Innovative Lenders Migrating to the Cloud to Achieve Agility and Scale

By Micheal Herman, Senior Vice President of Product Innovation and Technology, AdvantEdge Digital

Innovators in the financial services industry sometimes wrestle with a cart-before-the-horse dilemma. Do we hold off on a new product until significant demand appears? Or do we make the investment now and generate demand upon launch?

In perhaps no other area of financial services is this more true than lending. With new fintech and digital-native competitors popping up seemingly overnight, the competitive landscape is putting plenty of pressure on chief loan officers and their teams to provide members and prospective borrowers with sophisticated, tech-centric experiences.

While there are some merits to a credit union following the lead of its member borrowers, such a strategy should be balanced with a more aggressive approach to proactive innovation. That’s because credit union members and other prospective borrowers may not take the time to ask for what they need or want. They may simply find it elsewhere.

As evidence such a threat may be emerging, 26% of financial institution participants in a 2021 Financial Brand survey commissioned by AdvantEdge Digital said they had detected no change in digital engagement at their financial institution in 2020.¹ That’s a fairly shocking number given everything we’ve seen around the acceleration of digital engagement among nearly every age group during COVID-19. What’s even more surprising is another 30 percent reported actual decreases in digital engagement last year. ¹

With study after study revealing a dramatic acceleration of consumer use of digital banking, these findings beg the question: Were 2020 banking customers finding new providers to meet their increasing digital banking needs?

Loss of Digital Consumers is Costly for Two Reasons

Knowing that a digital consumer is a profitable consumer, the lack of digital engagement uncovered in the Financial Brand study underscores the opportunity cost of failing to lead members down a digital path. For credit unions with a double bottom line imperative, such a loss of engagement can be even more costly, given they may be losing business to providers less concerned about borrowers’ long-term financial wellness.

Of course, innovating for the digital borrower is far from a simple prospect. With its numerous complexities ranging from technical to cultural, digital transformation of the lending process requires credit unions to take a strong, yet nimble, approach. Many are finding such an approach is more readily enabled with access to the cloud.

According to Gartner, “Although software as a service (SaaS) remains the largest market segment and is forecast to grow to $117.7 billion in 2021, application infrastructure services (PaaS) is anticipated to grow by a higher margin at 26.6%.”²  That’s due in large part to the pandemic, which forced organizations to optimize IT costs while supporting a remote workforce. Now that SaaS cloud applications have proven their value, the tide of cloud demand is unlikely to recede.

While cloud-based solutions are ideal for credit unions both leading and following their members’ digital lending preferences, they are also enabling back-end operational improvements. Notably, 93 percent of respondents to the Financial Brand survey categorized operational improvements as very or somewhat important to their lending success, in particular.¹ This suggests leaders within the lending arm see a strong connection between process and outcome. Indeed, as we’ve seen in our own digitally transforming organization, streamlined processes and the integration of intuitive technologies can have a strong impact on the attainment of new business and greater revenue. The cloud enables these capabilities namely because of how quickly users can pivot when the need arises.

Take Urban Sports Club, for instance. Before the pandemic, the app directed employees through fitness options at thousands of physical gyms. Within a few weeks of COVID-19 shut-downs, the SaaS company pivoted, launching 45,000 online fitness classes through 1,000 partners.¹

The same is happening in both big and small ways inside the credit union space. 121 Financial Credit Union, for example, recently uncovered a small, but meaningful, tweak it could make to the AdvantEdge Digital lending solution it was rolling out. By switching the data source for the solution’s payment simulator from Kelly Blue Book to NADAguides to match the value the credit union uses for the lending decision, members would have a much smoother and more consistent experience across the credit union’s digital lending channels. Because the AdvantEdge Digital lending solution is housed in the cloud, making such a change was not only feasible, it could be accomplished rather quickly, keeping the overall rollout on time and on budget.

Cloud-based SaaS tools designed to digitally transform both the back-end lender and front-end borrower experience run the gamut, from standard out-of-the-box to fully configurable. Some are built on industry best practices; others via consumer-centric R&D. The beauty of nearly all SaaS solutions is agility and the ability to scale (both up and down as business and market realities dictate). SaaS models can adapt much more quickly than their on-premise counterparts – an essential capability today as rapidly changing market dynamics force faster evolution.

¹ AdvantEdge Digital, “Lenders’ Most Pressing Digital Priorities for 2021”, 2021. ² Gartner Press Release, “Gartner Forecasts Worldwide Public Cloud End-User Spending to Grow 18% in 2021”, Katie Costello, Meghan Rimol, Published 17 November 2020.

CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Corporate headquarters are located at 5910 Mineral Point Road, Madison WI 53705. © CUNA Mutual Group. All Rights Reserved. CORP-3562412.1-0421-0523