Mastering Lending Challenges: Strategies for Credit Union Success

In Jack Henry’s annual Strategy Benchmark study, financial institution CEOs were asked about their top three strategic priorities for the next two years.

Along with growing deposits and increasing efficiency, growing loans emerged as a top priority. Almost all financial institutions surveyed plan to enhance their lending solutions. Credit unions, in particular, are focused on automated workflows, data analytic dashboards, intelligent document processing, and AI-driven underwriting.

Embracing Change

If we learned anything from lending during the pandemic, it’s that lending must embrace change.

After COVID-19, the market underwent a dramatic shift, transitioning from a period of originating new loans to one characterized by higher interest rates, reduced tolerance for risk, heightened delinquency rates, tightened lending standards, and elevated provision for loan losses. Since the second quarter of 2022, credit unions have experienced a 31% decrease in lending. Due to economic uncertainties and potential credit challenges, credit unions need to focus on managing risk, recognizing evolving member expectations and technology advancements, and modernizing the lending platform to create a better borrower journey – all while keeping “time to money” top of mind to remain competitive.

The lending outlook for the second half of 2024 is expected to be sluggish, so use this time to reposition yourself for a more favorable lending market.

Three Ways to Differentiate from Competitors

• Embrace digitalization: Streamline your loan origination system with digital tools.
• Leverage automation: Use automation to enhance efficiency and accuracy in lending.
• Integrate data analytics: Combine open banking, alternative data, and analytics for a comprehensive lending approach.

These strategies can speed up your loan approval process, drive personalization and data insights, reduce risk, improve credit quality, and expand addressable markets, including SMB lending.

Now is the Time to Optimize

Consider moving to the increasingly open financial ecosystem, where 75% of financial institutions have already developed a strategy – with 43% of credit unions intending to leverage open banking for lending purposes.

Open banking can revolutionize your lending process by unlocking real-time member data and insights, fostering a member-centric lending experience enhanced by financial inclusion and a faster approval process. Think about leveraging these capabilities to automate working capital for small- to medium-sized business (SMB) loans of less than $100k to help capture relationships that lead to greater relationship primacy and the opportunity to gather more deposits. 

You can also explore the potential of integrating GenAI internally.

For lending teams, GenAI offers a world of possibilities, from analyzing vast amounts of data (especially with complex deals) to providing compliance guidance and personalized offers, assisting with fraud detection, and identifying anomalies. As GenAI evolves, it will further enhance the decision-making process, improve lending efficiencies, and allow your team to focus on growing member relationships.

Take the Time to Strategize

Leveraging open banking, data, and AI can help you streamline your lending process, mitigate risk, and win and retain members. Now is the time to stay agile and adapt strategies that will evolve with industry changes, regulatory shifts, and emerging technologies.

Download the 2024 Strategy Benchmark for insights you can use during strategic planning to better compete in 2024 and 2025.