The AI evolution: how GenAI will shape the credit union industry (and no, it’s not just chatbots!)

GenAI will be an industry-standard technology for financial institutions of all sizes. You’re hearing it right here, right now!

We’ve all seen the skepticism and fear of new innovations grow and fade as technology becomes status quo—just look at how websites were treated in the 1990s, and later smartphones in the early 2010s. In 1994, Stanford Federal Credit Union was the first financial institution (beating major financial institutions by one year) to offer a banking website. More than 20 years later, websites and apps are the bare minimum for businesses, nonprofits, and organizations of any kind. 

While this technology is important for attracting and retaining members, think about the impact that software such as Microsoft Excel, or cloud platforms such as Amazon Web Services had on business operations. These innovations fundamentally changed the way businesses perform basic duties and keep track of essential data. 

Today, credit unions have seen the impact of machine learning on delivering fast, smart loan underwriting decisions and swift fraud detection. As AI-automated underwriting has grown throughout the financial services industry, most members now expect convenience when applying for a loan (in fact, 70% say they do). Enabling not only the quickest, but also the most effective decisions is an essential pillar of today’s credit unions. 

Much like Google Workspace and easy-to-use software like Slack or Microsoft Teams have revolutionized the way that organizations communicate ideas and information, GenAI is the next rung on that ladder. Unlike machine learning technology, which takes thousands of data points to make accurate predictions (such as any fraud behavior flags or an applicant’s credit risk level), GenAI can use large language models (LLMs) to respond to questions, such as “what is the impact of my DTI policy on my loan approvals?” GenAI tools still pull in thousands of data points, but they fill different business needs. A member-facing chatbot, for example, would respond to questions like “what do I need to qualify for this loan?” 

These chatbots are already growing in popularity, providing that much-coveted speed and convenience, but the natural next step is to incorporate this technology internally. Information that used to take days to compile can now take seconds, allowing your credit union to take action on competitive insights and move in real time.

Tailored technology is vital

It’s not just any GenAI that will make a difference for your credit union—the technology needs to be tailored exactly for your institution’s needs. 

You’ve likely heard of popular GenAI chatbots like ChatGPT or Google Gemini. While these might be helpful for composing emails or helping your team generate new ideas, they’re trained on the internet, meaning they can only provide a generic output. There’s no specialization for your industry or your own organization. Additionally, these chatbots are not private, running a potential security risk for internal or private information.  

To unlock the full potential of GenAI for credit unions, customization is key. In nature, organisms naturally specialize to a specific ecological niche—for example, a bird might develop a curved-shaped beak to eat seeds that another species doesn’t eat. Similarly, technology should evolve to suit a specific organization’s niche and needs, in this case, your own credit union. Instead of generating generic advice and summaries, a tailored GenAI tool can look at your credit union’s data and compare it to surrounding credit unions. You can ask, “how does my delinquency rate compare to my peers?” and receive an instant, clear answer in an email ready to send to your team. 

Tailored technology is also more trusted, since you can take steps to ensure accuracy. For a highly regulated institution like a credit union, clarity and purpose are essential. Clarity means knowing exactly where your data is coming from and how it’s being used, and purpose means knowing why you’re using this technology. GenAI isn’t making the final loan application decisions, but rather helping gather insights and data to help your team strategize with precision and agility. 

“Survival of the fittest” means making an impact for generations to come

There’s a reason businesses need the ability to adapt. As the world’s natural environment changes, so do people, and organizations need the right skills to continue thriving in their niche. Contrary to popular wisdom, “survival of the fittest” doesn’t actually mean who is the biggest and strongest—it means who fits their environment best. A local community credit union can harness the custom insights and innovations that a larger institution can, allowing for credit unions of all sizes to not just survive, but thrive. 

As technology continues to evolve, so do credit unions, their communities, and the financial system as a whole. Tailored GenAI is a valuable tool to leverage your credit union’s knowledge and passion to serve, keeping your organization connected and agile through an ever-changing landscape.