Seeking solutions for retaining deposits? Let’s dive into the details and explore how Intelligent Process Automation (IPA) can be valuable in deposit retention and growth while enhancing competitiveness in today’s economic landscape.But First the Facts

Driven by loan growth records set in 2022, competition for deposits among credit unions is in full motion. Last year, credit union loan growth accelerated by 19.4%, almost tripling the long-run average of 7.2%. In fact, loan-to-share ratios are rising, with lending outpacing deposits, adding pressure to liquidity positions. 

With warnings of overexposure risk due to loan growth and net interest income being more susceptible to potential loss, lending standards are getting tighter and tighter. Credit unions feel the squeeze, mandating proactive steps to capitalize on opportunities as the economy normalizes.

Lending Standards are Getting Tighter and Tighter

Anticipated loss indicators are driving the tightening of lending standards, particularly in the mortgage and consumer lending sectors. Consequently, credit unions are encountering heightened Competition for deposit growth.

During a press conference, Jerome Powell, Chair of the Federal Reserve, stated, “You’ve got lending conditions tight and getting a little tighter, you’ve got weak demand, and you know, it gives a picture of pretty tight credit conditions in the economy.” With tighter lending standards escalating, so too has the importance of credit unions investing in innovative solutions—queue process automation technologies like IPA. 

What Is IPA and How Can It Help With Deposit Growth?

With increased competition to grow and maintain deposits, finding technologies to ensure sustainable lending practices while managing risk and maintaining operational stability are business imperatives. 

You’ve heard of Robotic Process Automation (RPA), but what about IPA? IPA combines RPA with real-time analytics and artificial intelligence, like machine learning, to make data-driven decisions. This combination allows IPA to handle more complex processes that require decision-making, such as analyzing documents or responding to questions a depositor may have. Additionally, IPA is less prone to breaking midway due to unforeseen conditions. Let’s cover the benefits:

Streamlined Processes: By automating repetitive tasks and workflows, credit unions can reduce manual processes, minimize errors, and enhance operational efficiency.

Efficient Onboarding and Member Engagement: We help facilitate the efficient onboarding of new members, essential for credit unions to attract and retain members. Automated touchpoints and personalized interactions powered by IPA contribute to a positive member experience, increasing loyalty and growth.

Data-Driven Decision-Making: With our integration of real-time analytics and AI, our IPA tools empower credit unions to make data-driven decisions. This is invaluable in adapting to changing market conditions while optimizing lending strategies.

Risk Management and Compliance: By automating compliance-related tasks and ensuring consistent processes, credit unions can manage risk effectively and stay aligned with regulatory requirements, even in the face of evolving standards.

Improved Member Engagement and Satisfaction: Automated services and personalized interactions improve member engagement and satisfaction. In an environment where member experience is a differentiating factor, our solutions help credit unions stand out and retain deposits through enhanced services.

For a more in-depth look at the ins and outs of process automation, we highly recommend reading our latest white paper, “Transforming Financial Services.”

Potential Impact on Deposit Growth

The rising interest rate environment has led to higher deposit costs for banks, increasing competitive pressures on credit unions to retain their deposits. With more pressure than ever, credit unions must leverage strategies that enable them to maintain and grow their deposit base. IPA will help with this growth by optimizing processes such as onboarding new members quickly and efficiently and automatically detecting and recapturing deposit accounts at risk before leaving the institution. By aligning these technologies with their strategic goals, credit unions will create an attractive value proposition to grow deposits and retain current members.

ROA Stability in the Current Lending Environment

Despite the aforementioned challenges, credit unions have maintained a stable return on assets (ROA) over their portfolios. In a 2023 NCUA analysis, the data for Q1 states, “The median annualized return on average assets at federally insured credit unions was 61 basis points in the first quarter of 2023, compared with 42 basis points in the first quarter of 2022.” A high degree of ROA stability indicates that management teams effectively utilize tangible and intangible resources to generate income for their institution.

Six Strategies for Deposit Retention and Growth

  • Emphasizing low-cost transaction accounts to minimize expenses tied to demand deposits, time and savings deposits, and certificate of deposit accounts.
  • Implementing IPA to streamline processes and bolster revenue.
  • Leveraging IPA to automatically identify and recapture deposit accounts at risk before leaving an institution
  • Ensuring comprehensive onboarding of new members through personalized automated touchpoints.
  • Leveraging mobile banking services will allow members to track purchases, transfer funds between accounts, and pay bills quickly. Simplifying financial management.
  • Tailor rewards like merchandise discounts while offering innovative services such as automated savings advice based on behavior, letting them save smarter.

Final Words

IPA’s ability to make data-driven decisions and handle complex processes offers credit unions the tools they need to effectively address the challenges of deposit retention, Competition, risk management, member experience, regulatory compliance, and resource optimization. By leveraging IPA, credit unions can create a foundation for sustainable growth in a competitive financial landscape.