Credit unions are facing many challenges from competitors of all sizes—both old and new. However, using artificial intelligence (AI), enhancing risk management programs, and improving accessibility are three ways to secure or maintain a competitive edge.
The global AI market is forecast to expand at a compound annual growth rate of 37.3% and reach US$1.8 trillion by 2030, according to Grand View Research.
Implementing AI
According to the IBM Global AI Adoption Index, only 37% of companies have deployed AI with the remaining 63% of the market either uncertain, not using, or still exploring AI. Furthermore, the global AI market is forecast to expand at a compound annual growth rate of 37.3% and reach US$1.8 trillion by 2030, according to Grand View Research.
The combination of these two forces—the massive investment in AI alongside so many companies still at the adoption stage—means that AI should not be ignored. Being an early adopter can create sustained and material market advantages.
Credit unions encounter a multitude of challenges, including profitability pressures, difficulties in attracting a younger demographic, outdated back-office processes, unoptimized technological infrastructure, and the necessity to keep pace with evolving risk and regulatory demands.
Additionally, these institutions must contend with increased competition from both traditional banks and fintech companies, the need for enhanced cybersecurity measures, shifts in consumer behaviour towards digital banking solutions, and the imperative to maintain member trust and satisfaction amidst an ever-changing financial landscape.
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AI can significantly assist the credit union industry in addressing these challenges:
A cornerstone to addressing any of these challenges with AI includes a level of analysis to ensure AI can be used responsibly and that it can drive a desired return of investment (ROI).
Reaching an AI maturity stage typically involves an iterative loop of these key themes below. Given the iterative nature, it’s less important which is prioritized first as they all intersect naturally:
- Assessing current AI readiness and identifying gaps, opportunities, and potential use cases.
- Developing a vision and road map for AI adoption that aligns to business goals and member needs.
- Investing in the right use cases, talent, technology, and data infrastructure to drive AI initiatives.
TPRM is no longer a nice to have, both from an operational and a regulatory perspective. It’s a necessity in order to be compliant.
Mitigating third-party risk
Credit unions face a new frontier of risk management challenges. Third-party risk management (TPRM) has emerged as a critical component in safeguarding the financial health and reputation of these institutions. As credit unions increasingly rely on third parties for technology and services, the potential for cybersecurity threats grows.
The need for a robust TPRM program was highlighted by two recent incidents. In July, cybersecurity company CrowdStrike sent an update to its customers using Microsoft Windows, causing their systems to crash. Many companies around the world were affected by the outage. And in June, cryptocurrency exchange Gemini announced that one of its third-party banking partners suffered a cybersecurity incident. Customers’ names, bank account numbers, and routing numbers may have been affected.
TPRM is no longer a nice to have, both from an operational and a regulatory perspective. It’s a necessity in order to be compliant. FSRA’s IT Risk Guidance and OSFI’s Guidelines B-10 and B-13 are examples of regulatory requirements for credit unions that touch upon TPRM.
It involves identifying and managing risks associated with third-party relationships. Annual cyber assessments are no longer acceptable. Instead, continuous monitoring of third parties has become the norm. This ensures that credit unions can continue to provide secure and reliable services to their members.
With the right governance structure and an up-to-date third-party registry, credit unions can navigate the complexities of a third-party landscape while maintaining trust and integrity in their operations.
As credit unions adapt to the demands of a digital world, the importance of TPRM cannot be overstated. It’s not just about mitigating risks; it’s about ensuring the continuity and success of the institution in a landscape where third-party partnerships are integral to member services. The imperative is clear: a robust TPRM is essential for the modern credit union.
Here are the steps involved in building a TPRM framework:
Develop structured processes and guidelines to identify, assess, prioritize, and mitigate potential risks within an organization and within the third-party environment. This should include maintaining an up-to-date third-party registry
Evaluate the risks associated with each third-party, including cybersecurity, operational, compliance, reputational, and financial risks.
It’s important to work with third parties to remediate the risks identified or perform an analysis to ensure the risk is within the organization’s risk appetite and tolerance levels.
Identify and manage risks associated with fourth parties, which are the third parties of your third parties.
Continuously monitor third-party relationships and report on the status of risk management efforts to stakeholders.
Encourage a risk-aware culture within the organization and ensure compliance with relevant regulations and standards.
More than 27% of Canadians identify as a person with a disability, such as physical, pain-related, mental, visual and a wide variety of other types of disabilities. Many others have persons with disabilities in their circle of family and friends.
Improving accessibility
More than 27% of Canadians identify as a person with a disability, such as physical, pain-related, mental, visual and a wide variety of other types of disabilities. Many others have persons with disabilities in their circle of family and friends.
Consumers are making decisions on where to shop based on where they and those around them feel most included, and accessibility is a big part of the decision-making process. For Canadian credit unions, removing barriers can increase the member base, enhance member and employee experiences, and contribute to community impact and corporate social responsibility. These benefits come together to grow a credit union’s reputation and increase profitability, but more importantly, accessibility is baked into the DNA of a credit union.
While most credit unions don’t currently need to comply with accessibility legislation or regulations, being proactive is a smart business decision. All federally regulated credit unions and banks have fully embraced accessibility and are working to remove barriers related to physical and digital environments, communications, employment, programs and services and procurement.
These credit unions and banks will have a competitive advantage in the marketplace compared to those that haven’t taken steps to include the 27% of Canadians with disabilities as well as their family and friends.
Canadian credit unions are built upon the values of social responsibility and caring for others. They are inherently designed to react to the needs of their communities. The number of persons with disabilities in Canada has increased, and credit unions are in a perfect position to respond to their members’ needs while also creating a more accessible Canada for all.
How we can help
Credit unions need to change and adapt to tackle the challenges they face. We offer a variety of services that are designed to improve your operations. Our Risk Advisory, Accessibility Consulting, and BDO Digital teams are available to help your business.
Contact us to learn more.
Contacts
Ziad Akkaoui
National Practice Leader, Risk Advisory
416-865-0111
[email protected]
Dishank Rustogi
Senior Manager, Cyber Risk Management and Transformation
416-369-3109
[email protected]
Mandi Crespo
Manager, Accessibility Consulting
613-690-5755
[email protected]
Joseph Salloum
Senior Manager, BDO Digital
613-696-8668
[email protected]