Credit unions have always been a popular alternative to traditional banks. Credit unions offer a local, personal touch that inspires trust and fosters community — something many consumers are hungry for in an age of megabanks and mergers.

But that doesn’t mean consumers are ready to sacrifice the conveniences of larger banks. On the contrary, most customers want the best of both worlds. Credit unions are positioned to win new members, but if they want to keep them, they must face their own unique challenges in this fast-evolving digital landscape.

Here are the top 10 challenges credit unions are navigating in order to keep up, and stay both relevant and competitive.

1. Digital & AI Transformation

Digital banking is table stakes in banking. Period. Credit union members expect similar seamless online banking experiences to what they would get with a big bank — including mobile apps, 24/7 service, digital transaction processing, and AI. Adapting to these demands can be a culture shock for a small credit union, requiring key investments in technology and training. With recent advancements made in the widespread availability of AI, credit unions must contend with incorporating generative and conversational AI to automate customer service, increase sales and conversions, streamline omnichannel member experience, and reduce call center workload.  

2. Regulatory Compliance

The financial sector is one of the most heavily regulated industries, and that’s as true for a credit union as a big bank. Staying compliant with ever-changing local, federal, and sometimes international regulations requires resources, good data, and ongoing training. 

3. Cybersecurity Threats

Credit unions are no more immune to crime than the big banks — and with a smaller IT bench they may present a tastier target. In fact, the NCUA has warned against an uptick, in 2023 of crimes such as ransomware, phishing, email scams, and distributed denial-of-service (DDoS) attacks. The rise of digital banking has brought an increased risk of these cyberattacks, so credit unions must be on top of cybersecurity measures to protect members’ sensitive data and maintain trust. 

4. Competing with Larger Banks and Fintechs

Larger banks have much deeper pockets than credit unions, and are able to invest significant resources in marketing, technology, and new product offerings. Similarly, Neobanks and Fintech often have low overhead and are highly agile and innovative. Credit unions, especially smaller ones, might find it more challenging to compete. 

5. Membership Growth & Awareness

While credit unions offer many advantages over traditional banks, many potential members remain unaware of these benefits. In fact, many people are unaware they are even eligible to join a credit union at all. Credit unions must focus on targeted marketing and education efforts if they want to win new members.

6. Aging Membership

A significant portion of credit union members belong to older generations. In fact, according to American Banker, the industry has struggled to move the average age of its members below 47 for decades. Engaging younger members and tailoring services to their preferences — and higher standards for digital transformation — will be essential for long-term sustainability. 

7. Talent Acquisition and Retention

Credit unions are no more immune to the talent squeeze than anyone else. To stay staffed, they need to attract tech-savvy talent and ensure they provide an environment where employees feel valued and can grow

8. Expanding Services

Credit union members expect a wide range of services from their financial institutions and may be looking to consolidate different kinds of financial needs with one institution. From specialized loans to insurance to investment advice, credit unions should consider diversifying and expanding their offerings to meet these expectations. 

9. Technological Integration

Using technology solutions, like conversational AI and knowledge bases, can vastly improve member experiences. However, integrating these solutions with existing infrastructures can be a significant hurdle, and credit unions can rarely afford to build vs. buy. Credit unions should look to vendors and partners who can accommodate a large array of third-party integrations, and preferably, in a no- or low-code environment.  

10. Navigating Economic Uncertainties

Economic downturns, inflation, interest rate fluctuations, and global political and climate events have all been impacting credit union operations as much as the bigger regional and national banks. Having a resilient strategy and contingency plans in place is essential for resilience and sustainability. 

But make no mistake: despite the hurdles, the future is bright for credit unions that can adapt, innovate, and remain member-focused. By leveraging technology to enhance member experiences, streamline operations, and tackle issues head-on, credit unions can not only navigate these challenges but also thrive as an alternative to the bigger banks. 

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To address these challenges and ensure member engagement and experience, credit unions must: 

  • Continuously listen to and understand member needs and preferences — and lean into the bespoke services that sparked their creation. 
  • Beat FinTech competitors at their own game by leveraging software partners — like Engageware — to better scale member experience and member service. 
  • Invest in training and development for staff, ensuring that the human touch remains the competitive advantage it has always been — even when doing more with less. 
  • Remain agile, constantly evaluating and adjusting their strategies in response to the evolving financial landscape. 

Modern platforms powered by conversational and generative AI can aid in many of these areas, offering seamless experiences, automating customer service, and reducing operational workload—all while drawing from a unified knowledge base that serves both members and employees.  

Engageware is such a solution. We offer mid-sized banks and credit unions the ability to provide a top-notch customer experience at scale, without breaking the proverbial bank. Our platform, powered by conversational and generative AI, not only ensures seamless experiences for members but also automates customer service functions, drastically reducing operational workload. With Engageware, credit unions can tap into a unified knowledge base that serves both members and internal teams, ensuring everyone is on the same page. 

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