Innovation and Financial Inclusion Opportunities for Credit Unions

Posted by Neil Dougherty on Sep 14, 2023 11:19:00 AM


At SRM, we consider ourselves not only advisors but information gatherers and trend trackers. When not working directly with our clients on strategic endeavors or identifying bottom-line savings, we seek out the latest industry insights across our professional networks and from our state, regional, and national partners.

To that end, I recently had the pleasure of speaking with National Credit Union Administration (NCUA) board member and former chairman, the honorable Rodney E. Hood. The team at SRM has known Hood for several years. He is an accomplished leader who keeps his finger on the pulse of the credit union industry. In fact, during his time with the NCUA – the regulatory body of American credit unions – he committed to and succeeded in visiting credit unions and their leadership teams in all 50 states.

Throughout the summer, Hood has been particularly focused on embracing innovation and creativity to futureproof the credit union industry and how that leads to an expansion of the circle of financial inclusion. He’s delivered this message on stages belonging to influential entities, including the World Council of Credit Unions, MoneyLIVE North America, and the Fintech + Insurtech Generations Conference.

Our meetup with Hood was a bit less formal, as our chat became the latest episode of our recently launched Firmer Ground podcast, now available on the most popular streaming/podcasting platforms.

Throughout the conversation, Hood delivered a consistent perspective to our listeners on the importance of the credit union mission as a whole and how innovation and inclusion are the keys to the next era of financial services.

“I believe that fintech is integral to the ongoing success of the credit union system,” Hood told me. “Technology can help our credit unions serve their members and be 21st-century institutions.”

Thinking back on this dynamic conversation, I wanted to share a few takeaways with our blog readers:

Futureproofing is critical for credit unions. Members want expanded and improved services, including data aggregation, faster payments, and expedited lending decisions. Hood asserted technology can bring people in underserved markets – what he calls “credit invisible” – into the mainstream.

The NCUA formed an office of financial technology and access, led by former state banking regulator Charles Vice. Hood would like to see the group work more with venture capital and fintechs to provide more tech options to credit unions. “Our industry needs to know that their regulator is empowering them to use these tools for their success,” he said.

Inclusion must be more than a concept. Hood believes credit unions’ “mission-driven ethos” is attractive to younger generations. Still, he said credit unions – and the NCUA itself – must be creative when it comes to meeting changing financial needs.

Hood noted that initiatives related to Diversity, Equity, and Inclusion (DEI) must extend to rural markets, indigenous communities, and differently-abled communities. The NCUA, for instance, is actively recruiting talent from Gallaudet University, which educates deaf and hard-of-hearing individuals. The agency will also host its annual DEI summit in early November.

Financial education with purpose is a worthwhile investment. Credit unions are promoting affordable housing in a rising rate environment – 40-year mortgages and interest rate buydowns – but more financial training is necessary to help members make better decisions. NeighborWorks America, where Hood serves as Chairman and NCUA’s representative on the Board of Directors, coordinates with public and private entities to provide such direction.

“Homebuyer education and readiness are important,” Hood said. “Folks can go through training so when they’re ready to buy, you will have a mortgage-ready person.”

Disruptive technologies – like AI – carry pros and cons. Hood – like the consultants here at SRM – believes credit unions should explore AI but must tread lightly. The NCUA is interested in using artificial intelligence to analyze data – potentially reducing turnaround times from months to days. AI can also help the agency better evaluate the profiles of their regulated credit unions.

“If properly used, AI can stimulate and let us move forward with data,” Hood said. “With the proliferation of fintech activities, we must remain vigilant about cybersecurity, authentication, and safeguarding data privacy. While I’m zealous about tech, I am also zealous about security.”

The Bottom Line

The NCUA’s supportive stance on innovation should give credit unions confidence, ultimately allowing them to plan more effectively for the future with products and member experiences that are constantly improving. Hood previously stated, “The purpose of regulation is not to hinder credit unions — the purpose is to empower credit unions so institutions can provide the highest level of service to members and communities.”

At the same time, Hood clarified that credit unions must be mindful of risk and thoroughly vet their potential integrations and partners. We appreciate Rodney Hood joining us and sharing his insights. We will continue to bring diverse thought leadership to our network of readers here on the Bottom Line blog.

Topics: Innovation, Fintech, Credit Unions, NCUA, Affordable Housing, DEI, Rodney Hood

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