Embracing Innovation: How Credit Unions Can Leverage Technology for Growth and Compliance

A recent Cornerstone survey notes that 76% of credit unions plan to increase tech spending this year, aiming to offer exceptional service across multiple channels, provide a unified digital experience for account holders and strengthen integration strategies. At the same time, the proportion of members who are “digital forwards” has grown, emphasizing the increasing importance of digital adoption within credit unions.

However, credit union leaders face the challenge of achieving these digital objectives while navigating a complex landscape of risk management, competition and evolving regulations. Balancing these priorities requires a thoughtful and strategic approach.

Key Market Trends Shaping the Credit Union Landscape

Over the past few years, credit unions have encountered heightened competition. Mergers and acquisitions have become common, reducing the number of credit unions with assets under $10 million from 3,000 to around 1,000, as reported by The Financial Brand in February 2023. This consolidation has intensified competition – not only with traditional banks but also among credit unions themselves.

Moreover, the average age of credit union members hovers around 53, according to the World Council of Credit Unions, presenting a challenge to capture younger consumers. Younger generations, particularly Gen Z, bring higher expectations, demanding fast, seamless and personalized banking services across multiple channels. Increasing the pressure, it is projected that by 2026, 65% of banking transactions will be conducted digitally, according to a BAI Executive Report. For institutions that fail to meet these digital banking needs, 60% of Gen Z customers indicate a willingness to switch financial institutions in favor of better digital services.

The imperative to invest in technology is clear. Credit unions must not only meet these elevated member expectations but also remain competitive against traditional banks and fintech players, especially in digital services. Adding to the challenge, the regulatory landscape has become more intricate, with new guidelines focused on data privacy, cybersecurity and the use of artificial intelligence in banking. Institutions that can skillfully navigate these regulations while advancing their digital capabilities will be better positioned to thrive in this dynamic market.

Delivering an Omnichannel Experience

To foster deeper member engagement, credit unions must prioritize an omnichannel approach. A Gallup study indicates that engaged members – those who feel their credit union prioritizes their financial well-being – are more likely to maintain multiple products and services with the institution. Increasing this engagement hinges on offering a seamless and integrated experience across channels.

Utilizing advanced digital platforms with application programming interfaces (APIs) and standardized data models, credit unions can create a unified experience that bridges mobile apps, online banking and in-branch services. This integration ensures that members can interact with their financial institution through any channel, providing convenience and consistency. By streamlining online transactions for simpler needs and preserving in-branch services for more complex interactions, credit unions can deliver a holistic experience that meets diverse member preferences.

Forming Strategic Fintech Collaborations

Collaborating with fintech partners presents an opportunity for credit unions to accelerate their digital transformation without overextending internal resources. In fact, 80% of credit unions find that fintechs will be a driver of their growth within the next few years, according to the Cornerstone report. These partnerships bring agility and innovation, enabling credit unions to enhance their offerings and meet modern member expectations, all while maintaining rigorous standards of compliance and security.

Through fintech collaborations, credit unions can offer cutting-edge financial solutions such as personalized financial advice, advanced mobile banking features and seamless payment systems, all of which elevate the member experience. Fintech expertise also enables credit unions to stay ahead of emerging trends and introduce innovative products in line with market demands.

Furthermore, fintech partners bring critical regulatory knowledge, helping credit unions navigate evolving compliance requirements. Many fintech solutions include automated compliance features such as reporting tools, transaction monitoring and data protection safeguards. This specialized knowledge allows credit unions to mitigate risk, streamline compliance processes and reduce the burden of manual regulatory management.

Looking Ahead

For the rest of 2024 and looking into 2025, credit unions will confront significant challenges, from increased competition to the complexities of digital transformation and regulatory compliance. Yet, by embracing technological innovation, forming strategic fintech partnerships and remaining committed to member-centric values, credit unions can meet the evolving needs of their members and position themselves for sustainable growth.

By improving financial well-being and enhancing digital engagement, credit unions can reclaim their traditional competitive advantage. The institutions that act decisively today will be the leaders in tomorrow’s financial services landscape.

Tyler Brantley is Vice President of Revenue and Marketing for Core10, a Franklin, Tenn.-based provider of lending, account opening and middleware products, as well as software development services.