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5 Common Challenges Faced by Credit Unions

5 Common Challenges Faced by Credit Union

5 Common Challenges Faced by Credit Unions

Most credit unions today face many of the same problems. This article outlines the 5 common challenges that credit union employees go through.  

The credit union industry has been experiencing some of its greatest challenges in recent years. The industry has been facing many challenges common to all financial institutions, but they have been exacerbated by the rapid changes in technology and business models.

There are many challenges that credit unions face. It's important to remember that these organizations face problems that aren't unique but rather in an era of increasing competition and dwindling membership. These challenges are a reflection of the changing financial services landscape, and these organizations need to address them to stay competitive.

Let's get started. 

5 Common Challenges Faced by Credit Unions

5 Common Credit Union Challenges 

With the rise of credit unions and their increasing use, there are several challenges that credit unions face as they try to ensure their members' safety, security, and privacy. 

As technology experts, we've identified the top five most common challenges faced by credit unions from a recent survey we conducted.  

Common Challenges Faced by Credit Unions

1. High volume of daily transactions & customer service requests 

Credit unions' biggest challenge is the high volume of daily transactions and customer service requests that come through the system. These are often referred to as "high-speed" transactions, including loan payments, deposits and withdrawals, loan extensions, and account inquiries. 

The problem is that this type of work doesn't scale well. Credit unions need to be able to handle a large number of transactions to provide excellent customer service. The more your members do it, the more they need to invest in technology, software, and hardware to support these systems. 

2. Human errors possibility 

Credit unions are subject to the same human errors and operational problems as other financial institutions. However, they also have a unique set of challenges that make them more susceptible to human error than other financial institutions and businesses in general. 

Credit unions are governed by a board of directors or officers who must manage the institution's day-to-day operations. While this may sound like a simple job, it can be quite complex due to the large number of employees that work for credit unions. 

When there is a problem that requires management attention, this can cause confusion between employees who are responsible for different tasks and systems within the organization. To avoid mistakes that could harm customer accounts or put the entire institution at risk, managers must communicate clearly with each employee about what needs to be done and how it should be done. Or take advantage of technologies like RPA to automate the end-to-end process. 

3. Regulations & Compliances 

The credit union industry is regulated by many federal and state agencies. Some of the major regulatory bodies include the National Credit Union Administration (NCUA), Federal Reserve Board, Office of Thrift Supervision, Federal Deposit Insurance Corporation (FDIC), and Consumer Financial Protection Bureau (CFPB). 

While each regulator has its specific set of regulations that must be followed, they all share common goals: to protect consumers while ensuring credit unions can continue providing financial services to their members. 

In addition to complying with regulatory requirements, credit unions must comply with local laws and regulations to meet their membership needs. This means that even if you live in a state with no specific laws regulating your particular type of credit union, your credit union must still comply with state regulations to remain fully operational as a member-owned cooperative. 

4. Legacy systems 

Credit unions face a number of challenges in the modernization of their systems. The first is the integration of legacy systems with new technologies. Of particular concern is integrating these systems with the Internet, which has become an integral part of credit union operations and dramatically changed how credit unions do business. 

Credit unions that have not yet fully implemented technology-based solutions will be forced to adopt them or risk losing members and revenue to their competitors who have developed more streamlined processes and customer service, models. Sometimes, it may not be possible to effectively integrate legacy systems into a modern technology platform without sacrificing member data or operational efficiencies. 

5. Manual, repetitive processes slows operations 

Credit unions often have manual processes that need to be updated regularly. This can cause delays in processing transactions and payments, which takes resources away from other areas of the credit union's operations. In addition, it can take longer for credit unions to process new applications than larger financial institutions with automated systems. 

Moreover, credit unions may not have the same level of technology and training as larger institutions in software development and employee talent management. As a result, they might not be able to keep up with changes in technology or industry standards as quickly as some larger financial institutions do. 

How can credit union technology solutions help solve these problems? 

Credit unions constantly battle to remain relevant, both in the minds of their members and in the eyes of regulators. To do so, they must maintain a strong brand identity, provide a first-class customer experience and provide an exceptional range of financial services. 

In addition, credit unions have to adapt to changing market conditions to stay competitive and survive. This is where technology solutions can help. 

Here are some technology solutions which help solve common credit union challenges: 

1. Robotic Process Automation Solutions 

Credit unions have a lot of manual processes, which are time-consuming, labor intensive, and costly. The best way to reduce these costs is to automate them using robotic process automation (RPA) technology 

Robotic process automation (RPA) is a digital enablement technology that predominantly leverages a combination of user interface (UI) and surface-level features to create scripts that automate routine, predictable data transcription work. 

Credit unions can use RPA to automate various processes, including: 

  • Mortgage origination 
  • Accounts receivable management 
  • Loan underwriting 
  • Client services, member services, and online banking 
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2. Data Science & Analytics Solutions

Data science is an interdisciplinary field that seeks to apply scientific thinking and techniques to data to solve real-world problems. Data scientists use statistical analysis and machine learning algorithms to create predictions based on data sets and then test those predictions on new data sets. They use programming languages like Python, R, and Java to write code that analyzes existing data sets or creates new ones from scratch. These can then be used for predictive analytics tools that help predict customer behavior or outcomes based on past behavior or outcomes. 

The use of data science and analytics helps credit unions improve their business strategies by providing insights into customer behavior and preferences. The technology offers a platform to analyze customer data, such as: 

  • Marketing campaigns performance 
  • Loan origination performance 
  • Portfolio performance analysis 
  • Risk predictions  

3. Superior Member Experience Solutions

Credit unions are businesses, and as with any business, they want their members to be happy. To that end, investing in technology solutions that make it easy for members to do what they want to do most is a game changer. 

Credit unions need to be able to connect with members in a way that is simple, easy to use, and frictionless. Member experience solutions help credit unions improve the user experience for both members and credit union employees. 

Innovative member experiences can help credit unions differentiate themselves from the competition and increase member retention rates. Credit unions can make their members feel like they're part of a team rather than just another number in the database. 

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4. Digital Quality Assurance Solutions

Digital quality assurance (DQA) is the process of monitoring an organization's digital channels to identify and resolve potential issues before they impact member experience.  

Digital quality assurance solutions are designed to help credit unions ensure their member experience and data are accurate, up-to-date, and secure. These solutions can help prevent:  

  • Fraud or identity theft 
  • Reduce internal costs 
  • Improve customer service by reducing the time it takes to resolve issues 
  • Automated testing of all digital channels 

5. Credit Underwriting Software

Credit underwriting software is designed to help credit unions manage their financial records and disbursements more efficiently than ever before. This means that it takes less time for staff members to complete tasks like issuing loans, managing budgets, approving applications, etc., which ultimately leads to better outcomes for both members and staff members alike! 

6. Enterprise Data Bus (EDB) Solution 

The Enterprise Data Bus (EDB) Solution is a cloud-based system that allows credit unions to connect disparate systems into one integrated platform. The EDB Solution helps credit unions achieve a single view of their business, which in turn leads to: 

  • Greater efficiency 
  • Improved customer service 
  • Enhanced risk management capabilities  

This new solution also enables credit unions to share information across the organization, resulting in better decision-making and greater business performance. 

Case Study

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Wrapping Up 

Banking in a credit union can come with many challenges, but technology is here to help. Technology services designed for credit unions can eliminate manual, repetitive processes and process transactions on demand. Through technology, your credit union can provide exceptional member experience, improve security and be prepared for the future. 

Empower your employees to handle customer service requests. Give them access to the right information faster. Take advantage of Zuci's credit union digital transformation solutions and technologies that can help you reduce operating costs and improve business processes. 

We are a credit union technology partner that can help you to achieve your goals through digital transformation solutions that empower you to create a better member experience and report data in an easy-to-understand dashboard. Talk to us and resolve your credit union challenges today.  

Janaha

Janaha Vivek

I write about fintech, data, and everything around it | Senior Marketing Specialist @ Zuci Systems.