Credit Unions

What’s in David’s slingshot? AI is the stone that saves small credit union autonomy

Denise Wymore
March 21, 2023

Who is Goliath? The lack of access to affordable technology

The NCUA published its fourth-quarter merger report for 2022, revealing that only 35 mergers occurred during the quarter, the fewest of the year. However, throughout 2022, 181 credit unions merged, with 82 percent citing “expanded services” as their reason for merging. 

In terms of business lingo, the phrase 'expanded services' can mean plenty of things. What comes to mind as someone who's been in the industry for some time now is that it's most likely that one credit union had access to technology that the other didn't. Why is this the case, and what stops the credit union without technology from accessing it?

Digital transformation is essential for credit unions to remain competitive in today's market. However, the cost of technology — rather than a lack of awareness or inability to adopt — often hinders smaller credit unions from accessing the best available tools to improve their lending capabilities.

What do we lose when credit unions merge?

When smaller credit unions merge, either with larger credit unions or another small one, they can lose some uniqueness and ability to respond to a more niche group of members within their community. Through a merger, the region or population a small credit union serves expands, which in turn could alter the ability for a member to receive a loan from their institution when they would have before. Like in the case of David versus Goliath, bigger is not always better. When a small credit union grows from a merger, there's a possibility of losing sight of the unique distinctions of the members in our communities.

To ensure smaller credit unions can keep up with the continuous waves of technological advancement and continue to compete in the market, we must find ways to ensure technology is affordable, effective, and accessible. By doing so, we can help preserve the independence of smaller credit unions by providing them with the resources they need to serve their members in today’s digital world. 

What’s in David’s slingshot? The tech partner credit unions want and need

Larger credit unions have the luxury of prioritizing and investing in innovation, but smaller credit unions have similar needs and desires. It's often that they just can't afford the technology or support the effort of consolidating old practices with the new. A lack of automation in the decision-making process can put every credit union at a disadvantage in today’s fast-paced lending market. Members expect loan decisions in seconds rather than days. 

The good news is that digital transformation is becoming more accessible for smaller institutions, and there are tools that already exist — like Zest AI's automated underwriting technology — to help small credit unions boost efficiency and significantly improve their capacity to serve all of their members. 

So what does this mean?

Credit unions of all sizes, but now especially small ones, can implement AI-automated credit underwriting, remain competitive in today’s vast market, and serve their members effectively and more inclusively. 

By implementing Zest AI’s technology, small credit unions can increase the efficiency of their loan decision process by 60 percent. This automation power allows loan officers to focus on serving their members’ needs rather than getting bogged down with decisioning that can be done in seconds by technology. 

Ultimately, adding AI-automated underwriting technology to a credit union’s lending strategy will enhance the member experience and help credit unions to serve their communities better. For smaller credit unions, this means that they can invest in their organization and continue to serve members independently, no mergers required.

Zest AI loves credit unions, and we recognize that small credit unions are essential for serving local communities, offering fairer lending practices, driving community development, and preserving autonomy in the financial sector. Small credit unions are by no means the underdogs of this story. They play a vital role in providing personalized service and support to their members and are a critical part of the financial landscape. Zest AI is here to support every credit union, big and small, in their digital transformation journey.

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