The right partners can help credit unions compete, prevent fraud and field the right technology for providing the kind of service today’s members demand.
Credit unions have all kinds of problems to solve. They must figure out how to protect their reputations by safeguarding member and organizational data. They must find ways to compete with a whole host of financial industry players for consumers’ business. They must find the delicate balance of being conservative enough to stay solvent in this tenuous economy, while still having the right mindset for taking the risks required to get the tech they need to serve members.
Fortunately, CUs don’t have to go it alone. Fintechs and other industry vendors can be among credit unions’ allies in solving such key problems as how to:
1. Prevent Fraud
The need for stronger fraud management has never been more apparent than during the COVID-19 pandemic, when the number of card-not-present transactions accelerated.
“In the past, organizations detected fraud by analyzing activity on each platform using tools that were not connected,” explains Jack Lynch, SVP/chief risk officer/president of CU recovery at CUESolutions Bronze provider PSCU, St. Petersburg, Florida. “While this method worked, it can’t compete with the latest wave of fraudsters skilled at utilizing multiple channels to execute sophisticated fraud schemes. Many older fraud detection systems managed to prevent fraudsters from making final cash-outs but were unable to stop fraudsters in the first place.”
New technologies shaped by fintech can assist credit unions in this fight.
For example, PSCU’s Linked Analysis takes a proprietary approach to intercept and predict fraud through the combined use of artificial intelligence, anomaly analysis, phone printing technology, data analytics and human intelligence. Related events are monitored across numerous channels to predict fraud before it happens. By analyzing data holistically, across multiple channels, malicious patterns of fraud are identified and intercepted.
“Fintechs offering members safety and security will be critical to the future, and authentication of members before transacting across any channel will be a focus,” Lynch continues. “Leveraging AI to create a better member authentication experience in the future will also be an important component in reducing fraud. The concept of digital identities using decentralized authentication technologies such as blockchain will also play a role in creating this experience.”
Scalability and reach can help differentiate fraud prevention solutions.
With Linked Analysis, for example, PSCU’s fraud intelligence team can analyze data at scale across multiple channels and create alerts about events either before or as they are happening. The company’s aggregate client data related to a fraudulent event is combined with metadata from third-party sources. Intelligence is also gathered from a variety of sources, including 1,500 PSCU owner credit unions.
“While we were previously aware of the channels being attacked, we did not know to what degree fraudsters were operating across multiple channels and credit unions,” concludes Lynch. “In many cases, there were no instances of fraud being reported as the fraudulent transactions appeared to be ‘good members’ conducting routine transactions.”
2. Compete With the Big Banks
It can be very tricky for even a large credit union to compete with the major bank down the street. “But securing a provider like FIS can help credit unions obtain the exact tech as the big banks but at a much quicker rate,” says Bill Hampton, division executive for CUES Supplier member FIS, Jacksonville, Florida. “This allows smaller, community credit unions to not only compete but win against bigger banks by delivering a more personalized member experience.”
The key is understanding the member experience holistically rather than through individual product silos and then solving problems through that holistic lens.
“For example,” Hampton explains, “consider what happens when a member loses a debit card in today’s COVID environment. We could instruct the member to go to a branch to receive a new card via instant issue, but they may not want to go into a branch. So, we solve that by digitally issuing a new card in their wallet in real-time that can immediately be used.”
Hampton notes there have been both positive and negative outcomes during the digital journey. “Most credit unions, for example, have several digital solutions acquired over the years,” he says. “However, the current pandemic made clear these digital assets weren’t knitted together to maximize their potential. The result is credit unions rethinking their digital strategies and investments. That’s where the open, flexible architecture of APIs (application programming interfaces) is imperative.” That use of open APIs—sometimes called “open banking”—enables third-party developers to build applications and services around the financial institution.
Historically, CUs have focused on providing fantastic face-to-face service as a way to compete with the potentially less personal service of big banks. Due to the pandemic, face-to-face service is not as good an option as it was in the past.
“Credit unions need to make the technological shift now, so the same member experience occurs, regardless if it is via phone, app or website,” Hampton emphasizes. “These moments of truth are a critical juncture and must be solved in the channel the member prefers. Varying automation tools can be evaluated to accommodate this shift, while value propositions need to reach beyond the branch into all digital member interactions.”
3. Provide a Better Digital Experience
With demand for digital banking tools at an all-time high in light of the pandemic, credit union leaders are looking for the best tools and approaches to provide the superior, personalized experience their members have come to expect and appreciate.
“One of these digital tools, artificial intelligence, enables the credit union to provide a more personalized and intuitive experience, especially in the area of payments,” notes Fran Duggan, CEO of CUES Supplier member Payrailz, Glastonbury, Connecticut. “AI learns the member’s patterns and habits to begin managing tasks, such as bill-pay, and shares recommendations concerning credit union products that may benefit the member, or areas where the member can find additional savings within their own accounts.”
Depending on the nature of a payment, whether it is a utility bill or P2P, a smart-driven digital payments solution can use its learned understanding and the member’s transactional behavior to discern how the payment should be best executed. “Our solution is unique in that it manages this via a smart router, creating an experience that is both proactive and intuitive for the member,” Duggan explains.
Critical to the efficient use of AI and building a better member experience is the speed in which transactions are processed.
“Members are better able to manage their finances with greater visibility into the transaction process, specifically when it comes to quickly processing transactions,” adds Duggan. “For AI to serve its role, transactions must clear in near real-time. This makes it possible for the member to have an accurate view into their finances and gives AI the ability to provide recommendations based on what is occurring in the account.”
“We’ve seen the rise of digital for some time now,” Duggan continues. “We can look to other industries, like retail, and see consumers opting for digital channels because these channels utilize tools such as AI to provide a ‘do-it-for-me’ experience. Certainly, the pandemic accelerated the adoption of digital channels in a compressed timeframe, but many can agree we were bound to reach this point.”
Moving forward, Duggan says, credit unions must remain agile and think innovatively to build on the systems they have in place. “Technology will continue to change and adapt. Members will continue to seek out experiences that remove much of the manual work when it comes to finances—because when it comes to payments, it’s the experience provided that matters.”
4. Be Nimble With New Tech
Member expectations are rapidly changing, and credit unions must find ways to compete and move quickly and efficiently with technology. Amber Harsin, CEO of CUES Supplier member Prodigy, a Salt Lake City-based fintech supporting credit unions with core processing technology, reflects that banking used to be something you first did at a branch—and later from your computer.
“Now, members expect to do their banking at any time and in any place,” she says. “What’s more, they expect to be able to perform sophisticated transactions, such as signing loan documents and opening accounts, not just inquiries or transfers.”
CUs must be as nimble as possible to remain relevant—both in organizational structure and with technology.
“Administratively, this includes reviewing policy and procedure and actively removing noncritical roadblocks that create friction to the member experience,” Harsin explains. “It’s also about positioning APIs to extend your core services and technologies as you see fit on the technology side. These empower credit unions to remain relevant and be responsive, even in the face of so many new challenges.”
Traditionally, CUs have had to choose between expensive, hardware-intensive in-house data processing systems or overly simple, expensive service bureau systems. Either way, these systems were not designed to adapt in today’s fast-paced environment.
“Today, virtually all financial technology is gravitating to the cloud,” Harsin adds. “Prodigy keeps credit unions agile and relevant by providing core processing systems designed from the ground up for cloud delivery. This adds the power and flexibility of an in-house system while maintaining the ‘hands-off-the-hardware’ simplicity of a service bureau system.”
Modern, API-driven architecture also gives the ability to seamlessly integrate other third-party solutions—including increasingly popular cloud-based solutions, which can assist speed of transacting and availability despite what is happening locally.
“Having that confidence and ability to deploy today’s solutions, as well as tomorrow’s, are what this nimbleness is all about,” Harsin continues. “It’s the agility to add key pieces that haven’t even been thought of yet.
“When we first developed our cloud-based system, we were literally at the forefront of data processing technology. We were confident that APIs and the cloud were the future, but at the time, about 10 years ago, the jury was still out. We took a calculated risk, and our foresight has paid off.”
All consumer-facing technology—whether it’s Amazon, Google, Apple or the credit union down the street—must focus on making people’s lives simpler. “Advanced technologies like artificial intelligence (AI) will gain a stronger foothold in the financial services space, and savvy credit unions will offer assistive technology, not reactive. This technology will make members’ lives simpler, the secret to staying relevant today.”
5. Fight Analysis Paralysis
Analysis paralysis can occur when a technology decision becomes overwhelming and a CU’s leaders feel incapable of moving forward with a decision.
“It happens to financial institutions of any size, and it can boil down to being deluged with information but unable to determine unique needs and business challenges,” says Jennifer Addabbo, co-founder and partner of CU Engage, St. Petersburg, Florida. “Our team can help credit unions navigate the evaluation process, ask the right questions, secure the right vendors, and ultimately negotiate the right contract and pricing conditions.”
Done wrong, the process can be tedious and manual, which frequently leads to analysis paralysis. Done right, it deciphers the CU’s specific needs and asks the right questions for a more compelling analysis of the options available. Addabbo thinks it’s essential to analyze and structure the data elements to create an analysis for the review of credit union leaders and members of the operations and members services teams.
“Vendor discussions also occur in a more meaningful way,” continues Addabbo. “For example, we ensure vendor demos cater to the specific requirements and use cases of each credit union, collaborate as a project team, and analyze the key differentiators. Then, that data is used to make vendor decisions more objective.”
Addabbo adds that the process enables separating vendors and focusing on what is most important to members. “This can sometimes be lost in the analysis of an RFP (request for proposal), thus fostering the feelings of paralysis. What’s needed are more table-stakes responses from vendors and to help guide the credit union to the right decision that provides the best member experience at the best value.”
Credit unions are also extremely collaborative.
“Why not leverage that collaborative spirit? We find it invaluable, incorporating sentiments from other clients to the process,” notes Addabbo. Consider the example of a credit union choosing Visa versus Mastercard or bringing credit card processing in-house or outsourcing. “What are the cost differences and the talent or FTEs required, for example? What problems or challenges should the credit union prepare for in the future? We can connect credit unions with their peers, helping them to learn through their experiences. And being completely agnostic from any provider allows us to guide them to the right solution.”
According to statistics cited in an article on spendmenot.com, fintech firms are used by 50% of all banking customers. So, it’s not surprising that 82% of traditional financial companies plan to increase collaboration with fintechs in the next three to five years.
Indeed, these are challenging, triple-crisis times as credit unions grapple with a pandemic, the resulting uncertainty in the economy and social unrest related to injustice. It’s a great time to have all the problem-solving allies they can get. cues icon
Stephanie Schwenn Sebring established and managed the marketing departments for three CUs and served in mentorship roles before launching her business. As owner of Fab Prose & Professional Writing, she assists credit unions, industry suppliers and any company wanting great content and a clear brand voice. Follow her on Twitter @fabprose.