Central Bank urges credit unions to invest in technology

Credit unions need to invest in new technologies in order to compete with challenging new entrants to the market, according to the Central Bank.

Patrick Casey, the regulator's registrar of credit unions, was speaking at the annual conference of the Credit Union Development Association.

“Today, the traditional business models of all financial institutions are being challenged by changing consumer expectations,” he said. “New, nimble market entrants are targeting specific business areas using disruptive, digital-based product offerings.

“The nature and form of customer engagement is changing as consumers increasingly expect to access products and services online, in real time.

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“The retrenchment by retail banks from their branch networks, whilst in tandem investing in IT infrastructure and digitisation, is a striking example of the impact of current competitive dynamics.

“Consumers expect choice, ease of access, efficient speedy decisions and service fulfilment across all delivery channels. Meeting their expectations requires business model and operational change, enhanced capabilities, new processes and investment in enabling technologies.”

‘Significant’

Mr Casey acknowledged, however, that the scale of investment and resources required “can be significant” and is likely to be beyond the capacity of many smaller institutions.

“Shared service solutions through commercial collaboration are necessary to drive scale benefits and to deliver cost efficiencies,” he said. “They require larger credit unions that have the necessary resources to lead the process of change.

“Experience elsewhere has shown that other less well-resourced credit unions can then avail of such arrangements to support sustainable product and service provision to their membership.”

Mr Casey also warned that “great care” is needed when credit unions consider the prospect of new business lines, such as mortgage lending.

“Our recent Home Loan Thematic Review showed findings which suggest that some credit unions have commenced mortgage lending without fully assessing and implementing a well-developed business plan,” he said.

“Mortgage lending has its own unique risk characteristics. Any entry into the mortgage market requires careful analysis, planning and execution, reflecting the unique operational, risk and viability characteristics of the business of making long-dated loans to members to buy homes.”