CUs' recent gains at risk without significant tech upgrades

Credit unions have a long, distinguished history of providing alternative options to conventional retail banking. Unlike their profit-driven counterparts, credit unions’ member-owner model emphasizes personalized services and a high-touch experience over the bottom line.

Yet, the image of being the antithesis to bank conglomerates that has helped credit unions increase their memberships by nearly 5% in the past couple of years is in serious jeopardy as customer interactions become increasingly digitized. Adopting fully digital processes and operations — digital transformation — is a high priority for industry CIOs, with more than 75% of retail banking execs eager to adopt more modern business models that drive profitability.

But digital transformation is neither easy nor cheap. And credit unions are now facing an existential challenge of transferring the high-quality, in-person experiences that have become their calling cards to their digital channels.

Barriers to transformation

Recent research shows that consumer preferences are driving change within the financial services sector, as more than 40% of consumers haven’t stepped foot in a physical branch location in six months. More importantly, some reports say that nearly half of all banking customers now interact with their financial institutions only by digital channels, challenging banks and credit unions to rapidly deploy new means of interaction and engagement outside the confines of their brick-and-mortar branches or contact centers.

For credit unions, this poses an especially difficult obstacle. Most lack the financial and human resources as their larger and deeper-pocketed competitors to pour into such efforts. While more than 70% of credit union executives say they plan to increase their budgets for digital projects, a majority still worry that they’ll simply not have the funds to execute those plans.

Meanwhile, large commercial banks are investing billions of dollars annually into artificial intelligence (AI) and automation. The infusion of cash is not only pushing institutions that can afford the investment to the front of the pack in terms of rolling out advanced digital and personalization capabilities, but it’s also improving their reputations in customers’ eyes.

In fact, data from the American Customer Satisfaction Index (ACSI) released yesterday shows banks have effectively closed the gap with credit unions, and the two industries are now nearly level on consumer satisfaction rates.

The dramatic shift in customer satisfaction measures should serve as a wake-up call to credit unions. Much like a sports team making a much-needed acquisition at the trade deadline, credit unions must also look for ways to augment and enhance their existing business without losing the focus on the personal touch their customers have depended on for generations.

A new business reality requires new business strategies

Fortunately, many credit union executives are heeding the warning and forward-thinking institutions are already taking decisive action. At this year’s American Banker Retail Banking Summit, several credit unions and industry thought leaders presented strategic plans for creating remote delivery business models through the aggressive adoption of new, cost-effective technologies. For example, one representative from Pennsylvania State Employees Credit Union described the credit union's strategy for deploying AI technology to better anticipate members financial needs, provide timely and relevant insights and advice, improve financial literacy, and deliver value across any and all digital channels.

Other high-profile credit unions have embarked on similar initiatives in recent months as well, recognizing the pivotal role technology will have in reshaping their operations for enhancing customer experiences and remaining competitive in a crowded market.

To accomplish this, they’re partnering with third-party artificial intelligence platforms featuring easily customizable tools that can be rolled out quickly and without the expense of hiring a full-time development team. These technologies, driven by enterprise-grade AI, feature bank-ready, content-rich applications that can help credit unions better predict and address member behavior, automate money management strategies and tasks, and proactively address potential concerns before they arise.

And it’s all done digitally, across any platform or device.

Using these applications, deployed on their own or as part of an integrated solution, credit unions are able to extend the personalized experience customers have come to expect to their digital channels, without having to staff up with more employees to handle the interactions.

Instead, member-facing applications make previously bland transactional platforms more personal by employing a credit union-specific lexicon for a more human-like experience.

More importantly, they leverage predictive analytics to proactively offer services and products in the member’s best interests and communicate easy-to-adopt banking strategies for maximizing cash flow or returns on investments, similar to what a personal banker might recommend in the branch office.

A foundation for sustainable success

As financial services customers move increasingly away from face-to-face interactions to digital ones, credit unions must accept it’s time to break free of conventional thinking and business models.

Adopting next-generation personalization and automation solutions enabled by artificial intelligence and machine learning is essential to remaining competitive in a rapidly evolving digital industry. While every transformation will look a little different, they’ll all need to focus on building modern and efficient processes that strongly support interactive, highly personalized digital customer engagements.