mission to empower members and communities across California.

How is your credit union upgrading payment systems for speed and convenience while managing risks? What are the biggest challenges you face in adapting to this new environment?

BB: We’re upgrading our payment systems to deliver greater speed and convenience while keeping security, compliance, and trust central to our strategy. Key initiatives include:

• AI And Machine Learning — Real-time analysis detects fraud faster than humans while insights improve member equity and experience.
• Cloud Computing — Scales efficiently to handle growing transaction volumes securely.
• Tokenization — Randomized tokens replace sensitive data, cutting fraud risk and enabling secure, fast payments.
• Multi-Factor Authentication (MFA) — Stronger security with a seamless member experience.
• Education And Device Security — Training members and staff builds defenses against evolving threats.
• Accessibility Enhancements — Expert partnerships keep digital and in-branch tools inclusive and secure.

One of our biggest external challenges is keeping up with rapidly evolving payment threats. Internally, adapting systems and staff capabilities to new tech — without disrupting the member experience —remains a constant balancing act.

The Future Belongs To Blended Systems

Jason Endsley joined Greater Texas Federal Credit Union ($952.6M, Austin, TX) in early 2024. He has managed card payment programs for more than 20 years in the credit union and consumer banking spheres.

Which emerging technologies will drive the biggest changes in payments and at your credit union?

Jason Endsley: In the coming years, artificial intelligence and open banking will drive the biggest changes in payments. AI already makes fraud detection faster and more accurate while personalizing experiences. It anticipates needs, speeds approvals, and makes payments seamless, turning transactions into connections.

Open banking accelerates this shift by linking credit unions, fintechs, and networks. Members gain instant, low-cost transfers, richer tools, and integrated services all within the credit union ecosystem.

Blockchain’s near-term value is behind the scenes, improving settlements, cross-border payments, and identity verification. The future belongs to systems blending intelligence, openness, and trust, giving members more choice and security while keeping credit unions central to their financial lives.

How is your credit union upgrading payment systems for speed and convenience while managing risks? What are the biggest challenges you face in adapting to this new environment?

JE: Greater Texas Credit Union is in the middle of a multi-year effort to transform payments for speed, convenience, and flexibility while keeping security and trust central. A key initiative is modernizing our card processing platform to deliver faster authorizations, deeper data insights, and more resilient operations. We’ve also secured long-term partnerships with networks like Visa to provide stability and accelerate innovation.

We’re also preparing to leverage new payment rails like FedNow and the RTP network. These capabilities will let members send and receive funds instantly — around the clock — for deposits, transfers, and more, all within a secure credit union environment.

The challenge internally is aligning people, systems, and processes to support this change without disruption. Externally, we face evolving regulations, rising fraud sophistication, and member expectations set by tech-first competitors.

Don’t Stop Here. Read “Innovation At The Speed Of Payments (Part 2)” to hear from Lake Trust Credit Union, Rogue Credit Union, Royal Credit Union, Texas Trust Credit Union, and YOLO FCU.

Interviews have been edited and condensed.

The post Innovation At The Speed Of Payments (Part 1) appeared first on CreditUnions.com.

I see my current work as an extension of what I did before. Payments, fraud, and support channels all carry inherent risk. Now I’m not just assessing it, I’m leading the teams that handle it. That creates real-time risk visibility where it matters.

Todd Link’s title — chief member services officer — might sound like a traditional executive role. But dig into the structure at Dupaco Community Credit Union ($3.5B, Dubuque, IA), and a strategic reshuffling of priorities becomes evident.

Link spent a decade as the Iowa cooperative’s chief risk officer — for which he headed up remote delivery — before moving into the member services role in February. His portfolio now includes card services, enterprise operations, contact center, fraud services, mortgage quality control, and facilities —  basically every area where direct member interaction meets complex institutional risk. His leadership underscores a core credit union truth: success depends not just on technology, but on making every transaction and interaction both safe and seamless. That’s especially true in the payments space, where convenience must walk hand-in-hand with compliance and risk management.

From embracing real-time rails like FedNow Service to rethinking how internal processes align with member service, Link is helping lead his shop through change at the critical, complex intersection of service, innovation, and risk.

Here’s what he has to say about his role, his path, and where payments are heading.

Why and when did Dupaco create the role of chief member services officer?

Todd Link: The role came out of an ongoing organizational redesign. I was already working closely with areas like card services and the contact center — places on the front lines of member interaction. As Dupaco evaluated how we deliver service, it made sense to shift enterprise risk management and compliance and bring more member-facing service areas under one umbrella.

We’re aiming for consistency in member support, regardless of how someone contacts us. Whether it’s a phone call, digital chat, or a card dispute, the experience should feel unified. This structure helps us connect the right work with the right teams and in doing so supports both member needs and institutional efficiency.

We’re also building out a centralized service model that can scale. We’re not there yet, but the early signs show it’s the right path for our members and our staff.

Did Dupaco design the role around your background?

TL: The transition was specific to me, but the underlying process was broader. Across the organization, we reviewed the work of each department and asked where it should live to best serve members.

For me, shifting from a risk role into operations wasn’t a huge leap. I see my current work as an extension of what I did before. Payments, fraud, and support channels all carry inherent risk. Now I’m not just assessing it, I’m leading the teams that handle it. That creates real-time risk visibility where it matters.

How is this role an evolution of your previous responsibilities?

TL: People often see risk and member service as opposite ends of the spectrum, but they’re two sides of the same coin. In both, you’re looking to prevent issues, protect members, and create consistency.

Now, instead of overseeing enterprise-level risk, I’m embedding risk management directly into operational workflows. That’s especially crucial in payments and fraud prevention — areas constantly targeted by bad actors. Having that layered oversight means we can catch issues faster and design processes with both security and service in mind.

What challenges and opportunities does your role address?

TL: Members today expect both high-tech and high-touch. That means we need to serve them however and whenever they prefer — through branches, online, or in between. And we need to do it efficiently because that’s what allows us to deliver strong loan and deposit rates.

There’s an ever-growing demand for digital capabilities, but it’s not a binary choice between branches or apps. It’s both. Digital complements our physical presence, not replaces it. My role is about making sure the service across all those touchpoints is smooth, consistent, and secure.

What payments strategies has Dupaco put in place?

TL: Payments are where the relationship lives. If you’re the place members trust to move their money, you’re likely the place they trust for everything else. That’s why we’re investing in speed, safety, and flexibility.

We’ve always had strong digital tools, and now we’re preparing for FedNow. At the same time, we’re navigating the fraud risks that come with instant payments and P2P platforms. The good news? Real-time AI fraud tools are getting better, allowing us to stop bad transactions before they cause harm. That’s where innovation and risk management intersect.

How do you work across the enterprise?

TL: Alignment is everything. Siloes kill strategy. To deliver on any member-service initiative, we have to collaborate across departments — from marketing and member experience to digital to data analytics.

A major shift has been how we manage and use data. Instead of each department owning its own silo, we’re moving toward a centralized repository. That helps with decision-making, compliance, member targeting — everything. We’ve seen firsthand how much faster and smarter we operate when everyone’s working off the same data set.

How do you work beyond Dupaco’s walls to advance your initiatives?

TL: We’re lucky to have board support to stay active in industry groups and networks. That external engagement gives us access to shared innovations — like using AI for back-office automation — that we can adapt internally.

Collaboration across institutions isn’t optional anymore. It’s how we all keep pace with the speed of change and avoid reinventing the wheel. In payments, fraud prevention, and member support, we learn a lot from one another.

What makes you a great fit for this role?

TL: I’m a lifelong learner. I read business journals, research, trade publications — anything I can get my hands on. Decisions should be rooted in data and understanding. That’s especially true in a role like mine that balances risk, operations, and member satisfaction.

I encourage others to study how the system works, from the Fed to NCUA to market forces. The better we understand the full picture, the better we can lead inside our credit unions.

How did your background prepare you for this?

TL: I’ve got a wide academic background — bachelor’s degree, master’s degree, and most of a PhD in human and organizational performance. I’m also a graduate of the Stonier School of Banking and the Wharton Leadership Program, and I’ve held various board roles.

But it’s not just about credentials. It’s about using that knowledge to connect dots between people, systems, and strategies. Understanding both the big picture and the day-to-day is what this role demands.

Who do you report to, and who reports to you?

TL: I report directly to our president and CEO, Joe Hearn. Departments reporting to me include card services, deposit ops, fraud services, IRA, contact center, member services, and several others — many via middle managers. It’s a broad span, but the common thread is they all touch the member and carry operational risk.

What’s your daily routine?

TL: There isn’t one. I might start with a team huddle and end with a nonprofit board meeting. Some days are driven by urgent calls or issues that surface unexpectedly.

I make it a point to stay close to member feedback. I even take escalated calls. It’s not about firefighting — it’s about finding friction points and routinely fixing them. That keeps me grounded in what really matters for our members.

How do you define success?

TL: At a macro level, we track success through personal, departmental, and organizational goals — all aligned to our strategic plan. But on a day-to-day level, success is when we’ve made life easier for a member and safer for the credit union at the same time.

How do you stay informed?

TL: I start my day with business news, read the Wall Street Journal daily, and spend evenings diving into deeper research or trade insights. I’m an HBR loyalist and stay active on boards to keep learning from peers. I also hold multiple industry certifications — staying sharp isn’t optional in a role like this.

This interview has been edited and condensed.

Job titles say as much about the organization as they do the person. “What’s In A Name” on CreditUnions.com dives into notable, important, interesting, or just plain fun roles to find out what’s happening at the ground level and across the industry. Read the series today.

The post What’s In A Name: Chief Member Services Officer appeared first on CreditUnions.com.

In response, credit unions are sharpening their mortgage strategies with a mix of data, digital tools, and targeted outreach. From optimizing repricing programs to reaching first-time buyers in high-cost markets, these five stories highlight how credit unions are making smart moves in today’s housing environment — innovating with purpose and executing with precision.

Repricing With Precision

Repricing can be a double-edged sword, but for Wings Financial Credit Union ($9.4B, Apple Valley, MN), it’s a strategic lever. The Minnesota-based cooperative adds some pizazz to its repricing program with competitive rates and other perks but can easily tweak its approach to target different member segments, adapt to evolving needs, and maintain a balance between competitiveness and profitability.

Best of all, the program has not only drawn in borrowers but also increased overall member satisfaction.

“Some stated if they had not received this offer, they would not be purchasing a new home,” says Lia Patino, vice president of mortgage lending at Wings. “That was what we were hoping for — an offer that positively impacts our members’ lives while also benefiting the organization.”

Read more.

Or watch this webinar clip to hear more about this program straight from Patino herself.

Millennials Take On Mortgages

Millennials are moving into the housing market, and credit unions are ready to say, “welcome home.”

At Liberty Federal Credit Union ($4.2B, Evansville, IN) and Veridian Credit Union ($8.0B, Waterloo, IA), borrowers between the ages of 25 and 34 made up roughly one quarter of all mortgages originated in 2023 — approximately 1,000 and 1,500 loans each for that age bracket, respectively.

Jeff White, senior vice president of mortgage lending for Liberty FCU attributes his credit union’s success to having the right people, products, and delivery channels.

“Our overall membership does skew younger,” he says. “At 46, our average member age is below that of the average U.S. credit union. We attribute some of this to our products and services on the retail side.”

Kara VanWert, chief lending officer for Veridian Credit Union, also notes the importance of having the right product and adds the right partnerships to the mix.

“Veridian’s mission is to partner with our members to create successful financial futures,” she says. “We partner with several organizations working toward a similar purpose. For example, we partner with Iowa Finance Authority (IFA), who offers a FirstHome program that only requires 3% down. That, paired with our option for 100% financing, can help make home ownership more attainable and affordable.”

Learn more about how Liberty and Veridian are meeting younger buyers where they are, from digital-first experiences to flexible products

Read more.

Geofencing, Upgraded

Northern Credit Union ($634.2M, Watertown, NY) uses geofencing to engage homebuyers at the moment of intent — whether they’re at an open house or scrolling Zillow.

Geofencing uses GPS or RFID technology to create a virtual boundary that triggers a response when a mobile device enters or leaves the perimeter. It allows marketers to reach an intended geographic audience with the right messaging at the right time to increase loyalty and engagement. Today’s higher rates, soaring prices, and low stock have nudged Northern to revamp its geofencing strategy with new locations (in addition to its own locations, Northern also has geofenced many of its competitors’ branches), enhanced outreach (Northern uses push notification to promote home loan options and education), and stronger real estate agent partnerships (push notifications also inform members of open houses).

With smarter targeting and real-time follow-up, Northern is marrying digital marketing with member service.
Read more.

Affordable Homes, Creative Paths

Credit unions across the country are tapping into state programs and employer partnerships to help members find affordable housing. These efforts go beyond lending to serve long-term financial wellness and community stability.

In Vermont, Heritage Family Credit Union ($772.9M, Rutland, VT) has teamed up with the City of Rutland and the Vermont Treasurer’s Office to increase affordable housing in the community. The cooperative kicked off its Roofs Over Rutland initiative in October 2024 with an $8 million investment the state made available to the credit union at the low rate of 1%. In turn, Heritage Family is lending that money back out via programs that range from construction and renovation loans to HELOCs and business lines of credit.

“We’ve had pretty exciting results with nearly $6 million in requests thus far,” Chris Gomez, CEO of Heritage Family, told CreditUnions.com earlier this year. “We’re optimistic in another month or so we’ll have our first ribbon cutting where we’re taking an offline house online.”

Read more.

A Masterclass In Mortgage Marketing Conversion

What makes a mortgage page effective? Clear calls to action, tailored messaging, and mobile-first design. This visual showcase of high-performing credit union mortgage landing pages shows how three credit unions are turning clicks into closings with well-crafted digital journeys, proving great design and great results go hand in hand.

Read more.

These articles aren’t just from the archives, they’re from the front lines of innovation.

In a lending environment that demands both agility and empathy, these stories show that credit union mortgage success isn’t about housing and rates — it’s all about people and strategy. Whether it’s refining pricing models, refreshing marketing, embracing new tech, rethinking how to connect with younger members, or leading with member impact, credit unions are proving there’s more than one doorway to meaningful mortgage growth.

So if you missed them the first time — or just need a fresh dose of inspiration — now’s the perfect time to dive in.

? Have a favorite credit union mortgage article of your own? Share it with us during Mortgage Theme Week using #CUMortgageWeek.

The post 5 Mortgage Must-Reads That Still Move The Market appeared first on CreditUnions.com.

“ARM” Isn’t A 4-Letter Word

The high interest rate environment led Tucson Federal Credit Union ($749.4M, Tucson, AZ) to roll out Fixed4Five, an ARM option that offers a 5% fixed rate for the first five years. After that period, the loan adjusts on a five-year basis with increases capped at two percentage points and a five-point limit over the life of the loan. The intent, explains Ashley Kemp, vice president of lending and solutions, is to make homeownership more accessible and affordable for members.

“ARM was such a bad word for so long after 2008-2009,” Kemp says. “People didn’t want to hear about it. But our branch staff is comfortable talking through this product with members so they feel comfortable.”

That said, the credit union isn’t about to force members who aren’t comfortable with ARMS into one. Traditional fixed-rate mortgages are available for borrowers who are more comfortable going that route or in instances where it makes more sense than an adjustable option.

Approximately 1,500 miles away, Veridian Credit Union ($8.0B, Waterloo, IA) has always focused on ARMs, but the interest rate hikes of the past couple of years have made that product substantially more attractive to members, says Kara VanWert, chief lending officer.

“The mindset and the knowledge today about refinancing your house is very different from what it was in 2009 and 2010,” VanWert says. “I don’t think there’s that fear of ARMs like there used to be.”

It’s All In The Approach

Both credit unions emphasize the importance of education.

Veridian offers 5/1 and 7/1 ARMs and approaches the subject when discussing how long members expect to be in the home. If they’re only planning for five or seven years, the ARM might be the best option because they’ll have moved on before the rate resets. This is an important product at Veridian because it focuses heavily on younger borrowers, many of whom are looking for starter homes.

“Usually when you buy your first home, you don’t think you’ll be there forever,” VanWert says.

To ensure members get the most accurate information possible, Veridian directs all questions to mortgage loan officers, who likely know the product and the market better than front-line staff.

“The most common question we get is about rates — is my payment going to go up $2,000 after these first five years?” says Tucson Federal’s Kemp.

To combat those fears, the credit union goes into detail explaining the math around indexes and margins so members know how the product works. It even breaks down the worst-case scenario, which at a 5% adjustment over the life of the loan won’t double the borrower’s mortgage payment.

Discussions at both credit unions also focus on the fact that ARMs can help members afford more house than they might get with a traditional fixed rate. Veridian sweetens the deal even further by offering a 100% financing option.

Part of the education process includes helping members understand how the ARM environment is different today compared to before the housing crisis. Rates were already low back then, so expecting them to drop further once rates adjusted was a bad bet. Additionally, many of the bad actors that caused the housing crisis were employing lax underwriting criteria and putting borrowers into homes they couldn’t afford with loan structures that were destined to cause problems, including interest-only payments and no-downpayment loans. In other words, the adjustment wasn’t the problem — it was merely the straw that broke the camel’s back on loans designed to benefit lenders rather than borrowers.

But, both credit unions recognize an adjustable-rate product isn’t for everyone.

“If members are that uneasy, they shouldn’t be in an ARM,” Kemp says. “Our CFO will be the first to tell you we don’t predict rates — you never know what’s going to happen. If members are that concerned with what could happen, it’s probably better for them to be in a fixed rate.”

Rising interest rates make fixed-rate mortgages less attractive. Read “Higher Rates Bring More Non-Fixed Mortgages” for Callahan’s take on how appetites for adjustable-rate mortgages have changed in the past 20 years and what the future could hold.

The Security Is In The Structure

Associated Credit Union ($2.2B, Norcross, GA) takes a different approach. Rather than a 5/1 or a 7/1, Associated offers a 15/15 split, fixing the rate for the first 15 years of the note, making a one-time adjustment at the 15-year mark, and fixing the rate for the second half of the note at a level based on the five-year Treasury with a maximum margin of 250 basis points up or down and a maximum adjustment of 5% above the initial rate.

“We’ve seen from historical data that most members don’t stay in a mortgage for more than five to seven years, so they’ll never see that interest rate adjustment,” says Chad Evans, executive vice president of lending. “That puts stability in the member’s mind. Most consumers are homed in on a 30-year fixed for the stability, and it’s hard to talk them out of it.”

The 15-year window, he adds, helps members feel secure about the initial term — and because many don’t expect to be in the home when the rate resets, the adjustment is far less of a factor. External factors such as rising property taxes and homeowners’ insurance premiums have also made the product more attractive, Evans says.

When it comes to promoting the product, Associated’s efforts to educate local real estate agents has been instrumental in getting the word out, as has a comparison calculator on the credit union’s website that shows the difference in interest rates and how payments could change post-adjustment.

“We feel a responsibility to let them know what happens at the end of that 15 years,” Evans says. “If they do make it to the end, they need to know there’s a possibility their payment could change.”

Rising rates have made ARMs an easier sell, but the real key to success lies in listening to members and staff, the EVP emphasizes.

“There’s risk in anything we do — reputational risk, interest rate risk, ALM risk — but you have to put the customer first,” he says. “Your staff is your front line. They’re talking to members and hearing what the challenges are. If you listen to your people and try to develop products and services that satisfy the challenges they’re hearing, it goes so much better.”

The post Embracing ARMs And Battling Members’ Misconceptions appeared first on CreditUnions.com.

The average first-time homebuyer in the United States today is approximately 35 years old, a figure that has gradually increased since the late 1980s and then jumped in the early 2020s. The average credit union member is 52 years old — a decade older than it was 20 years ago.

Credit unions need young members and young borrowers. Getting one is a challenge, getting both is even tougher.

But that’s not to say it can’t be done.

At Liberty Federal Credit Union ($3.8B, Evansville, IN) and Veridian Credit Union ($7.5B, Waterloo, IA), borrowers between the ages of 25 and 34 made up roughly one quarter of all mortgages originated last year — approximately 1,000 and 1,500 loans each for that age bracket, respectively.

Start By Serving Day-To-Day Banking Needs

Jeff White, senior vice president of mortgage lending for Liberty FCU attributes his credit union’s success to having the right people, products, and delivery channels.

2023 MORTGAGE BALANCES BY AGE BRACKET
FOR LIBERTY FCU
© Callahan & Associates | CreditUnions.com

Does your membership skew younger? How is your credit union getting such a big slice of younger consumers? 

 Jeff White: Our overall membership does skew younger. At 46, our average member age is below that of the average U.S. credit union. We attribute some of this to our products and services on the retail side. Free high-interest and rewards checking, reimbursement of ATM fees from competing institutions, and a robust — and constantly improving — suite of mobile banking services. So, for us, it starts with members’ day-to-day banking needs.

Are there specific marketing tactics that have helped attract younger borrowers?

JW: Social media and other select media are a part of our strategy, but we primarily attribute our success in attracting younger buyers to our people. We invest heavily in having mortgage loan officers outside the branch in each of the communities we serve. They’re active, working with realtors, of course, but also in local chambers and networking groups, non-profits, coaching youth sports. Our loan officers are our most significant marketing channel by far.

How does this borrower composition compare to pre-COVID levels or a more normal housing market?

JW: We are seeing originations with younger members skewing a little higher than pre-COVID levels. Cumulatively, our average member age at closing, Q1 and Q2 2024 compared to the same time period in 2019, is down more than one full year to just over 40 years old.

Have you done anything different from a product standpoint to address the needs of younger borrowers?

JW: We’ve made the conscious effort to offer mortgage programs, not necessarily for younger borrowers, but for all borrowers. Through the years, we would find so many times that the standard mortgage options were great in ideal situations, but we were missing out on so many opportunities for other borrowers. In the past decade or so, our mortgage team has done a fantastic job of expanding our product lineup to meet the needs of more borrowers. This does largely benefit a younger audience as many of these newer options often offer a lower down payment.

Any advice for other credit unions looking to attract younger or first-time homebuyers?

JW: Attracting younger homebuyers is an organizational commitment. It takes having the people, the products, and even the delivery channels. Internally, ask questions such as: Will they meet the program criteria? Can the borrower easily apply on their phone?

If you put in the work, the demand is there.

Digital Investments To Meet Members Where They Are

Kara VanWert, chief lending officer for Veridian Credit Union, attributes her credit union’s success to building relationships, offering education, and making homeownership more attainable via a digital application.

2023 MORTGAGE BALANCES BY AGE BRACKET
FOR VERIDIAN CREDIT UNION
© Callahan & Associates | CreditUnions.com

Does your membership skew younger? How is your credit union getting such a big slice of younger consumers?

KV: The average age of a Veridian member is 43.7 years old, which is younger than the average credit union member nationwide. We have a strong focus on offering our products and services digitally and meeting our members where they are.

Are there specific marketing tactics that have helped attract younger borrowers?

KV: We offer first-time homebuyer seminars and a series of videos focused on homebuying on our website and YouTube channel. But we’ve always had a focus on building relationships with real estate agents and partnering with them to offer financing options that make homeownership more attainable and affordable.  We’re currently in a buyers’ market, and those relationships are more important than ever.

How does this borrower composition compare to pre-COVID levels or a more normal housing market?

KV: In 2019, 26% of our closed loans were to borrowers younger than 34. Today that age group represents 46% of our closed loans. While established homeowners are enjoying the record-low interest rates from refinancing in recent years, we’re in a buyers’ market. Many homebuyers today are purchasing their first home or upsizing for their growing families.

Have you done anything different from a product standpoint to address the needs of younger borrowers?  

KV: Veridian’s mission is to partner with our members to create successful financial futures. We partner with several organizations working toward a similar purpose. For example, we partner with Iowa Finance Authority (IFA), who offers a FirstHome program that only requires 3% down. That, paired with our option for 100% financing, can help make home ownership more attainable and affordable.

Any advice for other credit unions looking to attract younger or first-time homebuyers?  

KV: Offer technology throughout your loan application process that allows the borrower to complete as much of the transaction as possible online and be there to educate your borrowers along the way.

Partner with real estate agents to bring the homebuying experience full circle.

Homebuying is often overwhelming and perceived as unobtainable. Educate your members online and through seminars to show them how they can make their dream of homeownership come true.

— Interviews have been edited and condensed.

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Top-Level Takeaways

• GreenState Foundation partnered with United Ways of Iowa to address community needs using data on financially struggling families who live above the poverty line.
• The foundation targets financial health, affordable housing, and environmental sustainability.

More credit unions are standing up foundations and shining a light on the importance of charitable giving strategies. But how can cooperatives identify local needs and develop an approach that maximizes impact? In Iowa, GreenState Credit Union ($11.2B, North Liberty, IA) consults ALICE.

The credit union stood up a foundation in 2022 to address unmet needs in its communities. Today, GreenState Foundation focuses on three areas of need: financial health, affordable housing, and environmental sustainability.

“We wanted to help fill gaps that were tied to our ‘people helping people’ mission,” says Tara Wachendorf, president of GreenState Foundation and vice president of GreenState Credit Union.

To better understand those gaps, GreenState Foundation has committed to a three-year partnership with the United Ways of Iowa to commission the state’s bi-annual ALICE Reports in 2023 and 2025. ALICE — which stands for Asset Limited, Income Constrained, Employed — represents the growing number of families who are above the federal poverty line but unable to afford necessities such as housing, food, transportation, health care, childcare, and technology.

Community financial institutions need an accurate understanding of financial hardships and local needs to develop effective solutions. Learn more in “What Can ALICE Do For You?”

“We’ve been long-time partners of the United Way in all of our markets,” Wachendorf says. “ALICE individuals and families are boosting the economy but still struggling to make ends meet. Understanding how the needs of our most vulnerable households change over time is vital for us to make a difference across our footprint. ALICE data will help us find and fund the right solutions.”

GreenState Foundation’s support enables United Ways of Iowa to dig deeper into the community to understand what is happening at the local level. The charity can then share those findings with community organizations to help them make better, data-driven decisions.

“This is extremely important to our daily work as we help lift the invisible, forgotten families struggling in our communities and start conversations about what else can be done to support them, especially as we expect to see a different story emerge now that pandemic supports are no longer available,” says Kelli Soyer, executive director of United Ways of Iowa.

Inflation, specifically the rising costs of housing and food, has had an outsized impact on ALICE households, and United Way is continually monitoring these areas in addition to overall and mental health. Meanwhile, to address its three key focus areas, GreenState Foundation has invested in providing access to financial literacy tools and resources for all, closing the racial homeownership gap, and making the community a better place to live, work, and play.

“Affordable housing is a big issue that was identified through the ALICE data,” Wachendorf says. “We’re a powerful mortgage lender, so we naturally saw an opportunity to move the needle there.”

GreenState Credit Union has committed $1 billion in mortgage loans to expand access to homeownership for people of color throughout the Midwest in the next decade. Its foundation has committed $20 million in funding for the endeavor. At a micro level, the foundation is earmarking $9 million to people or organizations working to close the racial homeownership gap or otherwise serve BIPOC, immigrant, or refugee community members by supporting their financial health and stability; $6 million to agencies that serve working families in this regard; and $5 million to support environmental causes.

In just 18 months, the foundation has awarded $980,000 in downpayment assistance grants and impacted nearly 240 families.

Are You Ready To Make An Impact? Visit CreditUnions.com the week of July 22 to learn how credit unions are getting serious about philanthropy — from strategies that break the cycle of generational poverty to the utility of donor-advised funds and more. Don’t miss out on this important topic. Register for the CreditUnions.com newsletter today.

“Our team is great at helping people,” Wachendorf says. “It’s all a testament to them.”

Anyone — no matter where they live and whether they are a GreenState Credit Union member — may join GreenState Foundation free of charge. This includes those outside of Iowa.

“Anyone can join the foundation and gain access to all our financial literacy tools and resources,” Wachendorf says.

And although the foundation has its own board that determines how to invest funds, members do have the ability to vote every year on $2,500 grant award recipients.

Currently, GreenState Credit Union is the sole funder of GreenState Foundation; however, there are plans to allow members to donate directly. When that happens, Wachendorf expects the foundation to evolve and priorities to change, but its vision will remain the same.

“The foundation gives us an opportunity to show the community we’re here to invest,” Wachendorf says. “We’re taking chances on organizations we know will do great things.”

— This article originally appeared on CreditUnions.com on Jan. 22, 2024.

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Credit union executives charged with overseeing the many facets of risk face a heady mix of technology, compliance, operational, and competitive pressures along with shifting local, national, and global economic influences on the members they serve and the balance sheet they maintain.

All in all, risk management is a dynamic space.

“The risk profile is adapting to market conditions and to emerging technologies,” says Todd Link, chief risk officer at Dupaco Community Credit Union ($3.3B, Dubuque, IA). “Increased use of AI, for example, continues to be an emerging risk that needs proper policy and controls around it.”

John Orton, vice president of enterprise risk management at University Federal Credit Union ($4.0B, Austin, TX), also sees risk growing on multiple fronts.

“Cybersecurity and fraud risks continue unabated, growing more than 30% a year for financial institutions,” he says. “Credit risk has grown considerably over the past year as financial challenges for members increase. That’s reflected in higher loan delinquencies and charge-offs. And liquidity challenges continue as member savings decline and money is more easily moved across platforms in pursuit of higher rates.”

Orton, who joined UFCU two years ago after 16 years serving as the chief financial officer at another Austin credit union, says he’s worried about over-extended consumers — those who might have a mortgage with a now-higher rate, an eight-year car loan, maxed out credit cards, student loans, and active Buy Now, Pay Later accounts.

These members are one missed paycheck away from real trouble, which calls for help from a multi-front approach. At UFCU, that help comes in the form of credit counseling, skip-a-pay options, and other member programs. The credit union also is adding technology to help it predict future issues and proactively reach out to help members.

The Real Risk Of Artificial Intelligence

The potential and perils of ChatGPT and its competitors, and AI and machine learning in general, are rapidly evolving, and leaders are working diligently to assess the space in real time. What’s already clear is the need for strong policies, procedures, and controls.

According to Link, who has overseen risk management at Dupaco for the past decade, machine learning can create efficiency and improve service delivery; however,  like any technology, it comes with risk involving regulation and privacy plus data confidentiality and proprietary information sharing in public generative AI systems. Link says the industry will ultimately need to ask itself whether the technology creates enough value for the energy and effort being invested.

AI And Cyber Risk: Tools That Cut Both Ways

In its 2024 State of Omnichannel Fraud Report, TransUnion notes some 13.5% of digital account creations are flagged as fraudulent. But that’s just one aspect of what risk managers face on the cyber front.

“Bot attacks, credential stuffing, member impersonation, and spoofing are some of the current member-based challenges we fight,” says Orton at UFCU. “Looking forward, AI-enhanced phishing and identity theft are major member security concerns. AI-enabled decryption of account protections would be a nightmare if it occurs.”

But AI also can be part of the solution. For example, Link at Dupaco says AI and machine-learning can help to better detect and prevent account and card fraud.

“We need to go to the strengths of the technology,” Link says. “That includes pattern recognition, managing infinitely large data sets, and analyzing multi-variable data sets.”

Link also points to conversational AI with dynamic speech recognition and response as another valuable tool. According to the risk office, all of these resources raise the bar for protecting member data and a credit union’s technology infrastructure, especially as integration with third-party services grows tighter.

“Privacy, confidentiality, and trust is the backbone of our ecosystem,” Link says. “We must ensure all partners share that same mindset and have invested appropriately in the controls necessary to meet those high levels of performance.”

At Dupaco, enterprise risk management is continually evolving. It currently uses software that identifies and measures risk in key organizational areas and provides a composite enterprise risk profile that leaders can compare against the credit union’s risk appetite and business plans.

“I want to see as many employees as possible actively engaged in our ERM program,” Link says. “I don’t believe ERM is about the destination but rather the use and value it provides throughout the credit union itself.”

The Complications Of Compliance Risk

Credit union leaders can expect rules around AI use to emerge while rules and regs for vendor management, lending, credit, and more also will continue to evolve. This all requires a strategy for monitoring and responding, adding to the complication of compliance risk.

“Regulation will always be an area where we will spend a considerable amount of time, energy, and resources,” Link says. “It’s part of our industry DNA.”

According to Link, one particular challenge is the indirect but very real effect and competitive consequences of regulations on credit unions and banks above the $10 billion line — corollaries that eventually spread to all credit unions.

“If we continue to see increasing pressure on margin, interchange reductions, and fraud losses, credit unions will be forced to take a look at a lot of presently free or low-priced products and services,” Link says. “This isn’t healthy for credit unions, our member-owners, and especially those of modest economic means.”

Costs, Vulnerabilities, And Collaboration

Although cost and vulnerabilities are major risks inherent in the use of technology, those investments must continue for competitive and operational reasons alike. But the way credit unions can collectively meet these challenges provides Link with reason for optimism.

“What makes me bullish on our industry’s future is the collaborative nature with which we leverage unique fintech relationships and share knowledge with one another,” the veteran Dupaco risk manager says. “This is one of the leading risk mitigation tools we have at our disposal, which ultimately translates directly into helping our member-owners build financial wellbeing.”

The post A Larger Look At Today’s Risk Landscape appeared first on CreditUnions.com.

As credit unions increasingly leverage artificial intelligence (AI) for tasks such as fraud detection, loan decisioning and much more, risk managers are also facing the need for proactive measures to address compliance, biases, and cybersecurity threats.

Below, six credit union leaders address how they’re developing governance frameworks and procedures at the same time as they explore and deploy new use cases. Their goal: to enhance operational efficiencies while addressing potential vulnerabilities that also can emerge if not properly managed.

“It reminds me of when Google first emerged. AI is going to naturally affect the way we work, but we’ve got to make those new technologies safe as we embrace them. We’re trying to balance the scales of justice here, if you will.”

GREATER TEXAS FCU

Sid Burkins is a vice president and risk mitigation officer at Greater Texas FCU ($949.8M, Austin, TX) and has been working in risk and loss mitigation for the past five years.

What AI applications are in use at Greater Texas?

Sid Burkins: We’re currently using Zest AI for loan decisioning and TruValidate for identity verification.

What do you see as the biggest risks around artificial intelligence?
SB: Artificial intelligence is a double-edged sword. AI is a great tool that can be used to detect fraud, however, it can also be used to perpetuate fraud.

Fraudsters can manipulate AI algorithms and models to generate realistic-looking fake data, such as videos, images, documents, emails, names, phone numbers, voice cloning, and addresses. These realistic fakes can then be sold for profit or used in the creation of fake and malicious accounts on unsuspecting platforms, and in many instances can be used to pass through a company’s identity verification and security procedures.

Credit unions can counter the rising threat of AI in multiple ways, for example with SMS alerts and pop-ups when members access apps and online accounts. But awareness training for staff and members will remain a key component in mitigating AI fraudulent exposure.

What are you doing about those risks?
SB: We’re investing in staff development and training, and in AI and machine-learning technologies designed help identify and assess commonly encountered fraud types critical in the development of a comprehensive fraud landscape.

GROW FINANCIAL FCU

Chase Clelland joined Grow Financial FCU ($3.5B, Tampa, FL) in 2013 and has been SVP for risk management since 2022.

What AI applications are in use at your credit union?
Chase Clelland: We’re in the infancy of applying AI at our credit union. We’ve opened up use of Bard/Gemini, ChatGPT, QuillBot, and Copilot and other Microsoft products. We’re also evaluating several others, including AbleAI and Pienso.

What do you see as the biggest risks around artificial intelligence?
CC: As I alluded to above, exposure of personally identifying information (PII) is the biggest risk. We’re seeing new ways emerge to use, for instance, ChatGPT with security control on the back end that engage with a private cloud. That could be a great way to run large language models (LLMs) in a safe environment, but it’s only been out for a few months and it’s still unproven.

As our credit union’s risk officer, that’s a focal point of my due diligence around LLMs. So is cost modeling. Anytime you get involved with tokenization of data, those miniscule basis points on a dollar really add up.

And then there’s the risk of malicious attacks. There already have been hundreds of instances of malicious code discovered embedded in downloaded LLMs. The bad actors are importing themselves into these new technologies.

It reminds me of when Google first emerged. AI is going to naturally affect the way we work, but we’ve got to make those new technologies safe as we embrace them. We’re trying to balance the scales of justice here, if you will.

What are you doing about those risks?
CC: We’ve formed a cross-functional AI governance team and a charter governance policy and we’re now in the process of ideating use cases to bring these tools to a greater population around Grow. Making sure that we don’t have account name structures or anything that could help identify a member is at the crux of what we’re doing and we’re making sure that whatever tools we use are either on premise or in our cloud instance. Nothing goes external.

Right now, about 50 of our nearly 600 people are playing around with and have access to the tools. That provides us with the opportunity for testing and learning. We also think of our governance charter as containing four pillars with a group focusing on each: training, ideation and use cases, security and safety, and compliance and ethics.

DUPACO COMMUNITY CREDIT UNION

Todd Link is chief risk officer at Dupaco Community Credit Union ($3.2B, Dubuque, IA) and has led Dupaco’s risk management program for the past 10 years.

What AI applications are in use at your credit union?
Todd Link: We use AI functions like many credit unions are as well. That includes fraud monitoring and detection, automated phone assistance, and conversational AI, to soon support member inquiry in foreign languages.

Certainly, there is tremendous opportunity for all credit unions to use AI to better understand and serve members with tailored offers, appointment scheduling, etc. Another area of growth is in generative AI, where applications like ChatGPT and Microsoft Copilot can be used to ideate or assist in content development. It’s an exciting time to leverage this technology for basic account inquiry to enable our team members to spend more time with members on their complex financial well-being questions and needs.

What do you see as the biggest risks around artificial intelligence?
TL: As with any technology, the risks include ensuring compliance with regulations, recognizing that AI can have programming bias to guard against, and ensuring the AI is accurate in any information it provides.

Another consideration is privacy and protecting all private and proprietary information. We work in a very precise and trust-driven industry. It’s incumbent on us to ensure that any tool we utilize to serve members has high accuracy and service reliability. AI also needs to fit within organizational strategy as well as business plans.

What are you doing about those risks?
TL: I believe a great place to start is to have a good AI policy in place, as well as procedures around any technology deployment. Use-case risk assessments also provide value to ensure the technology fits within the credit union risk profile and the existing business plans.

GOLDEN 1 CREDIT UNION

Jay Tkachuk joined Golden 1 Credit Union ($21.1B, Sacramento, CA) in August 22 as the cooperative’s EVP and chief digital officer.

What AI applications are in use at your credit union?
Jay Tkachuk: At Golden 1 Credit Union, specifically with machine learning, we use it for loan decisioning, various flavors of analysis, and other tasks. We use natural-language processing/understanding for call analysis and we’re currently experimenting with gen AI for productivity augmentation.

We continue to look for new ways to leverage these technologies for competitive advantage, and thus must be prudent, pragmatic, and methodical in how we compete in this landscape.

What do you see as the biggest risks around artificial intelligence?
JT: Specifically, with machine learning platforms, the greatest risks are the built-in, yet unknown biases. These technologies are very complex, and for those that truly understand the inner workings and can extract the maximal value out of them, will be highly valued assets for financial institutions looking to continue evolving these models.

What are you doing about those risks?
JT: We’re investing in internal resources with hands-on experience with such technologies, pursuing a pragmatic, focused approach to enable a narrow, well-defined set of capabilities. As we learn through this process, we’ll expand the AI applications as the member and operational needs evolve.

UNIVERSITY FCU

John Orton is vice president of enterprise risk management at University FCU ($4.0B, Austin, TX). He joined UFCU two years ago after 15 years as a CFO at another large Texas cooperative.

What AI applications are in use at your credit union?
John Orton: We currently use Azure Machine Learning, Microsoft Copilot and Teams, ChatGPT, Base AI, and many more. Most of our security tools use AI, for example, as do our digital account-opening and commercial LOS and digital banking platforms.

What do you see as the biggest risks around artificial intelligence?
JO: On offense, we could lag other financial institutions and not realize the benefits of AI in the areas of better understanding and solving the needs of our members/customers. We could also miss out on efficiency and effectiveness opportunities to do our work better/faster/cheaper. We could then in turn miss out on growth opportunities.

On defense, there are much increased risks for cybersecurity and fraud, for bias in decision-making, and for legal copyright protections.

What are you doing about those risks?
JO: We’re striving to achieve an unbiased and supportive resource on resources and decision-making in these areas. To make sure that we are not all gas and no brakes on AI, or vice versa. On offense, we’re looking at deploying AI chatbot solutions to answer member questions better and more quickly. On the defense side, we’re actively looking at AI-powered solutions to better ferret out fraudulent transactions in real time.

WRIGHT-PATT CREDIT UNION

Jen Ogden is chief risk officer at Wright-Patt Credit Union ($8.3B, Beavercreek, OH). She joined the Dayton-based credit union in 2010 and has been in her current role since September 2022.

What AI applications are in use at your credit union?
Jen Ogden: The credit union recently deployed conversational AI through chatbot technology on our website. Members can interact with “Patty,” our virtual assistant, to ask questions or easily locate information anytime. This not only enhances the member experience, but those interactions also help us understand how members prefer to engage in the digital channel.

Behind the scenes, we’ve also deployed generative AI in pilot to power internal reference material for our partner-employees. We’re excited about this opportunity as well because we believe it can enhance efficiency and help partner-employees quickly locate information as they are serving members.

What do you see as the biggest risks around artificial intelligence?
JO: Data security, compliance, and algorithmic bias are at the forefront of AI-related risks the credit union monitors. This is especially important as AI technology becomes more prevalent in vendor solutions and the tools we use.

Fraud and cybersecurity risks are also top of mind as language models become easier for bad actors to use and exploit. More broadly, AI technology is evolving quickly, and open-source AI is expected to accelerate that pace. The velocity of change itself will present risk as credit unions and the industry work to update controls and framework standards.

What are you doing about those risks?
JO: The credit union has established internal practices governing the use of AI, and we manage risk through a series of procedures, risk assessments, model validations, and our enterprise security program. We’re also working to enhance our model and vendor risk management functions to support the changing environment.

While AI introduces new risks, managing those risks effectively also provides new opportunities to positively impact our credit union and our members.

These interviews were edited and condensed.

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The post How Credit Union Risk Managers Are Addressing AI Threats appeared first on CreditUnions.com.

Top-Level Takeaways

• FedNow went live in July. The service offers instant payments 24/7/365, and proponents expect it to be a major competitor to fintechs such as PayPal and Venmo.
• Credit unions are eyeing FedNow for a growing range of uses, including P2P payments, bill pay, and internal processes.

Credit unions are often fast followers when it comes to innovation, but the industry is on the ground floor for the development and launch of FedNow, the Federal Reserve’s real-time payment and settlement service.

On July 19 at 6:01 p.m., the Fed launched FedNow. Corporate and natural-person credit unions alike were heavily involved in the conceptualizing, development, and now adoption of the service as a complementary alternative to the ubiquitous ACH Network.

Nacha has been adding payment windows and same-day functionality for the past few years, but its batch processing doesn’t offer true instant payments with immediate availability of funds.

FedNow, in development for several years, works non-stop to meet consumer demand for instant, secure, reliable financial transactions.

“Just as credit unions use the ACH system, FedNow is the next version of ACH,” says Gary Rodrigues, president and CEO of early adopter Star One Credit Union ($10.3B, Sunnyvale, CA). “Everyone should participate. It’s a cost-effective and secure payment system. We think eventually all credit unions will want to offer FedNow and take payments back from the fintechs.”

Consumer Demand

Competition might leave credit unions little choice but to adopt FedNow.

“If credit unions do not embrace this new infrastructure, they’re likely to lose members to other financial services providers that do offer instant payment capabilities, which consumers are coming to expect,” says Kurt Stevenson, senior vice president of payments at Alloya Corporate FCU, a Naperville, IL-based provider of wholesale payments and other services to approximately 1,400 credit unions.

Alloya expects real-time payment volume in the United States to grow to at least 6% of total payment transactions in the next five years, Stevenson says, an estimated 18 billion out of 322 billion payments.

He also points to surveys by PYMTS and PSCU last fall that found 64% of credit union members rate payments innovation as a top factor in choosing a financial institution; 27% would switch financial institutions based on that factor.

Brad Ganey, senior vice president and chief operating officer at Catalyst Corporate FCU, expects swift adoption and the impact to be transformative to consumers, businesses, and the financial institutions that serve them.

“There have always been challenges with availability of traditional payment systems outside business hours and across time zones,” says Ganey, whose Plano, TX-based corporate is the largest payments aggregator in the credit union space. “FedNow will knock down these barriers and provide a faster way to send and receive government payments, payroll, insurance claims, and so many others. We also believe this payment rail will have more rapid adoption from merchants because they were at the table alongside financial institutions from the beginning developing this solution.”

Credit unions had a significant presence among the 110 or so financial institutions and processors comprising a pilot program launched in January 2021 to support FedNow development, testing, and adoption. That was followed this past June, just a few weeks before the live date, by the naming of 57 early adopters to complete formal testing and certification. Now, it’s time to get in line.

“The sooner the start, the better the outcome as there will be significant demand among financial institutions to be onboarded with the FedNow service and the process takes time,” says Stevenson, the Alloya payments executive.

Credit unions that got in the long queue for Zelle a few years ago might remember that well.

Meet, And Beat, The Competition

FedNow is one more way credit unions can level the technology playing field currently dominated by larger commercial banks and fintechs.

Rodrigues at Star One says his credit union’s FedNow service, called Instant Pay, is an answer and alternative to Venmo, PayPal, and other third-party payment options.

“Our members are using these fintech apps, and we want to be our members’ primary payment services provider,” he says. “Fintechs have controlled the real-time payment market. We like that we can now directly compete with them with a system that’s even better than what’s been available.”

Pima Federal Credit Union ($1.0B, Tucson, AZ) is taking a systematic approach. On July 19, it was up and running on FedNow in the first moments the system was live, the first Catalyst credit union to do so.

“This is an ongoing, multi-phase project that we have consolidated into three phases,” says Eric Renaud, president and CEO of Pima.

According to Renaud, members will be able to receive payments from participating financial institutions or service providers in phase 1 and send payments in phase 2. Phase 3 will include integration into the credit union’s online and mobile banking platforms.

That approach jibes with advice from Iowa’s largest member-owned financial services cooperative and FedNow early adopter.

“Start with a long-term plan that identifies your opportunities to get the most out of this network for your members and your internal processes,” says Renee Christoffer, president and CEO of Veridian Credit Union ($7.0B, Waterloo, IA). “Identifying your use cases is an important early step. That was vital in determining our roadmap for moving forward.”

A2A, P2P, And Beyond

Star One, Pima, and Veridian are among the shops testing the waters by going receive-only, a step that Alloya SVP Stevenson embraces.

“Receive-only, real-time payment processing is a strong yet low-risk starting point for credit unions to get involved,” he says.

For its part, Alloya is piloting several P2P solutions and expects one or more of them to be available to member credit unions later this year, jump-starting what’s expected to be a growing list of uses for the real-time payments service.

Credit unions are preparing, too.

“FedNow is currently more of an account-to-account service,” says Rodrigues at Star One. “But there are several different use cases in the works, such as tokenized P2P transactions and bill payments.”

Christoffer at Veridian says she also sees a wide variety of use cases for instant payments with far-reaching benefits for internal operations and member service alike.

“Using instant payments for things like loan payoffs, closing costs, and more will increase efficiency in loan processing,” she says. “We’re also exploring uses in our member application and onboarding processes. Overall, instant payments will allow us to offer an improved experience for our members in a wide variety of interactions.”

At Pima, Renaud sees the potential for FedNow to compete with products and services like bill pay and wire transfers.

“When it comes to high-priority situations, real-time payments offered through FedNow will be preferred over wire transfers since they will be free and instantaneous,” he says.

He also sees the potential for FedNow to replace ACH in the future.

“This would be beneficial for businesses, government agencies, and individuals alike since it would mean receiving payments sooner,” he says.

Integration, Integration, Integration

Adopting institutions have to integrate FedNow with their existing services, including external payment rails such as PayPal, Venmo, and Zelle, as well as ACH and RTP rails. That requires critical connectivity among the complex systems involved in this money movement and integration with the heart of the credit union’s technology, its core processing platform.

“Core readiness and integration are a must for real-time transactions to occur,” says Stevenson at Alloya. “Alloya and our technology CUSO, Aptys Solutions, have been working closely with as many credit union core processors as possible to integrate with our real-time solutions. Although many cores have been receptive to integration with Alloya, others are uncertain or unlikely. Conversations with the core processor are critical.”

But as adoption becomes widespread and integration work advances, additional application developers and providers will be able to integrate with the solution, enriching the value far beyond simple transfer of funds, says Ganey at Catalyst Corporate.

“We’re not targeting a single provider but rather multiple efficient, cost-effective applications that will fuel credit unions’ ability to stand out,” Ganey says.

Retain And Attract Members

FedNow boosts cooperatives’ ability to serve and compete by offering services that are on par with, or even exceed, those available through larger competitors.

This is crucial for retaining existing members and attracting new ones, especially among younger demographics who are more accustomed to real-time services and are growing more dominant in the market every year.

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