The pandemic forced businesses around the world to shutter their doors, and sadly for many, they will never re-open. Among the businesses that were able to adapt and survive, many did so by turning to digital technologies to solve problems and conduct transactions that were traditionally done in-person. This has created a boom in technology that has implications for many different sectors of the business world and economy.

Lending has always been fundamental to the growth and sustainability of credit unions, and during such dire economic times, it’s become even more important. In the past, lending was conducted in-person at branches and was often time-consuming and complicated for members. But the world has changed and the old ways of doing things are changing with it. These days, members want quick and easy digital lending options, and CUs that fail to provide these services risk being left behind.

2020 has been an unprecedented year for businesses and financial institutions around the globe. Nearly everyone's bottom line has been affected by the pandemic, and credit unions, like all businesses, have had to be agile and adopt new practices in order to survive.

One area that has always been crucial for the profitability of credit unions (and now even more so) is lending. Credit unions that sustain profitable and healthy lending practices have a leg up on the competition and will be around for a while, and those that don’t, will run the risk of dying a slow death and ultimately weighing out their merger options. 

The goal of any credit union is to satisfy the needs and wants of its members. Since the pandemic reshaped the world and transformed how we do business, member habits and behaviors have been changing and changing fast. It should be no surprise that as people try to avoid contagion, in-person interactions have declined significantly, and folks have turned to digital solutions to meet their needs. This trend has huge implications for credit unions around the country.

There's no ignoring a new brand of competition making a "rocket" fast rise in popularity: digital lenders that provide an exclusively online loan experience. The Global Digital Lending Platform Market size is expected to reach $11.6 billion by 2025, and CUs would be remiss if they passed on the chance to grab a piece of that. One could argue that this could mean bad news for credit unions, who sometimes have more limited resources compared to the big banks or larger FIs. Fortunately, many CUs and their technology partners have been preparing and innovating for years making the digital playing field a familiar realm.

Six years ago, many credit unions were skeptical of electronic signatures. In 2013, about 10% of credit unions larger than $20 million in assets offered eSignatures and those with fewer assets adopted the platform at even lower rates. Today eSignatures are a coveted member benefit and those who predicted it would become an integral part of the digital lending process back in 2013… they were right!  At the time, eSignatures were fast growing, and in just one quarter eSignature integrations shot up 25%. Early adopters even found that pull-through rates on applications increased up to 20% as a result of eSignature options. If electronic signatures were providing results all the way back in 2013, then it should not come as a shock that the feature is even more important within digital lending processes today. Here’s why credit unions that have yet to implement eSigntaure options should take the leap this year.

Despite popular belief, digital lending has actually been around for quite some time. It began in the 1990s around the dot-com era with digital mortgage and consumer lending. While it wasn’t a popular solution back then, digital lending today has come full circle. Many financial institutions offer digital lending in some capacity. A recent survey by the ABA shows that digital lending could for 10% of all consumer and small business lending market by 2020. Despite this, there are many FIs that do not offer it, or they only offer digital options for part of the lending process. While those banks and credit unions have certainly gotten by without full digital lending, they are missing out on features and opportunities that it can provide. Here are 5 ways that digital lending can improve your credit unions lending process.

In 2015, just 7% of banking services were completed on digital platforms from start to finish. While the credit union industry has made great strides in the last few years, there is still a lack of digital options for members. This can be a huge deterrent for members especially when digital lending isn't offered. Some small credit unions might be under the impression that they won’t benefit from digital lending platforms due to the demographics of their membership or for budget constraint reasons. However, it has been proven to help many small CUs in crucial ways. Here are some questions small credit unions should keep in mind when considering digital lending platforms.

Many Baby Boomers are transitioning into retirement where their portfolio is shifting from wealth-building to waning assets. About 50% of credit union members are now 53 or older, and even though they will continue to rely on credit unions for their wealth management, CUs are in need of new members who are in their prime growth stages. Millennials and even some Generation Z-ers are now the target audience for credit unions as they are beginning to buy houses, cars, and paying for (or paying off) college. Millennial’s older sibling, Generation X, comprise 31% of the CU demographic largely due to the financial crisis in 2008 and 2009. They joined after becoming frustrated with big bank bailouts and stayed for personalized financial services. 10 years ago, Gen X fled to CUs, thus fulfilling their need for new, young members. However, Millennials and Gen Z will not be so easy to capture. Big banks have 10% more Millennial members than credit unions, and there’s one key way that CUs can win their business: digital self-service.

In addition to digital lending, another scalable technology has grown in popularity, especially in recent years. While credit unions both large and small were initially skeptical of automated decisioning, it is now being implemented at higher rates. The alternative to auto-decisioning, human review, was long-considered a more reliable form of decisioning by many credit unions. However, with increasing loan growth, credit unions have grown more comfortable with the idea of automation. The U.S lending portfolio has increased by 61.8% over the past five years, and last year, credit unions saw loan growth of 9.7%. Consumer loans are the fastest growing category, increasing 20.2% over the past year and 93.7% over the past five years. Due to this rapid growth in the consumer loan space, credit unions have been forced to reassess the efficiency of their lending process and many have taken the leap to adopt automated decisioning. For credit unions who are still on the fence, here are three factors to consider.