Top Challenges Credit Unions Face in 2024

Credit unions exist to elevate their communities and help those in the area make informed financial decisions. They put a more personal spin on banking and give members access to high-quality financial products and advice without relying on the same resources or funding that large multi-state banks have access to.

While these financial institutions benefit people from all walks of life, credit unions face unique challenges each year, many of which don’t affect larger banks. By understanding these challenges, these organizations will be better poised to overcome them. Here are the major challenges that successful credit unions have met and overcome this year.

1. Improving Information Security

Hackers are becoming a major problem for all financial institutions. These individuals can intercept sensitive information, scam credit union members out of their money or use data intercepted from the credit union’s systems to commit identity theft.

While most credit unions are working to enhance their website’s security and strengthen the security options available to their members when using their online banking platforms, the challenge remains. As technology improves, hackers become more determined and learn new techniques that force credit unions to stay vigilant and identify new ways to protect their members’ data.

How to Boost Security

Ultimately, it’s impossible to completely prevent hackers and information interception. But there are things that credit unions can do to protect their members’ information and data better in the local branch and online.

Credit unions will want to do the following to improve security efforts:

• Make sure security certificates are valid: Any website owned and operated by a credit union should have current security certificates. If any are expired, or the sites aren’t using those certificates, you’ll want to invest in a certificate from your hosting company.
• Perform routine audits: Work with your IT specialist to audit the security of the credit union’s systems. They will be able to identify any vulnerabilities and weaknesses that could put members’ information at risk.
• Encourage members to be cautious: Many security breaches are the fault of the members and account holders, not the credit union directly. Provide education on how members can protect their information and secure their data when visiting neighborhood branches or banking online.

These simple tips can go a long way toward helping credit unions of all sizes bolster their information security efforts.

2. Attracting New Members

One of the most difficult challenges that credit unions face is finding ways to attract new and younger members. Credit unions have long been viewed as a backbone in local communities, providing reliable services, great customer experiences, and financial products like loans and savings accounts to help their members make the most of their money.

As larger banks open more branches and make online banking easier and more accessible, encouraging new members to sign up is becoming more challenging and essential for business. Without new members, credit unions can’t grow, and many of the services they provide their communities will have to be scaled back or retired entirely.

How to Solve the Challenge

The key to attracting new members is finding out what motivates people in the community and tailoring the credit union’s marketing efforts and service offerings to those needs. Think about the communities you serve. If there are many younger families, offering loan products for first-time homebuyers could encourage them to open an account. Sponsoring local events and getting the credit union’s name in front of potential members can boost awareness and increase new member sign-ups.

Take a look at the types of products you’re offering as well. For younger individuals and families, the choice between a bank or credit union often comes down to which financial institution can provide them with the services they need at the lowest cost possible. Tailor your offerings to the needs of the community, and you’ll be better able to attract new members and show them the true credit union difference.

Keep in mind that you’ll also want to continue fostering relationships with your current members. Pay attention to their feedback and see what services or needs are not currently being met by the credit union. This can help you develop a strategic plan that increases engagement in the long term.

3. Embracing Digital Banking

With the rise of mobile browsing, more people are using those devices to perform tasks they used to take care of in person or on their computers. This includes banking, and while meeting the challenge of building a reliable digital banking platform is easy for larger banks, it can be difficult for credit unions.

Worse, many community members operate under the assumption that credit unions function in an old or outdated way. They may expect all business to be completed at a neighborhood branch rather than online. This can discourage new members from signing up and sending traffic directly to your competitors.

No matter how established the credit union is, going digital takes time and money. For smaller credit unions or those with struggling membership numbers, embracing digital banking can seem almost impossible.

How to Improve Digital Banking Experiences

You need to invest in the design and implementation of your digital banking platform as soon as possible. Partner with an experienced design team that can help your credit union’s message carry over into the digital space. Ask current members about the features they want to see available or the major issues they face when using your digital tools.

Use your members to your advantage. They’re the ones you’re building the systems for and can give you real-time feedback on what works, what doesn’t, and what’s lacking.

If you already have a great digital banking system, highlight it. Talk about it in your marketing materials, and make sure current members know how to use it so they can spread the word.

4. General Inflation and Rising Costs

Discuss how inflation can impact a credit union’s bottom line and thus their ability to meet the community’s needs.

There’s no denying that the current economy has wreaked havoc on many businesses’ operating budgets and credit unions are no exception. Rising costs for supplies, rent, utilities, insurance, and other core expenses have forced many credit unions to change their fee structures or make cuts where they can.

Unfortunately, those cuts come at a price — the ability to offer the same quality customer experience and services members have come to expect. Many credit unions are facing strict cost-cutting measures that make it more challenging to do what they do best.

How to Deal With Inflation

The best way to deal with inflation is to find ways to cut costs that won’t impact the customer experience. Shop around for partnerships with different suppliers. Invest in more energy-efficient lighting options. Repair broken or damaged equipment rather than replacing it. Even these small measures can help save your credit union money.

5. Planning for the Future of the Organization

Credit union members think about their future all the time. It’s why they open savings accounts and college funds for their children or take out loans to buy homes in the towns they love. But how much attention do the credit unions pay to their future? CEOs and members of the leadership team might be excellent at their jobs, but they will need to retire eventually or may want to move on to other opportunities.

This puts credit unions in a tough position with a changing leadership dynamic that may not be ready to handle the challenges the organization faces. Even minor disruptions can cause major repercussions for employee morale and member confidence in the organization.

How to Cope With an Unclear Future

The best thing credit unions can do for their organizations, their leadership team, and their members is to create a clear succession plan. Identify who should take over for each key leadership team member if something were to change. Use this chain of command if someone leaves the organization, retires, or is unable to fulfill their duties.

Once you have their duties covered, the organization can start looking for someone to take over more permanently. However, by having a plan in place, you can avoid many of the disruptions that other organizations deal with when trying to develop a succession plan. This can help preserve employee morale and keep members satisfied with their experience whenever they visit a local branch.

6. Increasingly Strict Compliance Standards

Every financial institution must adhere to at least some compliance standards. This governs how organizations can operate, ensure customer protection, and outline cybersecurity regulations and other guidelines to keep credit unions and their members safe. But those standards change yearly and can change more often should new threats or situations arise.

Keeping up with those changes and communicating them to the people who handle day-to-day operations can be difficult for credit unions. Unfortunately, any violation can lead to hefty fines that may seriously strain the credit union’s finances, damage its reputation, and make retaining and attracting members more difficult.

How to Manage Changing Compliance Standards

The easiest way to stay on top of compliance is to constantly monitor for regulation changes. If you notice anything being updated, take immediate steps to ensure your credit union is doing everything possible to fulfill those expectations. If you notice violations, deal with them immediately.

Communicate any changes to your team as soon as possible. The better prepared and more knowledgeable your team is, the easier it will be to ensure that everyone is doing their part to stay in compliance with current regulations.

7. Outdated Technology

National and even some multi-state banks have access to much larger budgets than credit unions. This often means that key pieces of technology like computers, printers, card terminals, and other equipment might be outdated.

While preserving equipment is great, there may come a time when that outdated technology may no longer serve the credit union to its fullest potential. Once that time happens, the credit union can experience delays in processing information or force members to wait longer in line when doing their banking in person.

Minor delays like that might not seem like a huge issue, but they can diminish the quality of the customer service your team can offer. That, in turn, can cause members to lose faith in the quality of the credit union and may send them looking for a different financial institution.

How to Deal With Outdated Technology

Though it’s likely too much to ask for a credit union to update every piece of outdated technology as soon as it becomes obsolete, it’s in your best interest to update what you can. Think about the equipment that poses the greatest security risk or inconvenience to your team and members. Prioritize replacing those items as soon as you can.

By updating the most important equipment as soon as possible, you’ll make the most of your budget without putting the people that matter most at risk — your members and your employees.

8. Growing Competition

Talk about staying true to the credit union’s core purpose and roots.

Community banks used to be the gold standard across the country. But with the rise of fintech companies, online banks, and large national financial institutions, credit unions are facing more competition than ever. That competition wants to take your members and turn them into their customers.

No matter how large a credit union is or how many branches you have in and around your main location, you will never be able to keep up with the larger institutions. They have more money to throw into marketing, access to newer tools and programs, and can make promises about the quality of the services they’ll provide, even if they fall flat.

It’s common for community members to feel tempted to switch to those larger institutions and the more members who do, the harder it will be to keep the credit union afloat, let alone growing.

How to Manage Growing Competition

The first step is to realize that credit unions may not appeal to everyone. The next step is to market the credit union to those who may find it to be the perfect fit. Remember, credit unions are all about serving the community. They exist to improve their members’ financial lives, but they’re also part of the local landscape and can be involved in causes that large financial institutions may overlook.

Credit unions can use this to their advantage. Be involved in the community by sponsoring events, volunteering for worthy causes, and participating in local parades. By doing so, credit unions can increase awareness and show they are invested in the community.

This can be enough to encourage new members to join and foster stronger loyalty among current members.

Challenges Can Be Managed

These are just a few challenges credit unions have faced and will continue to encounter throughout 2023 and beyond. No matter what those challenges are, they can be managed with enough determination and planning.

Review your credit union’s performance and status regularly. Keep up with the latest trends and don’t hesitate to ask employees and members for feedback. Doing so will help you easily position your organization for growth and improvement.