Modernizing your credit union’s lending tech stack: A strategic imperative for 2024
In today’s financial landscape, credit unions are navigating an array of challenges, from liquidity constraints and staffing limitations to tighter budgets. Among these challenges, one critical aspect often overlooked is the need to modernize their technology infrastructure. It’s during slower production times the prime opportunity arises to strategically add efficiencies that will prove invaluable in the busier times ahead. While the current focus is on growing deposits to combat liquidity challenges, credit unions must pay attention to investments in technology. Instead, they must leverage it to increase sales, reduce costs, and offset staffing challenges.
Modernization – the key imperative
Modernizing your credit union’s technology stack is not just a matter of keeping up with the times; it’s a strategic imperative for long-term success.
Modernizing your credit union’s technology stack offers various benefits. It enhances efficiency by streamlining operations, reducing costs in the long run. Automation and digitization cut manual labor and overhead costs. This streamlining also allows staff to focus on higher-value tasks, while a modern tech stack ensures a seamless member experience. Credit unions can offer online banking services, mobile apps, and responsive member support, which is crucial for retention and attracting new members. Additionally, embracing modern technology provides a competitive edge, allowing credit unions to adapt to market dynamics, offer innovative products, and stay ahead of regulations, ensuring long-term success.
So, where should credit unions focus their modernization efforts for 2024? This answer may vary based on the credit union and the needs of its membership. Each credit union will need to carefully consider and evaluate how its technology stack can contribute to the success of a member’s journey. Modern technology like artificial intelligence (AI), document processing automation (DPA), and digital member communication tools are well-positioned to help credit unions solve the critical lending challenges they face today.
AI enhances loan decisioning and credit access
Leveraging AI to provide members access to fairer, more accurate credit decisions is one tool that can help credit unions modernize. AI can enhance existing credit score models, pulling in alternative data sources (i.e., income expenses, credit history, and spending patterns), helping credit unions approve more creditworthy borrowers who otherwise may not have qualified.
Zest AI, the leader in AI-driven underwriting, ported that credit union partners approved 25% more auto loans and reached more than 50% automation. Credit unions can lend confidently down the credit spectrum, underwrite thin files, and achieve better risk ranking, especially in the middle tiers. It also delivers inclusive access to credit, optimizing for accuracy and fairness and increasing member approvals.
Document Processing Automation (DPA) improves operational efficiencies and experiences
Implementing DPA can provide significant operational efficiencies, saving the credit union time and money. DPA can automate, analyze, and extract data from a multitude of complex and unstructured documents in a fraction of the time. When AI and fuzzy match logic are added, DPA can process more than 250 types of loan jacket documents and more than 45,000 document subtypes. Not only is the information available faster, but DPA minimizes the time needed to sort and categorize documents manually. This allows team members to use automation to perform mundane tasks while using the time saved to focus on more thoughtful tasks that can improve member experiences.
DPA can also help credit unions strengthen their relationships with dealerships, which benefits their auto lending programs. This automation can create a swift and more efficient funding process, helping to solidify their position as a preferred lending partner. As a result, credit unions can improve their portfolio mix and offer competitive terms for members. Staff no longer spend time on manual data entry but can look for opportunities to build and expand their relationships with dealers.
Digital communications tools enhance the member experience
Credit unions should consider leveraging digital communication tools to help improve lending experiences for both staff and borrowers. For example, automated messages, reminders, and notifications can help members move more efficiently through the borrower journey with fewer abandonments. Automating these types of communications enables lending staff to work quickly and productively by communicating with members digitally.
Staff can work more effectively and productively, as these tools typically result in higher closing rates and fewer abandonments. Borrowers receive instant support from their credit union throughout the loan application process. These tools can also streamline and expedite document collection, reducing the need for multiple follow-ups via phone and email. This allows credit unions to better communicate with members digitally and transform their lending practices.
As credit unions plan for 2024, tech stack modernization is a strategic imperative. Credit unions need to use slower lending production to their advantage, taking the time to explore and implement new and strategic tools. There’s no better time to prioritize these efforts to become resilient in the competitive marketplace of the future and meet the modern expectations of members.
