5 Ways Credit Unions Can Be More Resilient with AI and Analytics

AI and other behavioral analytics can give you better, more actionable insights into customers' needs and risk

Credit unions are sitting on a lot of risk right now. As federal stimulus programs are ending, delinquencies and charge-offs are expected to rise in the months ahead.

This COVID pandemic aftershock is about to hit the financial services industry, which means that credit unions need to pay close attention to their capital, asset quality, earnings, and liquidity. You can be prepared by taking steps now to make your organization more resilient and profitable. Here are five ways you can make the most of your data and the economic turnaround.

5 Keys to Credit Union Resiliency


1. Identify & Understand Your Best Members

The first step is to get a complete understanding of your members. Do you know who your superstar members are? What are their financial goals? What are their needs and preferences?

All credit unions think they know their best members, but the most valuable members are usually the most difficult to understand. Success requires identifying and understanding your best members so you can target those segments and nurture those relationships.

High-value members tend to have numerous products and a longer history, and they utilize a variety of channels. This means their data is often messy and spread out across siloed systems that don’t communicate with each other efficiently. Despite this, you need to focus on learning who these members are because they have a big impact on the success of your organization.

As an article in CU Insight put it, “When credit unions misidentify or overlook their actual best members, they fail to value them correctly, and lack good insight into their behaviors and preferences. As a result, brands are unable to connect with them in a way that feels tailored and authentic.”

In order to properly evaluate your members, you need to make sure you’re looking at the whole picture. This involves collecting and analyzing data that is holistic, relevant, and predictive of member behavior (e.g., current accounts, deposits, loans, revolving credit, etc.). In many cases, credit unions don’t have the data they need to the whole picture in which case consortium data can be helpful. Use that information along with analytics to gain a deeper understanding of who that member is and how to best interact with them.

2. Make the Most of Your Unique Competitive Advantages

With more financial institutions focusing on customer experience (your competitive advantage), don’t take your member relationships for granted and continuously look for ways to improve and offer your members more. Credit unions are different and they inherently think of themselves that way – as part of a microcosm, somewhat separate from the broader financial services industry. But the reality is that credit unions are still competing for customers in the same market as big banks and FinTechs. Don’t ignore competition that can steal your members. To succeed, you need to leverage your competitive advantages and double down on your strengths.

What are your core advantages as a credit union? How are you different from other financial institutions? What makes you exceptional and distinct?

A credit union’s strengths lie in its members, its service, its community involvement, and the community’s trust. Don’t chase the competitive advantages of others. You need to open people’s eyes to what makes you unique and express your brand in a way that differentiates you.

Let’s consider the competition. On one side, you have big banks with big budgets and market dominance – but according to a recent survey by Accenture, only 29% of U.S. consumers trust their bank to look after their long-term financial wellbeing. That’s an embarrassing statistic. On the other side, you have FinTechs – they are much smaller and less regulated, but they have the digital savvy to steal customers and they’re taking advantage of market gaps in innovative ways. However, digital-first companies often lack a customer service aspect and when you’re looking for help, there’s no human on the other end of the line.

Don’t shy away from competing while staying true to your core values. Invest in digital solutions and analytics that enable you to respond quickly to changing market conditions. Always be looking for new ways to strengthen your member relationships and add value to their financial lives. Remember that credit unions hold a unique position that big banks and FinTechs cannot compete with but that doesn’t mean that you can ignore the competition as they focus on your unique differentiators.

3. In a Digital World, Focus on Experiences

A key challenge for financial institutions and even more so for credit unions is providing the same experience that members get in-person, online. Digital transformation has been a trend for years and the COVID pandemic has undoubtedly escalated the demand for virtual solutions.

Traditional banks are investing heavily in technology to focus on customer relationships. And while FinTechs are able to move quickly to meet digital expectations and fill gaps in niche areas, the trade-off is customer service for speed.

While in recent years, many banks have lost their connection to community, it’s something that credit unions have been able to maintain. Reflect on your brand in the eyes of the community. How can you better engage with the community to bring people in the door?

According to CU Insight, “This is an environment where every interaction is an opportunity to create connections with a member. An interaction that began digitally can be carried out in person – and the experience feels familiar even if the member has never stepped foot in the branch.”

Focus on your market distinction and using technology, data and analytics to create tailored experiences. It’s important to provide a streamlined experience from channel to channel – and your physical branches help tie everything together, so use those spaces creatively. Nurture your relationships with your community. You need to invest in digital transformation in order to stay relevant, but remember to maintain the human touch that credit unions are known for.

4. Invest in AI Analytic Solutions to Harness the Power of Data

The pandemic has been resulted in speeding up the pace of digital transformation and you need to ensure you’re not left behind. You should be investing in technology that leverages this data and helps you make smarter, faster, more profitable decisions. You should also be enhancing your knowledge base with third-party data so you can benefit from having a complete view of your members, which is more than one financial institution could ever gather on its own.

Credit unions need as much insight into their members as possible. AI solutions that are designed for credit unions can help you proficiently analyze and utilize data for a myriad of applications – including originations, account management, collections, marketing decisions, and more. This enables you to gain behavioral insights and triggers (e.g., nuances, customer preferences, buying priorities), real-time analytics and decisioning, credit risk assessment and fraud protection, and the agility to respond quickly to changing market conditions.

AI gives you the power to understand what's happening, to predict what will happen, and to see the next best move. That means the ability to offer your members the right products at the right levels to minimize risk and maximize growth. This is an opportunity to better understand your organization and your members so you can provide more consistent, personalized experiences.

5. Empower Your Employees & Keep Customers Engaged

For credit unions, customer service and profitability are synonymous. You look after the well-being of your members, and your profits are reinvested and returned to them in the form of better pricing and lower rates. 

Focus on your member relationships, which means keeping members happy, creating stronger relationships, and increasing retention (e.g., through intelligent cross-selling and service bundles). Leverage your available customer data and use it to provide instant, personalized experiences across all departments (member relations, business development, marketing, and more). This frees up your employees to focus on what they do best: making human connections with your members.

Furthermore, don’t just train your employees to complete tasks – teach them about your brand, culture, and mission. Provide them with the tools to solve problems on their own and encourage relationship-driven interactions with customers, rather than transactional-driven interactions.

These days, customers expect real-time responses and accessibility on whichever channel(s) they choose to use. There is also an element of social and ethical responsibility that’s expected on behalf of financial institutions. Let people see your brand as part of something bigger and find ways to participate in your community in a non-banking way.

Remember that your investments indicate where your priorities lie. These strategies will enable you to create integrated and personalized experiences, build brand loyalty, and increase your profitability which all contribute to your credit union being resilient and relevant.

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