John San Filippo
Industry Leaders Forum: Technology and Inclusivity, Pt 1
By John San Filippo
Finopotamus has assembled a panel of experts in a recurring series, The Industry Leaders Forum (ILF). Each month, we’ll ask the panel a broad technology question and share their informative responses. Respondents are presented in alphabetical order by last name.
Part 1 includes responses from:
Baron Conway, Senior Vice President & Head of Client Relations, CuneXus
For April 2023, Finopotamus asked the ILF panel:
Credit unions have always been committed to inclusivity. How can modern technology be used to strengthen that commitment?
NCR's Doug Brown
According to Findex, roughly 1.7 billion adults are unbanked. Startups, fintechs and traditional institutions alike are creating solutions to help this group; better serving the unbanked is increasingly becoming an industry wide initiative.
Credit unions in particular are uniquely positioned to be strong advocates for the underserved and effectively drive how the financial services industry can better foster financial inclusion. However, they must act fast, responding to critical technology trends and prioritizing financial inclusion initiatives.
According to the World Bank, lower income consumers tend to have a mobile connection rather than home-based Internet. Credit unions should encourage members to take advantage of this connectivity by creating a simple, convenient mobile experience with key functionality. Incentivizing mobile banking and designing experiences that appeal to the underbanked will reduce exclusion. Credit unions should also be analyzing their data to better understand their members and cater to their unique needs.
ATMs and ITMs are transforming into digital financial services outposts for regions without robust banking sectors. They act as a new type of branch that is more accessible and lower in cost, directly addressing one of the key issues with the unbanked – transportation to a credit union itself.
Additionally, AI can be used to create a more inclusive approach to determining creditworthiness. For instance, if someone lacks credit history because they have not had a bank account, AI can access alternative data on which to base decisions. Certain forms of AI can access over 1,000 different indicators to determine how likely a member is to pay a loan back. AI will allow credit unions to identify new ways to deliver greater access to financial products besides traditional credit scores.
Through offering convenient, personalized digital banking experiences and increasing the use of AI, credit unions can expand their ‘people helping people’ philosophy, increasing access to financial support for those in need.
CuneXus’ Baron Conway
As with almost every aspect of a credit union’s business, the smart application of technology and data can be transformative in how they can embrace and lead the way in inclusivity. Here are three core areas of opportunity where technology can make a difference:
Digitization, self-service capabilities, and workforce technology. When it comes to managing finances, opening accounts or applying for loans, many people are unable to, or uncomfortable with, walk into a branch or speak to a customer service representative. Some may be too busy during working hours while others might have language concerns or value their anonymity. This is where digital and self-service options come to the rescue, offering new ways for members and prospects to engage with their credit union. The ability to receive pre-approved offers, apply for loans, open accounts, and manage finances through digital channels, available on mobile devices or desktops 24/7, shifts the power and control in the hands of the members and prospects, providing accessibility on their terms.
Data and artificial intelligence/machine learning (AI/ML). While the Equal Credit Opportunity Act requires lenders to protect applicants from discrimination in any aspect of a credit transaction, traditional methods based on bureau credit scores have various limitations. To counteract bias, recent advances in modeling techniques - enabled through artificial intelligence (AI) and machine learning (ML)-based systems - are increasingly being designed from the ground up with anti-bias or de-bias algorithms, leading to less bias-based decisions in credit transactions.
Literacy and education Providing online tools to help members and prospects understand their finances - including how to save, how to borrow and how to manage money - shows credit unions’ commitment to engaging all their members and improving their financial health. This is about more than having a section on the website dedicated to financial education content and video; it’s about providing tools that enable members to have better visibility into their financial life, for example credit or fraud monitoring capabilities.
These areas, individually and especially when combined, can help transform a credit union's approach to inclusivity in ways that benefit both the member and the institution.
Apiture’s Chris Cox
The ability for credit unions to effectively serve a wide range of consumers, including those in underserved or marginalized communities, has never been greater. Historically, individuals with limited geographic access to branches have been challenged to access basic financial services, credit, and loans. Today, with 85% of American adults using smartphones, digital banking has truly helped level the playing field. Credit unions can reach individuals regardless of geography and socioeconomic status with tailored banking solutions that deliver services once available only in physical branches.
Beyond basic banking services, financial health tools are also available directly within digital banking solutions to help consumers better manage money and improve their financial acumen, a key component of financial inclusion. Budgeting tools, for example, can provide members with a holistic view of their finances through spending insights and intelligent auto-categorization, along with a view of their spendable balance that considers pending transactions and upcoming bills. In addition, credit unions can provide credit score reporting and simulation tools that help members better understand the impact of various actions, such as taking out a loan or paying off a credit card balance.
Credit unions can also leverage today’s technology to strengthen their commitment to a particular community by customizing the member experience for a specific group. Likewise, marketing campaigns, products, and programs can be created to reach and support a given community, including low-income families or those with credit challenges. Newer data intelligence tools are available to support these efforts, providing a way for credit unions to effectively segment audiences to deliver the right product or service at the right time.
When it comes to financial inclusion, credit unions can take advantage of today’s technology to better serve all populations with financial services that are available anywhere, at any time. Digital banking solutions are no longer one size fits all, and a modern, fully featured solution with robust data analytics capabilities can help credit unions better support previously underserved communities.
Glia's John Fernandez
Providing service to all members, across every generation, has become increasingly challenging. While Gen Z and Millennials typically favor digital-first channels, such as chat and video, some Gen Xers and many Boomers are still more comfortable with traditional phone support. To be as inclusive as possible and accommodate generational preferences, many credit unions try to provide a mix of digital and phone service options. More often than not, they accomplish this through a mix of technologies, which on the surface seems to satisfy the need. Below the surface, managing multiple interaction systems creates operational complexity and silos that trap members in one channel or another.
Credit unions are better served (and better able to serve) by a single member interaction platform that can support phone and digital channels, as well as automated self-service. This holistic approach ensures seamless interactions across all channels and allows members to leverage digital-first tools at their own pace. The digital ‘generational’ divide is not static. Research continues to show that older generations are increasingly embracing new technologies, particularly for self service. Credit unions can foster inclusivity (and not just for generational diversity) and improve overall satisfaction by easily enabling not only a choice of channel, but the ability to fluidly transition to others as needed for an optimal member experience.
ASA Technologies’ Landon Glenn
Although there are rules set in place to help those who might otherwise be excluded with lending and access to credit, nothing currently exists on the technology side of banking. Apps that support the minority have never been widely launched because of the time and cost required to implement such solutions. Because of the resource restraints, it has historically only been possible for credit unions to adopt solutions that fit the majority of members’ needs.
However, credit unions are eager to find a way to enable simpler, more flexible access to a wide range of financial tools and options that meet the niche needs of each individual. Time, cost and risk barriers have to be eliminated in order to meaningfully increase inclusion.
An increasing number of credit unions are closing this gap by leveraging collaborative banking, a new form of open banking which includes embedding an app store of fintechs into the mobile banking experience via digital rails, allowing members to select and instantly access the technology that best suits their financial situation. The platform effect makes inclusivity possible; it becomes realistic for someone to build an app that benefits one percent of accounts holders because that app now has an avenue to more easily reach account holders across many institutions. Suddenly, it makes financial sense to build and launch these solutions.
Collaborative banking is working to unlock a new type of inclusion where any marginalized or underserved group can gain access to tools and solutions, helping provide equal opportunities through their local credit union.
Prodigy’s Amber Harsin
Credit unions have long advocated and practiced their commitment to inclusivity, offering financial services to individuals and communities that have historically been underserved or intentionally excluded by traditional banks. Modern technology plays a crucial role in pushing credit unions’ commitment further, allowing them to expand their reach and better serve all members.
Leveraging digital platforms and online services, credit unions can offer online banking, mobile apps, and other digital services to make it easier for members to access and manage their accounts, giving them a sense of control in times of uncertainty. This is particularly helpful for individuals who may have limited access to physical branches because they’re in rural areas, have mobility issues or have anxiety about interacting with people in person, especially over an issue as sensitive as their finances. Using a cloud-based core system that allows any of the fintech partners for services your members need and want is key to ensuring and optimal member experience with minimal downtime.
Technology also supports inclusivity through accessible, easy-to-read data analytics and personalized services. Analyzing member data for behavior patterns helps credit unions better understand the unique needs of their members and tailor services to those specific needs. Actionable data analytics from your core can be especially beneficial and cost effective when serving underserved communities; credit unions can use data to identify gaps in service – their own or others’, as in identifying banking deserts – and create targeted programs to support niche underserved communities efficiently and effectively.
In addition, technology can be used to support financial empowerment efforts, which is a key component of inclusivity. Credit unions can offer online courses, webinars, target market in-person educational sessions, and other resources to help members learn about financial management and planning, as well as how to access and use your credit union’s services. With only a small minority of young adults being required to complete a financial education course to graduate high school, the need is a large one that aligns with credit unions’ values and reveals credit unions as pillars of their communities.
Building the right technology partnerships with modern providers offers credit unions a multitude of opportunities to strengthen their commitment to inclusivity. By using digital platforms, insightful data analytics for personalized services becomes a reality, helping credit unions expand their reach, improve financial stability, and better serve the diverse needs of their members and communities.