ONTARIO, Calif.—Although it can be tempting to chase the next new shiny object, in 2019 credit unions should focus on a trio of core issues, and “forget” about one other, according to CU Direct.
Brian Hamilton, VP of innovation at CU Direct, pointed to three important technology initiatives that should grab credit unions’ attention in the year ahead.
“Credit unions need to be brilliant at the basics,” said Hamilton. “Before spending money on new technology, credit unions should first ensure they are making the most of what they already have. Confirm you have clean data and ‘one version of the truth’ when it comes to reporting—if you ask three departments at your credit union the same question, you should get the same answer. Beyond that, a good place to start is measuring your credit union’s current instant approval ratio and setting a goal for improvement.”
Hamilton said he’s seen credit unions that have tremendous resources—smart people, well-capitalized, great market, strong brand awareness, and a robust loan decision engine—yet they are only automating 11% of their loan decisions.
“Credit unions can significantly increase efficiencies and accuracy by fully optimizing their loan origination system’s decision engine to increase the number of automatic approvals,” he said.
Hamilton said many credit unions are known to average less than 30% when it comes to automated decisions, while those automating 50% or more are much more likely to exceed their lending goals.
‘Moving On Without You’
“Why maximize automated decisions? Because members shop online for loans and are most likely applying with more than one lender. If you make them wait while another lender approves them immediately, they’ll move on without you,” he told CUToday.info. “When you automate decisions—and move from 11% to 50%—you can quickly move the needle on your loan production. And to be clear, an automated loan decision means either an approval or a decline. If you’re referring an application to a staff member for review, that’s not an automated decision.”
Additionally, before the CU introduces a new product or service, it should make sure core products and services are the best they can be, Hamilton said.
“Look at your internal reporting, channel availability for members, how the products are structured and whether your margins are optimal, especially in this rising-rate environment,” he said. “Now, I’m not saying to delay launching a new product or reduce your tech budget. You can invest in new things, but make sure you also have a team dedicated to optimizing your existing systems and product offerings.”
Front AND Back End Solutions
Once the credit union’s “foundation” is firm and it’s ready to invest in something new, the focus should turn to the digital experience and machine learning, Hamilton said.
“Improving the digital experience on the front end gets a lot of attention, and rightly so. Members want a seamless digital experience, especially via mobile channels.
But you must also provide a seamless digital experience for your back-office, or the front-end experience will fall flat,” Hamilton said. “I’ve seen many large, well-marketed lenders selling their superior digital experience, but when a borrower moves from the front line to the back office, it’s another story. Don’t make your digital experience smoke and mirrors, make sure it’s seamless from start to finish.”
The most common place for credit unions to start is in document processing, Hamilton said.
“Members expect to be able to take a photo of their driver’s license or paystub with their phone and deliver it to you securely,” he said. “If you invest in a tool that provides this service, it will not only improve your member experience, it will speed up your processing and increase your loan production.”
Marketing is another back-office area in which credit unions should look to increase their digital investment, he said.
“The days of batch emails to your entire member list are long over. Implementing a digital marketing strategy can significantly strengthen member relationships, capture more loan opportunities and improve the borrowing experience,” Hamilton said. “Using data science to send targeted emails, text alerts and other mobile messages delivers real value to members and will increase their likelihood of responding to your offer.”
Member data in the credit union’s core banking and lending systems can be integrated into an advanced marketing automation platform, noted Hamilton.
“This intelligence allows the marketing team to effectively leverage information your credit union already knows about its members to automatically match them with meaningful marketing messages,” he said. “This connects them with the right loan products and services for them.”
What to ‘Forget’
Credit unions should keep in mind that back-office technology upgrades may require the use of APIs and cloud storage, pointed out Hamilton.
“Forget hardcoding—in three years this will be outdated. APIs and the cloud allow you to update and replace apps and other technology,” he said. “Transitioning to those solutions will pay off well into the future, with a better experience for your members and employees.”
Hamilton emphasized that machine learning allows the CU to get the most value out of its efforts to leverage data in its newly automated back office.
“Statista reports that in 2017 more than 25% of companies that used machine learning solutions are continuing to commit more than 15% of their total annual IT budget to it. This also isn’t futuristic—like geolocating, it’s available now and increasingly affordable,” Hamilton said. “Credit unions that invest both time and money into optimizing their existing systems, products and services, and further develop digital back-offices and utilize machine learning, will have a great opportunity to knock their growth and income goals out of the park in 2019.”