ALL NEW – Technology Trends in the Credit Union Industry for 2022

Let’s face it… The past two years have required tons of leadership, dynamic management teams, creative problem solving, and lots of hard work. On one hand, being home constantly slowed things down. On the other hand, doing more with less has never been more necessary. After many years of some latent technology trends, I think it’s fair to say that the pace of change and trends are about to get more dynamic than ever. The bottom line is this: Everything is going to be different within 3 years… and here’s how! But first, here are 7 ways you can stay abreast, get involved, and follow along:  

1.    Join the Fintech Mastermind

CU 2.0’s Fintech Mastermind has created a community of fintech and credit union leaders focused on the very subject of credit union technology trends. It’s quickly helping to speed up adoption and partnership opportunities while helping to deal with credit union complacency. It’s also spawning some pearls of wisdom. Click here to apply to the Credit Union–Fintech Mastermind.  

2.    Find your next fintech

We’ve done the research and cataloged thousands. We update it regularly. Check out the CU 2.0 fintech database.  

3.    Sign up for CU 2.0’s Quarterly Fintech Calls

How do you save lots of time while getting up to speed? Each quarter, CU 2.0 hand delivers a customized briefing on 5 new fintechs just for your management team. Join the CU 2.0 Quarterly Fintech Call program here.  

4.    Sign up for the CU 2.0 blog and keep an eye out for the Fintech Friday series

Each week, we dive into a new fintech brand, technology, or strategy. It’s a great way to learn about the best and most promising new fintechs in our space.  

5.    Get your board involved with a CU 2.0 strategy session

Book a fintech strategy workshop with CU 2.0 and move from reactive to proactive—take control of your future. Sign up here or read more about our strategic planning sessions here.  

6.    Attend Fintech Meetup

What is the Fintech Meetup? The Fintech Meetup is a three-day, all-digital networking event. Thousands of representatives from new and established fintechs will be there. The same goes for representatives from credit unions, banks, investors, and other financial institutions. Each half day features a few hours of dedicated 1:1 meetings. No speakers, just focused networking. All meetings are double opt-in, too. You don’t have to meet with anyone you don’t want to! The goal is to maximize networking time and exposure. It’s all the best parts of a conference with none of the major drawbacks or lackluster speakers. Find out more here: Why You Need to Join the Fintech Meetup  

7.    Sign up for the CU 2.0 Brainstorm Event

The CU 2.0 Fintech Mastermind is a group of nearly 100 credit union and fintech leaders. They meet in small groups each month to tackle the financial industry’s biggest challenges. Every six months, the groups catalog the most salient discussions they had in that period. Then, they pick the topics they feel most qualified to speak about. These are industry leaders showcasing rigorous thought and expertise. And we’re calling it the Brainstorm Event.  

Major Credit Union Technology Trends for 2022

Trend adoption—or technology adoption—in the “real world” is a bit faster than with credit unions. If it were a city, Credit Unionville would be downright quaint and wholesome by comparison. But that’s not to say that credit unions are technology averse. Some things just take a bit longer to get up to speed, and our industry’s gears are just starting to turn faster. In fact, here’s a look at the state of things as of a little over a year ago:  

• Lending Fintechs
• Checking 2.0 (Overdraft, EWA, Neo-Bank)
• Artificial Intelligence and Machine Learning
• Fintechs in general
• Crypto, Blockchain, and DeFi
• Cloud, Security, and Infrastructure
• Digital Transformation
• Digital Identity

 

1.    Lending Fintechs

The last two years have seen tons of stimulus money pumped into credit union member accounts. This has ballooned credit union balance sheets and caused loan portfolios to shrink. The consequence is that yield is being squeezed across the industry and credit unions need get their Loan to Share ratios back to health levels. At the same time, a group of fintechs is off generating billions (with a B) of new loans. The good news is that we can memberize, create sponsored lender relationships, facilitate participation, and leverage credit unions low cost of capital and creativity to put these fintechs to work. Quite regularly we see credit unions buy/participate in large blocks ($10m, $100m or $250m) of low-risk, higher-yield, fintech-generated loan product. We have seen 5 key buckets:

• Auto Lending (e.g. WithClutch)
• Unsecured Backyard Lending (e.g. Upgrade, Powerpay, Figure)
• Secured Renovation Lending (e.g. Renofi)
• Unsecured Buy Now Pay Later (e.g. Equipifi, Quilo)
• Other (e.g. Amure, cannabis)

  All of these are producing 4%–18% loan product that meets credit union membership and underwriting criteria. The sooner you can get your deposit dollars back to work, the sooner you generate yield for your members and communities, and the sooner you fund your other digital transformation and fintech strategies.  

2.    Checking 2.0 (Overdraft, EWA, Neo-Bank Strategies)

If you haven’t realized it yet, the traditional checking account is under attack. The reality is that the last time checking accounts had any real innovation was when the monthly fee was eliminated in the 90’s. Neo-Banks like Chime have come out hitting hard and are disrupting the old checking account with fully integrated digital branchless checking accounts that get around traditional banking rules… and banks the unbanked. At the same time, lawyers, congress, the CFPB, and everyone else is targeting bank and credit union overdraft solutions. Finally, earned wage access (EWA) and other ways to pay employees early for hours worked have garnered huge support. For example, over 500,000 Walmart employees signed up for the program. All of this points to the need for credit unions to reimagine the traditional checking account—and quickly. Checking accounts should protect their cash cow, bank the unbanked, add transparency, and help their members. Here’s how:

1. Sign-up for Accelewage and empower your SEGs to offer EWA through their credit union. This allows members access to their money and avoid overdraft fees.
2. Sign-up for DoubleCheck and give your members payment choices to avoid fees. For example, they may decide which items to pay, which to fund with alternative sources, and more. Bonus: this avoids a one-size-fits-all solution for your members.
3. Sign-up for Q-Cash and provide life event loans to your members on the spot.
4. Join a Neo-Bank strategy like Bank Dora and find an alternative source of members that directly competes with Chime and engages the next generation of members.

 

3.    Artificial Intelligence (AI) and Machine Learning (ML)

This technology trend is on fire. Tons of credit unions jumped into AI underwriting, conversational banking (e.g. chatbots), collections, and more. AI-based tools speed up, automate, and improve the member experience. As machine learning progresses, more and more financial institutions and fintechs are using it. And because it’s such a flexible technology, they’re all using it for different things. Pretty much every new fintech we look at has A) been cloud-built, and B) leverages AI and ML in some capacity. Many of the digital transformation technologies like the leading chatbots, marketing automation, risk management solutions, etc. are all built with some amazing new technology. A few quick starting points:

1. Buy the new FinAncIal book from CU 2.0 to see how credit unions are using AI, complete with case studies and valuable how-tos.
2. Have an AI strategy session with the CU 2.0 team to make sure you are ready for tomorrow!
3. Sign up for AI underwriting with Scienaptic or Zest to speed up and scale your loan portfolios!
4. Get a next-level chatbot with Finn AI to serve your members without wait 24 hours a day, every day of the year.
5. Install a voice-driven chatbot from Posh to support the emerging voice banking market.
6. Try AI-driven collections with Debtsy to improve your post-charge off collections strategy.

 

4.    Fintechs (in General)

Well, if you’re like me, then you’re already exhausted and overwhelmed. By now you should realize that your team must speed up if your credit union wants to keep up. We’re just getting started! 3 years ago, when we started on the CU 2.0 journey, we identified 1000+ fintechs. Now there are 10,000+. There are 3 types of Fintechs.

1. Fintechs that want to eat your lunch (Chime, Sofi, Acorns, etc.). These fintechs may work with you, but ultimately they want to take your business.
2. Fintechs that want to buy you lunch (XDI, Redboard, OM Financial Group). These fintechs sell a product or service that will improve your bottom line (such as through reduced operational costs, etc.).
3. Fintechs that want to eat lunch with you (listed below). These fintechs bring a new service or improve an existing one, and their success is contingent on yours. Thus, they’re invested in seeing you succeed.

The fintechs that want to eat lunch with you include standouts like UNest, Boomtown, ChannelNet, DocFox, Equipifi, HomePace, Finsync, Hurdlr, Hyperverge, LiveSurvey, Otomo, Statflo, Teamonup, Flexpay and many many more. Your best bet is to join our Quarterly Fintech Call program to stay up to date and find a good lunch buddy!  

5.    Crypto, Blockchain, and DeFi

Imagine we’re having lunch 5 years from now. You’ve done everything right. You got to the cloud, had a data strategy, partnered with tons of fintechs, adjusted your balance sheet, dealt with the pandemic, transformed your branches, and reimagined your checking account… And then bammo! Crypto hits you. A couple quick stats: 50% of wealth in the US is held by Boomers, 17% Silent Generation… Oh wait—these are credit union members, and they probably won’t be goofing around with crypto… But GenX and Millenials make up 33% of wealth in the US and are largely untapped by credit unions. Gen Z is predicted to quickly overcome Millennials, too. In the next 20 years, a huge portion of wealth will shift to these younger generations who don’t remember when we used to get returned checks by the postal service back every month from their bank. This group is savvy and digital and is not all that highly engaged with cooperatives. They bet on Tesla, Microsoft, Google, and Apple and trust their future to tech. Well, Crypto, Blockchain, and DeFi are faster, cheaper, and more equitable solutions to wealth management. Don’t pretend it isn’t going to have an impact—look at your data. In fact, just do a crypto analysis, go sign up for some crypto, and try it out, stake a coin, and figure out what all the fuss is about. You may just be surprised that the hype has some truth to it.  

6.    Cloud, Security, and Infrastructure

We’ll start with the Cloud: We regularly come across credit unions that go with hyperconverged solutions believing that they’re finding the right blend of on-premises cloud technology. This is like the hybrid Toyota Prius compared to the Tesla Model Y with self-driving capabilities. No matter how much you upgrade your local stuff, you are getting further and further behind from a true cloud strategy and advantages. Mostly, this comes down to the advances in AI, identity management, scalability, etc. that are occurring in the cloud and are not being created for on-premises environments. This is a philosophical decision—sure, COVID hit and your IT department spun up hundreds of remote users in weeks… The cloud credit unions had it in hours. Yes, hours. For the credit unions already on the cloud, those few weeks that crushed your IT folks were spent on digital enhancements and member service technology improvements—not getting back to square one. Cloud strategies are about being best at what you can be best at and knowing where you add value to your members. Credit unions continue to lag in cloud adoption. To be frank, this doesn’t make sense. Licensing is easier, business continuity is simplified, and you get easier access to enterprise-level automation. What’s crucial to understand about the cloud is that it serves as the foundation for most other credit union technology trends. If any of the following are part of your road map going forward, you’ll need to start with the cloud:

• Machine learning and AI;
• Digital transformation;
• Faster disaster recovery; and
• Robust security and SIEM

And that’s just the beginning. If you told any younger generations that most credit unions aren’t on the cloud, they would roll their eyes, shrug, and say, “maybe that’s why we choose big banks and fintechs.” Maybe. But they would definitely be surprised. Considering that Millennials are turning 40, maybe it’s time to pay attention to what kinds of technology they expect to come standard… So, if you want to stay competitive and open doors to opportunity in the future, cloud computing is where to start. Now we’ll discuss cybersecurity: The current tight labor market makes it difficult for credit unions to find cyber experts. Furthermore, the NCUA’s focus on SIEM (Security Incident Event Management) continues to crank up the pressure. And, although the cloud offers many security perks, it still has vulnerabilities. So, to avoid becoming the next Equifax or Capital One, it’s critical to continue ramping up IT security efforts in 2022. Here are some cool cyber technologies we have been investigating:

• SIEM (Adlumin)
• CISO as a Service (from Ongoing Operations)
• Endpoint detection
• Managed patching (also from Ongoing Operations)
• SD-WAN (Trustgrid)

The all-digital era once again escalates the risk of cyberattack and the impact to the credit union. Credit unions need to have an advanced strategy, governance, and technology platform and plan to deal with the myriad of threats, regulation, and risks coming out of every system, member, fintech, etc. This trend is here to stay and can completely derail many other plans.  

7.    Digital Transformation

Digital transformation was the poster child of 2020 and 2021. Not anymore. If you’re still working on your digital transformation strategy, you’re in danger of irrelevancy. COVID accelerated digital changes—now, it’s time to switch providers and solutions to perfect the change. Here’s a quick digital survival check list every credit union needs:

• Online appointment setting
• Marketing automation
• Online account opening
• Digital vehicle buying services
• Digital loan closing
• E*Notary services
• Enterprise service bus
• UI/UX
• Digital customer service
• Online banking
• Mobile banking

But while that’s a great checklist, you could do all those things and still lack a strategy. Those are merely tactics. It’s essential to interweave a usability, analytics, single sign-on (SSO), CRMs, core systems, and continuous improvement throughout all of that to truly move to an integrated member experience that feels fluid, fresh, and relevant in 2022. Need help crafting and executing a strategy? Check out CU 2.0—they provide awesome digital coaching services to fit your specific needs. Otherwise, here’s a decent run-down of all the technologies listed above: Online appointment setting should fully integrate into Google search and Maps to make it easy for your members to find, book, and transact business on their schedule. One thing though: 1–2 days to open a new account is fine—no availability for 2 is not! Coconut Software has the best solution we’ve seen in this space so far. Marketing automation combines many different marketing technologies and adds an element of automation. Create complex email workflows, manage social media, create web pages and forms, and even use a credit union CRM… It’s time to ditch your crappy, old email marketing software. It’s holding you back. Online account opening is offered by every bank and fintech, and it’s a competitive advantage today. If you have a half-baked version of this—or no version at all—then it’s time to dive into something more current. The options today have evolved considerably. Look at Digital Onboarding and Array to see some great, fully-baked solutions that make your credit unions look great! Digital vehicle buying services help your members find and finance their next ride. Just like COVID put the branch on the sideline, Carvana and Tesla have disrupted car buying. Get behind a digital car buying service like LOANIFY and make sure your members don’t cut you out of the car buying process! Digital loan closing helps credit unions increase the speed and efficiency of closing large loans, such as mortgages. For example, LenderClose helps credit unions scale their process while improving the member experience during the loan process. E*Notary services like IMM provide the convenience of digital signatures and consent to credit union members. If you make members visit a branch (or mail a document) to get something done, then you’re not making their lives easy. Enterprise service bus is an idea that addresses common credit union feedback to fintechs. That is, credit unions are bombarded with fintech solutions daily. The credit union simply doesn’t have the bandwidth to digest them fast enough. Hence, if the solution doesn’t solve at least 2–3 problems, it probably wasn’t going to make the cut. Wow. So, a startup that is trying to execute and deliver an MVP must solve multiple things just to have a chance. The competition is fierce. But with an enterprise service bus, multiple niche solutions could be bundled, sold, and integrated together. Check out ModusBox for information on faster integration of fintechs without relying on your core or online banking vendor! UI and UX are key to you brand experience. If your credit union had an ugly logo would you just keep using it? Heck no. You would get a killer brand designer and level up that logo. Yet our UI and UX are often outdated, unengaging, and counterintuitive. They don’t represent what you want your credit union to represent. 5 things to avoid include:  

• Uninspired or inconvenient login and home screens;
• Difficult navigation, such as with hamburger and bloated menus;
• Slow loading screens and the “spinning wheel of death”;
• Lack of personalization throughout the app; and
• Products developed exclusively by engineers without help form designers.

  For more tips on how to improve your mobile banking experience, we highly recommend talking to the credit union UI/UX experts at BankingON! Digital customer service tools help credit unions connect with and serve their members. Check out Glia and Boomtown for some cool ways to improve the member experience and drive engagement while simplifying complex issues for them. Online banking is the first and most basic form of digital banking. This is, in no uncertain terms, a must-have. Mobile banking is currently the most common way consumers bank today—and that trend is still increasing. In so many ways, your mobile banking app is the front door to your credit union. The branch is an increasingly distant second.  

8.    Digital Identity

After focusing on this one for more than 8 years, here’s my conclusion: Credit unions mostly experience fraud from new members. So, rather than building an ecosystem to reduce the friction and labor of authentication for all members, they lock up new members in digital hell for 90 days and then slowly remove the cuffs. In the process they boot out the fraudsters and then torture the good members with more passwords, passcodes, identify questions, pass phrases, and multi-factor solutions. I’m tired of this fight, but I’m still putting it out here: It’s simpler than passwords and other remote verification solutions, and it’s much faster. No more bothering your members. We recommend looking at MemberPass™ from Bonifii, which is already gaining broad industry adoption.  

9.    Other

Other key strategies that you shouldn’t forget about include, analytics, core systems, branch transformation, and more. I’m sure there are some gems here… but the stuff that moves the needle is above!  

Final Thoughts

So, now that we are emerging into a post-covid world, it’s probably time to revisit this list. Executive teams and boards in particular must start talking (out loud) about each of these technology trends and how they may impact your credit union.

• How has Covid-19 affected your credit union’s needs?
• How has it affected your members’ needs?
• What problems do you need to solve?
• Can any of them be solved by following one of these trends?
• How might each trend change your members’ perceptions and/or expectations?
• What should your credit union invest in first?

Maybe some of these should go onto the CU 2.0 list of credit union strategic planning topics…