There’s good and bad news for credit unions. After five years of decline, member satisfaction rose to an ACSI score of 77 in 2024 — but that’s still 10 points lower than it was in 2011. The average annual attrition rate for credit unions is 12%, and research shows that credit union members are more likely than bank customers to switch financial institutions.
The most common reasons members leave credit unions are related to convenience:
Meanwhile, recent rate cuts by The Fed have created fierce competition, especially for members with student loan debt, as credit unions are now actively targeting other credit unions’ members. Can you keep them and acquire new members just like them? Well… it depends.
Simpler Lending Leads to Happier Members
Between mid 2023 and mid 2024, U.S. credit unions added 3.3 million members. As of Q2 2024, members had $2.23 trillion worth of assets in federally insured credit unions, which is 3.7% more than the year before. Credit union loan growth is expected to double in 2025, rising to 6%. The demand is certainly there. Convincing consumers to stick with your credit union, however, requires a fresh look at your loan origination strategy.
“Simple is the new loyalty” is how a top leader at our partner Velera explained it. Simple digital experiences have become the norm in all facets of life, and eCommerce in particular has set a high bar. With one tap of a finger or one command to our Alexa, we can make a purchase and have it delivered right to our doorstep. Of course consumers crave the same convenience from their credit union — the idea of waiting days or weeks for a loan feels antiquated.
According to our exclusive research report, The State of Digital Lending Readiness, 75% of mid-sized community banks, regional banks and credit unions rate their digital lending readiness as “very good” or “excellent.” However, only 28% can fulfill loans to both consumers and SMBs within the same day. Just 7% of them can fulfill consumer loans within minutes, while only 2.4% can do so for SMBs. For 74% of these financial institutions,, SMB loan fulfillment takes two or more days.
The culprit? A legacy loan origination system (LOS). These outdated systems slow down loan approvals, provide inconsistent member experiences, and create obstacles for both staff and applicants. Until credit unions modernize, they will struggle to attract and retain members.
The Roadmap to a Modern Loan Origination Process
Modernization doesn’t have to be daunting. The recipe for simplicity consists of three ingredients:
1. Automated decisioningManual decisioning isn’t necessary anymore thanks to advanced (responsible!) AI. AI solutions can instantly evaluate creditworthiness, assess risk, and identify fraud. Even better, AI won’t make innocent mistakes that humans sometimes do. As a result, a decisioning process that once took weeks can happen in mere minutes.
Hesitant to let AI do all the heavy lifting? It can also alert your team to potential red flags for a manual human review. That way, applicants with better creditworthiness can go into an AI-powered express lane, and those that need a closer look can get it faster than they would in a manual workflow.
Automating your decisioning will increase employee efficiency by freeing up your staff to focus on more strategic initiatives. It will also reduce delinquencies — which have been growing over the past year. Financial institutions that rely more on a digital lending platform have a delinquency rate of 1.2%. Financial institutions that rely less on a digital lending platform have a delinquency rate almost double that (2.1%). The end result? You’re in prime position to make faster, more informed lending decisions in a highly competitive market.
2. Digital documentationRequiring physical documents frustrates members and brings the application process to a screeching halt. Advanced AI can verify documents digitally, in seconds. If there’s an issue, the AI solution can ask for additional verification steps — like a selfie with a driver’s license, for example — and alert your team to any red flags.
Afraid of cyber attacks and data breaches? A data handling and management system, such as a File Transfer Protocol (FTP) site, can securely transfer documents for eligibility screening, onboarding, and reporting purposes.
3. Tailored loan offeringsJust like eCommerce companies personalize experience to increase the likelihood of a purchase, modern credit unions provide loan options that are best suited for each applicant.
Even better, an AI-powered LOS can take the applicant’s information, determine which additional products or services they might be interested in, and offer them up instantly. It’s a win-win — the member gets to apply for multiple offerings with one application, and the credit union gets an easy cross-sell opportunity.
Modernizing your loan origination process isn’t just about keeping up — it’s about leading the way in creating meaningful, lasting member relationships. By focusing on convenience, speed, and personalization, your credit union can turn every interaction into an opportunity to build trust and loyalty. The tools are available and the demand is clear. It’s time to move ahead of the pack.