Credit unions lag in tech. Coronavirus is changing that.

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As the coronavirus drives financial institutions nationwide to limit branch access and reduce hours, some credit unions are noticing deficiencies in their mobile banking offerings.

Larger credit unions can more easily adapt those solutions to meet member needs, but that’s a bigger challenge for small and mid-size shops. But the COVID-19 outbreak has spurred some CUs to take measures to put new technologies in place where they can.

“I think this pandemic has really taught a lot of credit unions who haven’t made that full [digital] transition the need to do so as soon as possible,” said Tom Sakash, manager of Small Credit Union Initiatives at the Credit Union National Association.

To facilitate that, some vendors are offering long-term free trials of various e-services as the pandemic increases the need for digital interactions with members. The CUSO eDoc Innovations is providing free use of its eSign tool until September 30, and as of March 31 had more than 50 new institutions onboarded with another 57 in the works. Similarly, POP i/o Video Banking is offering no-cost services until mid-May to help credit unions deal with business continuity issues.

Data from Callahan & Associates shows more than half of the industry didn’t offer e-signature at the end of 2018, though some CUs may not utilize the technology since some states still have laws requiring a wet signature.

Stacy McCann, CEO of Old South Federal Credit Union in Natchez, Miss., said her credit union went live with the free eSign trial as a way to keep serving members once in-branch traffic started to decline. So far the $17 million-asset credit union has retained its regular hours, though it has closed its lobby.

“When we started [seeing] the need for not having anyone coming into the credit union [because] of the virus, we started looking into it,” she said

Old South also made some tweaks to its remote deposit capture capabilities. Previously there was a $300 limit for remote deposits, but that has been waived and deposit limits are now being examined on a case-by-case basis, McCann said.

Less than one-third of Old South’s 2,800 members use the credit union’s mobile banking platform, while just 5% take advantage of RDC capabilities. Part of that low metric could be attributed to members already having their paychecks sent to the credit union via direct deposit. Still, McCann does expect that number to increase as more of her membership sees the importance of staying at home. Mississippi Governor Tate Reeves issued a stay-at-home order that is set to remain in place until at least April 20.

The remote deposit capture market was valued at $184.66 million in 2018 and is projected to have a compounded annual growth rate of nearly 11%, according to analysis from Reports and Data. Credit unions that route deposits through RDC could also see an uptick in usage of those platforms following passage of the CARES Act, a $2 trillion coronavirus economic relief bill that will provide most adults one-time payments of $1,200, plus $500 per child. Most of those monies are expected to show up via direct deposit, but some recipients may receive paper checks.

But implementing new technology always comes with risk, and many credit unions can’t afford additional risks during a pandemic. One reason some credit unions have limits on cashing checks remotely in the first place is to prevent fraud. Seventy-two percent of mobile banking fraud involved use of remote deposit capture and fraudulent checks, according to analysis from Guardian Analytics published in a March 2016 white paper.

“What [COVID-19] will do is really force credit unions to look at their risk parameters surrounding remote deposit capture and perhaps take a different perspective on things,” said Brewster Knowlton, owner and principal consultant of The Knowlton Group.

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It’s not just small credit unions that are having to adapt their digital platforms.

“What we’ve discovered is that as this occurred, it really began to shine a light on the gaps that we have in our existing digital banking platform,” said Ben Morales, chief technology and operations officer at Washington State Employees Credit Union.

Some of those gaps include improving the $3.3 billion-asset credit union’s in-app messaging system to make it more real-time and the ability to make branch appointments online, which was a function that did not exist before the outbreak. Both of these are quick fixes, Morales said.

The Olympia, Wash.-based credit union used to think its online banking offerings were “very robust,” said Morales, but it became much easier to spot the holes in its online offerings after members stopped visiting branches and the credit union’s contact centers began getting backed up. Finding those gaps is the easy part. The hard part, he said, is determining how to seamlessly implement those capabilities into a digital banking platform.

There are three criteria that credit unions should prioritize when it comes to their digital suite, according to Richard Crone, CEO of the advisory firm Crone Consulting. Chief among those is ability to open an account online, followed by mobile payments – both P2P and point of sale – and ensuring that RDC capabilities are fraud-resistant.

Those kinds of functionalities, said Crone, will be key to helping members during the current crisis but also help with attracting new business after this blows over.

"Credit unions should prioritize online platforms that open an account online instantly with immediate access to mobile payments,” he said. “Sole proprietors and members running small businesses will need that ability."

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Digital banking Coronavirus Growth strategies Mobile banking Fintech Deposits Consumer banking