5 Common Challenges Faced by Banks & Credit Unions

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

The banking and 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 banks and 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. 

1. High volume of daily transactions & customer service requests 

Banks and 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. Banks and 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 

Banks and 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. 

Banks and 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 banks and 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 banks and credit unions can continue providing financial services to their members. 

In addition to complying with regulatory requirements, banks and 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 

Banks and 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 banks and credit unions do business. 

Banks and 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 

Banks and 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 banks and credit unions to process new applications than larger financial institutions with automated systems. 

Moreover, banks and 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? 

Banks and 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, banks and 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 banking and credit union challenges: 

1. Robotic Process Automation Solutions 

Banks and 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. 

Banks and credit unions can use RPA to automate various processes, including: 

• Mortgage origination 
• Accounts receivable management 
• Loan underwriting 
• Client services, member services, and online banking