The pandemic brought not only economic downturns and slowdowns, but also radical changes in consumer behavior. This is especially true as it pertains to banking preferences. There have been revolutionary advances regarding digital banking, and the consumer’s need for excellent service has never been higher. This is largely due to the remote/digitally interactive way many people have conducted business since the pandemic. Mega commercial banks are staying abreast of these trends and adapting their business and technological infrastructure. To capitalize on these post-pandemic opportunities, credit unions must rise to the challenge of meeting these demands by being more adaptive and innovative than ever before.
With the right credit union technology, this can be accomplished. The unending impact of the pandemic and changing consumer patterns are not the only concerns that lenders will have. In addition to the need to stay competitive in the financial sector is the critical demand to comply with regulatory standards that are ever-changing and increasing in scope. In 2021, there was a radical shift in the regulatory compliance landscape for credit unions. There have been an overwhelming number of regulatory changes, in addition to increased enforcement and more arduous audits. Here is a more in depth look at the primary regulatory-related trends credit unions must adapt to during these unprecedented times:
Keeping Current with Regulatory Change
It can be a lot to handle when lenders need to adhere to what the changing compliance factors are while maintaining the existing ones. On top of that, for fiscal years going into 2023, Current Expected Credit Loss or CECL standards will go into effect for mandatory compliance from credit unions.
Customers are also demanding to be able to invest in quality cryptocurrency. A recent study from Reuters shows that nearly half of all 2022 cryptocurrency owners from the United States, Latin America, and the Pacific bought their digital assets for the first time in 2021. These numbers will only continue to grow. That means credit unions have to figure out a way to offer these services to customers and follow the vacillating NCUA guidance for working with third parties on crypto goods and services.
Digitalization to Meet Regulatory Requirements and Deliver Proof of Compliance
The hot button issues being faced today and for the foreseeable future are compliance and reputational risks. Even though we are living in an increasingly digitalized world, many businesses (especially small ones) are still operating under manual processes.
But what happens when regulators show up, request hard copies of lending logs and they can’t be located? What do you do when excel crashes on a local hard drive and a year’s worth of compliance management labors are gone?
A minor glitch in technology can equate to a major loss of data. This is where regulatory compliance and digitalization meet. Changing regulatory requirements is an unmanageable task without digitalizing credit union processes and maintaining up to date host technology.
Because of regulatory change, having the proper management program in place is vital to a credit union’s success. Trying to keep up with the planned and unplanned is just not feasible anymore. Especially with risks being more complex than ever before.
Providing the security, clarity, and flexibility needed to meet both regulatory and member standards is no small feat. To accomplish this credit unions will need a digital risk management process that is both methodical and automated. There are many post-pandemic conversations being had regarding automation. These include the use AI for loan decisioning, and mechanical process automation through robotics.
Investment in automation is calculating and forward-thinking, but also comes with stipulations. Regulations have to be met and upheld. The best way for these items be managed is using a digital system. The same will pertain to self-service options via portals, apps, and other online tools and services.
An ERP system capable of tracking the regulation of digitalized lending services and payment options can help credit unions better prepare for audits. All while reducing the risk of fraud.
In addition to regulatory challenges, credit unions are currently encountering other obstacles. Loan default risk, inflation concerns, business resilience and adaptability, and climate-related financial risks are just a few of these. The financial services industry grows concurrently with globalized mega banks. This means credit unions that have a desire to thrive in the lending ecosystem will need to embrace these new technologies and services. This is imperative to ensure control of their regulatory and fiscal future.
Your Credit Union can address the post-pandemic world with the help of HSO and Microsoft
With solutions powered by the Microsoft platform, including
- A 360-degree view of customers and prospects
- Member management
- Pipeline management
- Engagement tracking
- Marketing automation
- Reporting and analytics