The future of FinTech for credit unions

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Credit unions are Ireland’s most trusted financial institutions, but they face challenges if they are to continue to grow and serve ordinary citizens of Ireland and their communities.

The forthcoming report from the Oireachtas Finance Committee says Irish credit unions have an ‘unsustainable’ low level of lending and should be allowed to offer a wider choice of loans, including helping to fund housing agencies for housing. deal with housing crisis. The report will confirm that the loan-to-asset ratio for the sector is at a very low level of 26%, which means Ireland is in the bottom five out of 105 countries with credit union movements in terms of volume. ready. We believe this figure should be closer to 60% to ensure a sustainable sector.

In June, credit unions were again judged, for the third year in a row, as Ireland’s most trusted brand – out of 170 brands – by the CXi survey, conducted by CX Company in partnership with Amarach Research, in June 2017. It is not surprising that credit unions are different, in particular, from other financial institutions, not only because we are non-profit, but because decisions are made at the local level and tailored to the individual needs of members.

But credit unions must capitalize on market changes and continue to expand our use of technology. As in other sectors, digital transformation is underway in financial services and fintech offers opportunities to improve customer service, back office efficiency, decision making and governance. Credit unions have a great market share and the confidence of their members, but with increased competition, new regulations and architecture looming, they need to refresh their approach. Fintech offers such an opportunity.

The opportunity

Fintech is already paying dividends to many Irish credit unions. The Solutions Center – funded by a group of the strongest credit unions in the country and managed by the Credit Union Development Association (CUDA) – reports that since it started rolling out its digital loan service “Facebook Loan” more early this year, the credit unions involved saw their interaction with younger adult members increase tenfold. The initiative has already been a huge success – and now accounts for 15-20% per month of loan applications for some credit unions.

The Irish market is undoubtedly lagging behind our European neighbors in the adoption of fintech. Manual paper-based processes are expensive and risky. Automation allows new members to be created online, loans can be disbursed in minutes, and back office management is performed in real time. The advantages are compelling. Members are offered even more personalized service with greater convenience.

And the cornerstone of credit union success – the human touch – is not lost. FinTech is about doing more, faster and better. Staff time is freed up to focus on direct relationships with members. The market reach is extensive and members enjoy convenient service anytime, anywhere. Credit unions can approach fintech incrementally, automating things that are easier and increasing them as the needs of the business grow.

A data-driven economy

We have entered a data-driven economy where data is transformed into business intelligence and used to provide members with personalized offers and services. While many credit unions have been positive about the digital transformation, deep, long-term engagement is needed to meet members’ growing expectations for a frictionless process and the continued desire for governance and accountability. improved management. Digitization can create a virtuous circle: Credit unions can reach the next generation of members with personalized service, while regulators will receive better data, promoting trust and security.

For example, with the manual credit assessment process implemented by most credit unions, loyal members are forced to wait for credit decisions. Modernizing the credit system can increase member interaction and boost online business and lending by approving and disbursing loans within minutes while remaining cautious and compliant. Applied effectively, fintech can empower borrowers, and the potential benefits for credit unions and their members are enormous.

The future of early adopters

At first glance, the digital transformation journey seems daunting for the credit union industry – new technologies, cybersecurity, cost, uncertainty. While these considerations should not be underestimated, there are methodologies to make sure we are doing things right. This is just the start, as advances in technology, analytics, and user sophistication seem poised to open up new possibilities for those with the data and digital capabilities to harness it.

Our motivation behind the recent entry into the fintech space was reinforced by the results of a nationwide survey of 1,000 people that we recently commissioned. Almost 57% of respondents said that, given the choice, they would prefer to apply for credit from a lending institution using an online channel such as Facebook, rather than going to the branch and meet with an employee of a bank or a credit union.

Credit unions are uniquely positioned in that they have loyal members, a mark of trust, local knowledge and a positive local impact. There are adequate resources that can be leveraged to create movement-wide initiatives.

Fintech is the missing element that now enables and helps credit unions to regain control of their own destiny and to respect their social ethics and commitments like never before.

We believe that credit unions will and should continue to be cooperative, consumer-owned financial services organizations whose core business is to provide a competitive return on their members’ savings – using those savings to make savings. practical and affordable members. the loans.

We are committed to our agenda for change and are delighted that many of the country’s leading credit unions, with a combined workforce of over one million people, are currently implementing fintech projects, through the Center de solutions, which will improve their ability to deliver even more value for more members.

Kevin Johnson is Managing Director of CUDA

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