Technology investments can elevate product and service delivery
Focus on three important initiatives.
Although it can be tempting to chase the next new shiny object—and there are always exciting new innovations to consider in the financial industry—credit unions should focus on technology investments that optimize the delivery of trusted products and services to members. With an increasingly competitive lending marketplace vying for consumer loyalty, focus on three important technology initiatives.
1. Be brilliant at the basics.
Before spending money on new technology, ensure you are making the most of what you already have. Confirm you have clean data and “one version of the truth” when it comes to reporting. If you ask three departments the same question, you should get the same answer. A good place to start is measuring your credit union’s current instant approval ratio and setting a goal for improvement.
The Origence Consulting team has worked with credit unions that have tremendous resources—smart people, well-capitalized, great market, strong brand awareness, and a robust loan decision engine—but 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.
Credit unions are known to average less than 30% automated decisions, while those automating 50% or more are much more likely to exceed their lending goals. 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.
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 you introduce a new product or service, make sure your core products and services are the best they can be. Look at your internal reporting, channel availability for members, how the products are structured, and whether your margins are optimal, especially in a rising-rate environment. That’s not to say you should delay launching new products or reduce your tech budget. Invest in new things, but make sure your institution also has a team dedicated to optimizing your existing systems and product offerings.
Once your foundation is firm and you’re ready to invest in something new, your focus should turn to the digital experience and machine learning.
2. Digital must extend from front to back.
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.
Often, large, well-marketed lenders sell their superior digital experience, but when moving from the front line to the back office, it can often be another story. Don’t make your digital experience smoke and mirrors; make sure it’s seamless from start to finish.
The most common place to start is in document processing. 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. If you invest in a tool that provides this service, it will not only improve your member experience. It also 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.
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. 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.
Customer data in your core banking and lending systems can be integrated into an advanced marketing automation platform, such as Origence’s CRM. This intelligence allows the marketing team to effectively leverage information your credit union already knows about members to automatically match them with meaningful marketing messages. This connects them with the right loan products and services for them.
Keep in mind back-office tech upgrades may require the use of APIs and cloud storage. Forget hardcoding—in three years this will be outdated. APIs and the cloud allow you to update and replace apps and other technology. Transitioning to those solutions will pay off well into the future, with a better experience for your members and employees.
3. Machine learning takes it all to the next level.
Machine learning will allow you to get the most value out of your efforts to leverage your data in your 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.
Credit unions that invest time and money into optimizing their existing systems, products, and services; further develop digital back offices; and utilize machine learning will have a great opportunity to improve both growth and income goals in 2020.
BRIAN HAMILTON is vice president of Innovation & Insights at Origence.
Hamilton has 27 years of experience with financial institutions, contact centers, and fintech start-ups. He has managed all facets of consumer lending operations and has led key initiatives in the development of groundbreaking online applications, remote delivery, custom scorecards, and loan origination systems. At Origence, he leads research efforts on emerging trends and product innovation, as well as their consulting services. Prior to his position with the company, Brian was vice president of lending at several of the largest credit unions in the United States; senior vice president at Placer Sierra Bancshares; and chief credit officer at BlueYield. Brian holds a Bachelor of Science in Management and an MBA in Digital Innovation and Information Systems from Pepperdine University.