HOW TO CHOOSE CREDIT UNION SOFTWARE

Credit unions have a distinct advantage over nationwide financial institutions: their deep understanding of the local economy and the specific financial needs of their members. This inherent advantage allows credit unions to tailor their services to meet the requirements of local markets. This advantage has led to a significant increase in the credit union market. Total assets in federally insured credit unions rose by $88 billion, or 4.1 percent, to $2.26 trillion over the year ending in the fourth quarter of 2023, according to data from the National Credit Union Administration (NCUA).

“The credit union system remains largely stable in its performance and remains resilient against a challenging interest rate and economic environment,” said NCUA Chairman Todd M. Harper. “Credit union executives, administrators, and boards of directors must remain diligent in managing the safety-and-soundness and consumer financial protection risks within their institutions. Today’s marketplace requires active — not passive — management by all,” he added.

This article will provide valuable advice on selecting the best credit union software for loan origination and servicing. One area where credit unions can capitalize on their established goodwill is auto loans and leases. By offering competitive auto loan options to their members, forging lending partnerships with local auto dealerships, or simplifying the application process for community members, credit unions can bolster their profitability and cultivate member loyalty. To achieve these goals, credit unions must rely on a reliable credit union software solution. 

What to Look for in Credit Union Software Solutions
Cloud-based Lending Platform	Cloud solutions are everywhere, offering tangible benefits such as faster implementation times and lower operational costs. Opting for a cloud-based lending platform ensures your credit union can take advantage of these benefits.
Configuration Menus	Configuration menus empower lending professionals to tailor the software to your institution’s unique processes and requirements. This flexibility enables customization according to your specific needs.
Integrated Analytics	Analytics empowers lending professionals to extract valuable insights from data. By identifying trends and refining credit policies, these insights help reduce lending risks. It is important to choose a software solution that offers integrated analytics.
Configurable Decision Rules	Well-designed decision rules within the software eliminate the need for numerous manual decisions and handoffs that can hinder process efficiency or lead to inconsistent outcomes.
Digital Lending Experience	Borrowers nowadays expect a seamless digital lending experience. A modern lending platform empowers credit unions to handle communications and documentation digitally, providing convenience and efficiency to borrowers.
Information Sources That Reduce Risk	Integrating lending-specific information sources within the software solution enhances lenders’ confidence in assessing borrowers’ financial situation and creditworthiness, ultimately reducing risk.

How to Choose Credit Union Software: Key Considerations

The field of lending software solutions has witnessed significant advancements in implementation and management capabilities. Credit unions now have the opportunity to leverage the latest features swiftly, benefit from automatic software updates for improved performance, and seamlessly extend functionality by integrating innovative information sources and services. To make the most of these advantages, it is crucial to select a credit union software solution that offers the following key features:

• Cloud-based lending platform. Ensure that reputable and market-leading cloud service providers host your chosen software solution. Cloud solutions have gained widespread adoption across various industries, delivering proven and quantifiable benefits such as accelerated implementation time and lower operational costs.
• Configuration menus. Look for a software solution that provides extensive customization options through configuration menus. This allows your knowledgeable lending professionals to quickly tailor various aspects of the solution, including the user interface, access rights, workflows, queues, decision rules, verifications, and integration with cloud-based lending services. Compared to software solutions that require lengthy and customized programming, the configuration approach empowers your team to swiftly align the solution with your specific process and policy requirements.
• Integrated analytics. Integrated analytics is a crucial component in any credit union software solution. It equips lending professionals with the ability to monitor emerging trends in loan or lease applications and assess portfolio performance. Today, analytics is essential in empowering lending professionals to explore data, gain valuable insights, identify trends, and refine credit policies to reduce risk.

Software Features to Enhance Efficiency and Mitigate Risk

While cloud, configuration, and analytics are essential features of any credit union software solution, exploring additional functionality that can provide credit unions with a significant advantage over older software solutions is crucial. To optimize efficiency throughout the lending lifecycle, consider the following capabilities:

• Configurable decision rules. Look for a software solution with configurable decision rules to drive workflows across loan submission, underwriting, funding, and servicing processes. Well-designed decision rules can eliminate the need for manual decisions and handoffs, improving process efficiency and ensuring consistent decisions. By translating credit policies and compliance guidelines into automated processes with an audit trail, underwriting decisions that once took minutes can now be accomplished in a fraction of a second.
• Completely digital lending experience. Embrace the advantages of a fully digital lending experience to eliminate the burdens of paper-based processes and their inherent inefficiencies. From initial loan submission to funding offers and throughout the servicing phase, the software should handle all communications and documentation digitally. Leveraging mobile devices, borrowers can capture required documentation for loan or lease applications. Offers can be delivered as e-contracts for quick review and acceptance by borrowers through e-signatures. Borrowers can also set up auto-payments, make one-time payments, access statements, and update contact information online. Embracing a completely digital lending experience enhances efficiency throughout the lending cycle and empowers borrowers to have greater control over their accounts, reduces printing and mailing costs, and minimizes the need for borrowers to contact the call center.
• Information sources and services for risk reduction. A significant advancement in credit union software solutions is the integration of various lending-specific information sources and services. These resources give lenders greater confidence in assessing a borrower’s financial situation and creditworthiness, reducing risk.

Consider the following benefits:

• Enhanced credit extension for borrowers with limited credit history: Alternative credit data sources utilize utility, rental, mobile payment records, and banking information to provide a more comprehensive view of a borrower’s creditworthiness. This allows credit unions to offer credit to applicants who may have been denied previously due to a lack of credit history.
• Fraud detection capabilities: Sophisticated algorithms analyze loan or lease applications to identify inconsistent information that may indicate potential fraud. Based on confidence in the fraud score, the software can auto-decline applications (with accompanying reasons) or route them for review by experienced underwriters to determine eligibility.
• Risk-based loan or lease terms: Machine learning techniques evaluate historical borrower attributes and credit union portfolios to develop credit models that assess lending risk. These models recommend appropriate terms and conditions, resulting in up to a 15% increase in auto loan approval rates without compromising risk assessment.

How To Choose Credit Union Software: A Step-by-Step Guide

Selecting credit union software is of utmost importance as it aids in managing operations, member satisfaction, and the institution’s success as a whole. Here’s a systematic approach you can use to guide you in making an informed choice:

1. Define Your Needs

• Identify critical objectives: Decide on the features and functions your credit union will need, including core banking, loan origination, member relations, and payment processing.
• Assess your systems: Examine your current software to see what works, what does not, and where improvement is needed.
• Consider future growth: Consider how you want this software to help you and how it fits into any future expansion plans.

2. Research and Compare Vendors

• Identify possible vendors: Search out reputable credit union software vendors and secure information about their product offerings, level of service, and feedback from clients.
• Compare features and functionality: Evaluate how well each vendor’s software fits your needs and requirements. 
• Consider costs and licensing models: Compare the costs, licensing fees, and other charges of each software solution.

3. Evaluate Vendor Capabilities

• Evaluate technical expertise: Make sure the vendor you are considering can provide dependable and secure software solutions.
• Consider customer care: Assess the vendor’s customer support, such as response time, availability, and effectiveness. 
• Assess scalability: Make sure the software can scale to handle your credit union’s growth and increasing workload.

4. Demo and Test the Software

• Request a demonstration: Ask vendors if the software can be demonstrated in person to understand its functions.
• Conduct a thorough evaluation: Evaluate the software’s usability, features, and performance to determine whether it is appropriate for your credit union.

5. Consider Integration and Customization

• Assess capability: Verify if the software can integrate with your existing systems, including accounting applications or the core banking system.
• Evaluate customization capabilities: Investigate whether the software can be modified to accommodate your needs and workflows.

6. Evaluate Security and Compliance

• Validate security measures: Ensure the vendor can protect sensitive information, such as the credit union’s confidential information and member data.
• Assess regulatory compliance: Make sure that the software satisfies standards and regulations that govern practices in the industry.

7. Consider Implementation and Support

• Assess the implementation process: Review how the vendor implements the software and how long it takes to ensure a smooth transition. 
• Consider ongoing support: Evaluate the vendor’s post-implementation support, such as employee training, software updates, and ongoing maintenance.

By following these steps and carefully considering your credit union’s unique needs, you can select the right software to streamline operations, enhance member satisfaction, and drive your credit union’s success.

Selecting the Right Software Solution Partner

When selecting the right credit union software solution partner, look for a vendor with roots in lending that continues to focus on innovative solutions and services that improve the experience of credit unions and their members. They’ll understand all the nuances of delivering the functionality and user experience that optimizes the lending process for all involved—credit union members, existing and new, loan officers, managers, risk analysts, and customer service representatives.

The best credit union software vendors employ people with real-world lending experience that guides the software’s development, implementation, and support. Customer support portals, annual user group conferences, and customer round tables are essential to establishing a mutually beneficial business relationship. When choosing a credit union software solution, take a holistic approach. Technology, industry focus, and employee experience are all vital to your success.

If you are looking for an industry-leading credit union software provider for loan origination and servicing firmly grounded in lending best practices, look no further than defi SOLUTIONS. Our defi origination platforms provide the following features.

Key Features of defi Loan Origination Systems
✔ Scalable cloud-based platform	✔ Built-in APIs and quick integrations with third-parties
✔ Automated underwriting, decisioning, deal structuring, and funding	✔ Data analytics capabilities
✔ No-code configuration for workflows, rules, policies, features, and admin functions	✔ Fully integrated mobile apps
✔ Customer-facing portals and other customer service tech	✔ Support for advanced features like AI and machine learning.
✔ Support of complex pricing matrices	✔ Quick implementation of business decisions