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It's no secret these past 21 months have been filled with unthinkable challenges and new opportunities as credit unions and their members navigate a "new normal" together. As we begin 2022, credit unions need to rethink their business strategies to remain relevant and serve members in creative, digital, timely and more connected ways. How can credit unions ensure they're delivering a high-grade level of service? Through technology.
Each year, Jack Henry conducts an annual survey of its clients to better understand their top technology investments and priorities. This year, more than 130 financial institution CEOs participated, reflecting the strategic priorities for a wide range of community and regional banks and credit unions across the U.S. The results help identify major technology trends and opportunities across the space.
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The next two years will be critical in technology investments and developments; the wide majority (78%) of respondents reported plans to increase their investments in financial technology during that timeframe, with over 30% of respondents in the $1- to $5-billion asset range planning to increase investments by more than 10%. Many of these innovations and advancements are propelled, at least in part, to address new and emerging threats.
In the survey, respondents identified their top three concerns or threats for the next two years as net interest margin compression, fraud/security and failure to innovate. Financial institutions are facing overwhelming pressure to keep up with evolving technology trends and consumer demands, all while trying to compete with both fintechs and bigtech firms that are increasingly vying for market share. In response, credit unions are looking for ways to improve digital offerings, loan growth and enhance the member experience.
Taking Core to the Cloud
Cloud-based cores have caught the interest of many financial institutions, with an equal number of them in the "research/planning" stage as the "already deployed." While there's been a shift to private cloud environments, many still require education around its benefits, specifically how these cores already have built-in security features. Having this type of infrastructure will be key to supporting the next generation of digital banking.
Doubling Down on Digital
Because of the pandemic, researching, planning and ultimately investing in digital technologies like video banking and digital banking bot/virtual assistants has jumped to the top of financial institutions' lists. The next two years will be important in deploying these digital capabilities, specifically those that support personal financial management (PFM), consumer financial health and digital account opening. Credit unions will be looking for partners to support these capabilities, as well as offer education in areas like consumer financial health and its benefits.
Boosting Efficiencies With Lending
Many financial institutions are prioritizing digital end-to-end loan origination platforms and automated prequalification/loan approvals; 86% of institutions plan to implement a digital end-to-end loan origination platform by 2023 and 93% report to deploy portfolio management by 2023. Even though loan growth was reported as respondents' second-highest strategic priority, few are investing in modern, digital lending capabilities such as underwriting with alternative data sources and automation of both renewal management and exception tracking, representing significant opportunities for credit unions.
As the world continues to change, credit unions will need to be prepared to adapt and pivot when necessary. Financial institutions are increasing their technology spend in the next two years, which means the race toward enhancing these key capabilities are already in motion. Winning the race will be a matter of working closely with technology providers to learn and prioritize these capabilities to make an impact on their business and members.
Shanon McLachlan Shanon McLachlan is the vice president of Jack Henry, a SaaS provider primarily for the financial services industry, and president of Symitar, a division of Jack Henry based in Fargo, N.D.
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