Cybersecurity Best Practices for Credit Union Lending

 

Your credit union members are likely more worried about making sound and safe financial decisions, especially as housing and living costs rise with an unprecedented hike in inflation. In the last several decades, these costs have quadrupled in most areas of the country, while wages have yet to even double. That means your members and prospective members are looking for smart and secure lending options.

July through September is the peak lending season for most financial institutions, and you don’t want to alienate prospects by employing less-than-optimal lending cybersecurity.

There are several ways to incorporate cybersecurity into your credit union lending process and practices.

Start with a Good Foundation – Or Build It

Large, for-profit banks are the only organizations in the financial sector that can afford to create a proprietary system for loan processes. The rest of us, including your credit union, must rely on strategic planning, and smart tools.

Lending cybersecurity, like cybersecurity in other high-risk industries, can’t successfully rely on DIY programs to create a solid digital wall of protection around networks and systems within it.

Your cybersecurity program should have all-encompassing strategies, not just piecemeal solutions. Think of it this way: while you can build a boat with several hundred pieces of wood or metal and create a strong enough hull for the boat to float, you’ve now got hundreds of seams and potential cracks just waiting to be breached. Whereas, if you create the hull using something more akin to one seamless piece, your chances of water seeping in are much lower.

A good foundation includes things like reviewing your current digital landscape and cybersecurity. The first step is looking for potential security gaps. These gaps can be interwoven throughout this landscape: in data collection, storage, and encryption protocols as well as third-party vendor interfaces, mobile apps and platforms, servers, cameras, social media accounts, and more.

These things need to be audited regularly, starting from the first days of your newly integrated systems.

Simplicity is Key – But There’s a Limit

Lending cybersecurity mainly relies on the implementation of practices, education, and technology solutions that minimize the risk of a cyberattack. If you have fewer holes in your systems, that a hacker will find a way through them is going to be much smaller.

That’s why simplicity in your lending practices and tasks is key. The loan process is complicated by nature, but the more seamless you can make it for your members and your staff, the better the outcome will be.

User error is often touted as one of the most common causes of data breaches. The goal of your loan programs and the steps you employ to carry them out should be to create a user-friendly experience without skimping on network security and other precautionary measures.

For example, employing multi-factor authentication in parts of your data and lending information collection process is inherently more complicated than single-factor authentication, but you are trading safety for convenience. Two-factor authentication is still the best choice when it comes to collecting and storing lending data.

Finding the balance between “easy-to-use” and “optimal protection” should be the simple target you aim for in credit union lending cybersecurity.

Here’s a great article from Medium about cybersecurity in the mortgage process. It goes into more detail about how complexity is the “worst enemy of security.”

Automating Compliance Increases Lending Cybersecurity

Lending cybersecurity is not the only way to protect your credit union loan processes. In fact, much like the risks for cyberattacks have increased, lending compliance issues are also on the rise.

Because compliance is crucial to the efficacy of your credit union, maintaining that credibility should always be a top priority regardless of whether your credit union is growing, merging, or simply focused on optimizing current business operations.

There are several benefits to automating your compliance tasks. Automation is primarily used to ensure that there is no impact to normal operations and production. There is also no learning curve – compliance automation means machine learning drives for you – it is constantly improving and identifying potential violations of internal compliance policies by tracking sensitive data nd where it goes.

By automating your compliance processes with tools and software like IMS’s Polaris Sonar, you can quickly reduce sensitive data exposure without having to add to your current infrastructure or allot employee time towards completing these tasks.

Anomaly Detection – Recover Faster

Cyberattacks on financial institutions are inevitable – your credit union holds a wealth of assets and hackers are always looking for ways to exploit your security systems to take some of those assets for themselves.

And with ransomware on the rise, it’s important to implement the most effective strategy for recognizing ransomware attacks early and defending against them.

IMS has anomaly detection solutions with Polaris Radar to track your data changes over time, replace manual recoveries for minimal business disruption, and increase intelligence with machine learning.

Make sure your credit union lending and all financial data is never used against you for ransom. Learn more about partnering with IMS today by requesting a consultation.


CU Tips for Serving the Unbanked & Underbanked

 

The Federal Reserve has reported that 22% of US adults are unbanked or underbanked. And one of the top reasons Americans report not wanting to put their financial assets into the hands of banks and credit unions is because they don’t trust them.

But this puts credit unions at an advantage over big banks – many Americans struggle with brand trust, especially with for-profit brands. Credit unions are financial institutions that only exist to serve specific communities, industries, and areas. Here are some tips for using your credit union to better serve the unbanked and underbanked.

Build from Your Foundation

As we mentioned, credit unions are built on brand trust – they are non-profit organizations owned by their members.

The first thing you should be doing is educating your communities (both in-person and online) about these advantages. It’s hard for the unbanked and underbanked to have the same trust issues with your credit unions when they, as members, are the owners and primary beneficiaries of your products and services. As more and more people become distrustful of big business, it’s important to remind your members and non-members alike that you are here for them.

Regain Market Share from Payday Lenders

According to a recent article from the Credit Union Times, unsecured consumer loans account for less than 10% of credit union’s loan portfolios, but make up 100% of the portfolios for payday lenders. The article posits, “one could argue that payday lenders are already making more money serving the underbanked than credit unions serving the banked in the same product category.”

By using your recently-implemented online products and services at your credit union, you could take back this market share and still make a good profit, even by offering loans that cap at 18% APR. Compared to the 400-500% being charged by payday lenders, this not only can help you generate more business for your credit union, but it also offers unbanked and underbanked individuals a great opportunity to start building brand trust. This could even lead to more of these people choosing to become members of your credit union.

Focus on the Needs of Low-Income Communities

Most unbanked and underbanked individuals are found in lower-income communities. While that community may only be a part of the areas you serve, it’s still important to create connections within it.

A great way to foster those connections is to partner with local non-profits. These organizations operate as food banks, community centers, minority-led professional associations, and other businesses.

Focus on creating business relationships with non-profits that can help you grow your membership while you help them get their products and services more attention.

You can offer financial literacy and education classes at local community centers or set up a booth at a community event to offer quick budgeting consultations to underbanked and unbanked individuals. And then you can put out donation jars or other marketing materials from your non-profit partner. You can also feature them at your next community event or become a sponsor for their next program.

Part of expanding your services to the unbanked and underbanked is meeting them where they are.

Re-Examine Your Minimums and Other Fees

According to a detailed paper from The Clearing House, thee of the top four cited reasons people do not have a bank account include:

  • Not having enough money to meet the minimum balance requirements
  • Don’t trust banks
  • Bank fees are too high

These issues have the potential to be solved through a re-examination of your credit union’s current fees, minimum requirements, and other potential barriers to entry.

The unpredictability of these fees also drives away the unbanked and underbanked. In a study cited by the paper, one of the main reasons people choose payday lenders (whose services virtually always cost more to use than a bank or credit union) is because many check-cashing customers “preferred to pay predictable flat fees they understand, rather than incur unexpected charges.”

Simplicity and transparency are worth more than stability in their finances. These brand trust issues run deeply through the unbanked and underbanked, and that distrust has to be addressed by your credit union if you hope to grow your membership.

Use Your Expertise & Assets to Educate

Part of what keeps people unbanked and underbanked is the distrust in the motives of financial institutions. Historically, those with fewer or less reliable assets are preyed upon by banks who look to hike interest rates as well as other penalties and fees. This creates a cycle that keeps unbanked and underbanked individuals in their current situation. And partnering with a bank that doesn’t have their best interests in mind only perpetuates and exacerbates the debt cycle for these people.

To help bridge the gaps between your credit union and the unbanked and underbanked populations, you can use your expertise, educational resources, and online assets to create connections with these individuals.

Even just running a few marketing campaigns online and via social media could pull in new prospects that have unique needs your credit union is already able to assist with.

Next-Level Credit Union Solutions

Unbanked and underbanked individuals may not bring record-breaking cash amounts into your business, but it’s important to serve this subset of your community to create more diversity in your membership. It’s also a great way to show your members that serving them, in any capacity, is your credit union’s top priority.

When serving your members is your main concern, it’s easy to push other things aside, like data management, backups, and disaster recovery, or IaaS. At IMS, we are created to provide you with the private cloud services you need to keep your operations running smoothly. IMS uses the premier backup solution for credit unions, which can give you peace of mind as you work to improve your credit union for your staff and your members.


How to Embrace the Future of Digital Banking

 

When we talk about the future of banking, a lot of that future is rooted in the digital transformation that will take place in the next several years. Online loan applications, cryptocurrency – these services and more will be the differentiators for success as we move through 2022 and beyond. Here’s how your credit union can embrace the future of digital banking.

What Is Digital Banking?

Digital banking used to mean your members could log into an online account to see their balances and perform funds transfers from one financial account to another. But today, digital banking has expanded so much that your members rarely – if ever – have to visit one of your physical locations to perform any financial activity that will be run through your systems.

It’s not just about convenience, digital banking is about ultra-convenience for your members. Netflix, Amazon, and social media sites use data and other digital tools to make every user’s experience highly personalized – this is becoming a standard to which all B2C businesses are expected to reach in order to maintain member satisfaction.

Embracing Embedded Banking

You don’t have to leave your house to get groceries, prescriptions, Christmas presents, dog food, or to pay your mortgage or car payments anymore – and members like it this way. That one-stop-shop website model is becoming the expectation for your members. Embedded banking may seem like a complex phrase, but it just means that your members are doing their banking without having to visit a bank or credit union website, app, or physical location.

An example of embedded banking is the presence of mortgage applications and services being promoted on real estate sites where your members are browsing available homes in their desired area. Rather than creating financial services that must be accessed separately from the need they are born from, we’ll see more and more companies partnering to allow for end-to-end transactions. You can go to a car dealership and get a loan right then and there through partnerships between the dealership and their chosen financial institution, and savvy consumers will gravitate towards that all-inclusive model because it’s more convenient.

Facial Recognition

One of the fastest-growing authorization tools for financial accounts is biometric access. This includes fingerprints and, most recently, facial recognition. 15% to 20% of US financial institutions are already using facial recognition, coupled with other best practices when it comes to multi-factor authentication, to give members access to their financial information online.

Virtual Branches

The need to “speak to a representative” will never go away. People still like talking to and connecting with real people when they give a business their patronage. Since the start of the pandemic, virtual branches have become increasingly popular as a way to bridge the gap between in-person interaction and the convenience of digital banking solutions.

Virtual branches are digital platforms that simulate the conversation that occurs in a regular branch and rely on diverse communication tools like web, mobile chat, video, co-browsing, and document or screen sharing, according to American Banker.

Infrastructure-as-a-Service: Serve Members While We Cover Your Servers

Your data, servers, and digital banking operations shouldn’t need babysitting. That’s why IMS offers configured resources that meet your unique needs through Infrastructure-as-a-Service. We tailor our program to your specification to ensure our solutions are straightforward, flexible, and pay-as-you-go so you can take advantage of premier cloud services at affordable prices.

Browse these and other offerings here on our website or contact us today!