Nov 15 2021

What Credit Unions Need to Know About the Cloud

The cloud offers substantial benefits for credit unions, if integrated and implemented effectively.

Pandemic pressures have posed unique challenges for credit unions. Customer satisfaction — long a differentiator from big banks — fell by 2.5 percent in 2020, putting these nonprofit financial institutions slightly behind their larger competitors. Memberships continued to rise, but the rate of increase hit a seven-year low of just 3.2 percent.

To improve service and capture customer interest, credit unions are leaning into digital transformation. According to a recent PYMNTS study, 12 percent say they launched new products and services ahead of the competition last year, and 46 percent said they were quick to innovate after seeing market trends.

For many credit unions, this move starts in the cloud: 42 percent are committed to adopting cloud solutions, while another 54 percent are “curious” or “considering” a switch, according to a CUInsight survey. Here’s what credit unions need to know. 

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Credit Unions Are Beholden to Members

Historically, credit unions have been reluctant to make cloud moves, owing to the complex nature of existing legacy systems and business-specific banking processes.

Unlike banks, however, credit unions rely more heavily on their membership to deliver sustainable ROI. As a result, they’re more likely to adopt new technologies — including the cloud — if their members push for the change.

With 76 percent of Americans now using mobile applications for common banking tasks, such as depositing checks or viewing balances, and 20 percent of credit union members saying they plan to permanently decrease the frequency of in-branch visits once the pandemic ends, the cloud is critical for sustained success.

As a result, credit unions are making the move.

MORE FOR CREDIT UNIONS: Learn how to avoid compliance issues in the cloud.

Benefits of the Cloud for Credit Unions

Of course, it’s one thing to recognize the benefit of cloud services in theory; it’s another to apply them to networks and services in practice. For credit unions, the cloud offers three key benefits:

  • Scalability: Cloud solutions can be configured on demand to meet changing resource needs. This offers a dual advantage for credit unions. First, they can expand service offerings to ensure continued satisfaction as membership grows. Second, there’s no need to move everything at once; instead, organizations can start with a measured approach to the cloud for critical data and services. If more rapid uptake is required, cloud scalability makes this possible at any time.
     
  • Availability: Credit unions can’t afford downtime for data and services. Not only does this negatively impact member perception of security and stability, but it opens the door to potential compliance challenges. Distributed, redundant cloud solutions help ensure continuous availability.
     
  • Affordability: Cost remains a top concern for credit unions, and for many is the primary benefit of adopting cloud services. With cloud platform market leaders now offering broad interoperability and no data lock-in, organizations can pick and choose the mix of cloud services that work best for their brand without breaking their budget.

Addressing Cloud Security Challenges

Security remains the top challenge for credit unions in the cloud. This isn’t due to the security of cloud providers themselves — industry leaders such as Google, Microsoft Azure and AWS all include robust security controls and defensive frameworks — but rather the interaction of data, staff and services in the cloud.

This is especially critical as credit unions shift to more permanent hybrid work structures. For example, American Banker notes that financial firms are now prioritizing spending on mobile device management and remote monitoring software to address the changing nature of work. As a result, credit unions often face uncertainty about what workloads should move to the cloud, and why.

Given the expanding impact of regulations such as the General Data Protection Regulation and the California Consumer Privacy Act, along with the more familiar Payment Card Industry Data Security Standard and SOC 2, there’s increasing pressure for credit unions to simultaneously boost service speed and availability without sacrificing security. Their best bet is an end-to-end evaluation of what can safely move to the cloud, what needs to stay onsite and which technologies can help streamline the process.

Credit unions are moving to the cloud as both operational requirements and member expectations evolve. But the shift doesn’t require an all-or-nothing approach. Instead, steady adoption, informed by specific needs, can help drive reliable cloud ROI.

This article is part of BizTech's EquITy blog series. Please join the discussion on Twitter by using the #FinanceTech hashtag.

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