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How credit unions can use technology to foster financial inclusion

Oct 13, 2023
By: Jeremy Solsaa

Credit unions embody the spirit of “people helping people.” But to make financial services accessible to more people, they need to accelerate their digital transformations.

Around six million U.S. households were “underbanked” in 2021, according to an FDIC survey, meaning no one in the household had a checking or savings account with a financial institution. Researchers found several reasons why:

  • 22% couldn’t meet the minimum balance requirements
  • 13% of respondents avoided accounts due to privacy concerns
  • 8% distrust financial institutions

Without a financial institution they trust, these individuals rely on alternative (often unregulated) services to meet their banking needs. They’re more susceptible to predatory lenders, high interest rates and costly fees — which reinforce and perpetuate many of the reasons they avoid banks.

Credit unions, with their commitment to members and personal service, can help individuals overcome some of these barriers. By fostering financial inclusion, credit unions can:

  • Reduce inequality, bridge the wealth gap and enable economic participation for all.
  • Stimulate economic growth and create opportunities for entrepreneurship and investment.
  • Foster innovation and drive new, innovative financial products and services.
  • Enhance stability. A financially inclusive society is more resilient to economic shocks.

Credit unions can be a lifeline for individuals who need financial assistance.

Credit unions’ role in financial inclusion

There’s a pressing need to reimagine financial services to stay relevant. Inclusion needs to be a central part of the digital solution.

In a recent webinar, Charles Vice from the National Credit Union Administration said credit unions can do four things to improve financial inclusion. They can:  

  1. Make connections: Credit unions need to build strong relationships with potential accountholders and within the credit union community. Connections are vital to overcome communication barriers and solve problems collaboratively.
  2. Build trust: Trust is the foundation of any long and healthy relationship. Prospective accountholders need to have faith in the products, services and advice they are offered.
  3. Be transparent: Identification procedures play a pivotal role in whether a person pursues a banking relationship or not. Be clear about what’s required to open an account, why information is needed and how personal information will be used.
  4. Reach out: Right now, there are too many financial deserts where individuals are unbanked or lack credit history. Credit unions must find new ways to reach and serve these individuals.

Technology promotes financial inclusion

Technology is the driving force behind financial inclusion. Credit unions can make financial services available to every member, everywhere — with the right technology.

Many digital tools, like apps and mobile banking, are already available to help credit unions reach remote and underserved areas. Technology can also reduce transaction costs, which make services more affordable for members. Digital IDs and biometric authentication methods enhance security and privacy, without making accounts hard to access. And credit unions can put limitless resources and financial literacy tools online to empower members and help them make informed financial decisions.

In a span of four years (from 2017 to 2021), mobile banking usage jumped from 15% to 44%. During the same time frame, teller traffic declined about 10 percentage points. Banking customers are flocking to digital tools to manage their accounts and banking relationships.

Credit unions need to jump on these opportunities to enhance relationships and bring more members into the community. AI and digital tools can make credit union services more accessible and personal. For example, credit unions can use AI to explore alternative credit scoring methods, drawing from unconventional sources such as rent and other payments or to analyze cash flow patterns to tailor advice.

Start your journey

The financial services space is on an accelerated digital journey, in part because of the rapid rise of fintechs. Advancements in capabilities and customer experiences in other fields are pushing the edge of what’s possible (and expected) in finance.

Technology is revolutionizing the financial landscape and leading to innovative loan and investment products. And its giving individuals greater control over their personal data and online identities. For credit unions, these advancements hold the promise of a more inclusive, efficient and secure financial future.

How Wipfli can help

Not sure where to start your credit union’s digital transformation journey? Our experienced team can help you find high-value projects and easy wins to build momentum and reach new members. Together, we can find ways to serve more individuals and build healthier, more financially stable communities. Contact us to start your journey.

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Jeremy Solsaa