Credit Unions Look to AI to Cut Costs--and Scale Work Without Scaling Teams

While large retail and investment banks go all in on AI - often replacing workers in the process - Canadian credit unions are taking a different approach to implementing the technology, according to a new report released today. Part 2 of the two-part Banking Disruption Index from global AI and digital transformation company GFT Technologies finds that one of credit union’s top AI goals is to cut costs (28%), a concentration retail, commercial and investment banks do not share. However, 0% plan to do this by letting go of workers. According to GFT’s report, credit unions’ other top goal for AI, which supports its initiative to cut costs, is to increase the efficiency of current internal operations (28%). This includes enhancing everything from portfolio management to automated compliance and customer support. Despite 72% of credit unions dedicating less than 40% of their IT budgets to AI initiatives, return on their AI investments are already being seen in those key areas. Credit unions are even generating higher ROI from portfolio management (11.76%) and automated compliance (23.53%) than other banks, such as retail banks, whose return percentages in those areas are below 5%. Although firing may not be top of mind in conjunction with AI, the Banking Disruption Index revealed that hiring is also not a concentration, with no respondents citing it as an AI priority. Instead, credit unions must upskill the talent they already have in order to scale operations. The report highlights key areas where this AI implementation strategy is paying off as well as where there are challenges:

• Credit unions are all in on customer facing AI. Seventy six percent (76%) of credit unions are using AI for customer service. And their dedication is paying off with the institutions seeing the most ROI from automated customer support (23.53%). The success is not only benefitting the business, but also their customers with 94% of credit unions stating their customers are satisfied with their AI offerings.
• Lack of AI knowledge is causing internal roadblocks. Credit unions are still working through internal challenges with teams. Twenty two percent (22%) lack personnel they deem as skilled in the technology and another 22% are grappling with cultural resistance to AI adoption.
• Credit unions are ahead of other banks in their usage of predictive analytics for loan approvals. While only 3% of investment banks have seen ROI from AI driven loan approval capabilities, 12% of credit unions have experienced gains. This is also higher than retail (4%) and commercial (5%) banks.

“Credit unions have a huge opportunity to attract Canada’s younger population - and the way to do this is to heighten focus on digital capabilities like AI,” said Andre Gagne, CEO of GFT Canada. “While the amount and rate at which the Big Six are investing in new technology may not be easily matched, despite co operatives' historically smaller size they have just as much potential to benefit from AI. By strategically dedicating small amounts into the areas that will make the most impact, credit unions have the opportunity to not only keep pace, but surpass the gains other institutions are seeing.” GFT surveyed 200 IT decision makers in banking to better understand how they are implementing AI and where it is driving tangible value.