Technology

How can credit unions and community banks verify members in today’s remote world

April 8, 2022

Credit unions and community banks play a vital role in the financial services ecosystem.

Unlike fintechs and big banks, they’re deeply invested in their communities — and they’ve shown what they’re made of when the COVID-19 pandemic struck.

In Ireland, local credit unions designed new services to support members who experienced sudden reductions in earnings. Some, like Donore Credit Union, reached out to their members directly to offer reassurance that their credit union was open, active and listening. (1)

In the US, it was community banks that kept small businesses and self-employed workers afloat amid shutdowns. In total, they made 60% percent of the vital Paycheck Protection Program (PPP) loans and served more than 90% of rural, suburban and urban localities. (2, 3)

Barriers to growth

Despite efforts to retain members, the number of credit unions in the US has nearly halved in the last couple of decades. (4, 5)

Community banks, on the other hand, have been facing a declining share in several key lending markets for years, according to Federal Deposit Insurance Corporation (FDIC) data. (6)

Two major factors are at play here:

The competition is tough

Credit unions and community banks are getting squeezed from two sides. First, far bigger banks with deep pockets and strong brand recognition have somehow realized technology is worth investing in. They’re now launching digital transformation strategies and are in some cases creating digital-only subsidiaries to capture new market segments. 

On the other side, challengers such as neobanks and peer-to-peer payment platforms are creating new models for exchanging, investing and borrowing money online. Both are setting user expectations high and make it difficult for credit unions and community banks to compete.

Digital transformation is lagging

It’s clear that credit unions and community banks need to start innovating at a faster pace. But they have generally been slow to embrace the remote world, with only 42% offering a mobile app to their members. (7

The way to level the playing field starts with onboarding new members, managing risk and delivering core services in the context of today’s online economy. And identity verification stands at the very beginning of that journey.

For credit unions and community banks, identity verification isn’t just a legal requirement, it’s the first touchpoint with new members, and a good predictor of the experience that follows. But it’s not easy. New members expect convenience and speed, wrapped in a sleek UI. Plus, most of the checks should happen automatically, in the background, so that users can get on with opening their account without having to wait for a manual review. In essence, this requires:

  • Using AI to detect the document’s type and country of issue without user’s input
  • Reading the data on the ID to cross-check it with relevant registries
  • Verifying the document is genuine by analyzing the user’s scanning environment and matching its security features
  • Comparing the selfie image with the image on the ID document to ensure the person applying is its rightful owner.

These are some of the best practices credit unions and community banks can use today to verify their users remotely. We’ve covered more of them in depth in our new eBook — Remote identity verification: A guide for credit unions and community banks.

If you’re trying to implement identity verification in a way that grows enrollment figures and complies with regulations, this is a must-read for you.

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