1. Technology – A Panacea
To Mutuals’ Challenges?
Technology is transforming the way we bank and consumers are driving this transformation. Customer centricity is the buzzword
as banks’ processes and systems are being aligned with their customers. Current trends in banking like mobile first design, digital
branches, innovation, and enhanced customer experience are bringing about a disruptive innovation in the banking sector.
Technology is the enabler for driving new loan origination and better customer service.
Mutuals or cooperatives like credit unions, building societies, mutual banks, etc. are the lifeline in many nations like Australia, Africa
and South-East Asia. They have members who hold stake in the organization, making member service a top priority.
However, Mutuals today face significant challenges in the lending market.
Competition: Mutuals have to often contend with their larger rivals in the banking sector with deep pockets to invest in technological
capabilities. In addition, Mutuals also have to compete among themselves for acquisition of new members
Membership: Currently, Mutuals are struggling to acquire customers in the youth segment due to limited digital presence. In
addition, membership at many Mutuals globally is stagnating or experiencing limited growth
RegulatoryConcerns: Mutualsdue to theirsmallerscale have to putin significantefforts into meeting statutoryregulationsadversely
impacting their growth
Margins under Pressure: Despite Mutuals’ primary objective not being profitability, investments require a threshold profitability
level many Mutuals are struggling to meet
Mutuals’ larger rivals – banks, on the other hand, continue to maintain significant competitive advantage over Mutuals due to a
multiplicity of reasons.
Scale of Operation: National and even regional banks operate on a far larger scale compared to their Mutual counterparts. This
results in lower cost-to-income, higher interest income, and increased visibility leading to a massive lending portfolio
Diversified Product Portfolio: Globally many smaller banks have product portfolios more diversified than some of the largest
Mutuals. Mutuals on the other hand are focused on lending especially home and personal loans. Banks on the other hand lend
actively to SMEs and corporates
Financial Muscle: Banks possess financial strength far superior to even some of the biggest Mutuals allowing them to aggressively
market their loans & advances thus acquiring customers faster and across segments
Most Mutuals provide loans at rates lower than banks, making them significantly competitive. There exist 57000 credit
unions in 103 countries giving them a significant presence globally making them a highly heterogeneous bunch
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HOW CAN MUTUALS HARNESS TECHNOLOGY TO ADDRESS THEIR CHALLENGES?

2. ABOUT THE AUTHOR
Arup Das, Vice President and Lending Product Head (P&L Management)
Mr. Arup Das is the Vice President and Lending Product Head (P&L Management) at Nucleus Software
where he is responsible for taking the flagship product to the next level of global leadership. Before
joiningNucleus,heheldavarietyof rolesinstrategyandproductmanagementwithleadingcompanies
including CISCO, IPValue and Mphasis.
Nucleus Software is the leading provider of mission critical lending and transaction banking products to the global
financial services industry. With three decades of expertise and experience, today, it powers the operations of
more than 150 companies in 50 countries, supporting retail banking, corporate banking, cash management,
internet banking, automotive finance and other business areas.
ABOUT NUCLEUS SOFTWARE
Technology: A major area of focus by banks has been investments in next-generation technology to acquire customers and provide
better service. Only the largest Mutuals on the other hand have made significant IT investments in these areas
With a multiplicity of challenges, Mutuals can overcome the same by harnessing technology; something that smaller banks across
the globe have followed suit to counter large banks’ dominance. Lending being the primary source of income for Mutuals, lending
enterprise solutions and core banking solutions should be at the forefront of priority IT investments. Cloud is an area of focus as
many Mutuals have sought next-generation solutions for the scalability and flexibility benefits provided at a lower cost.
Analytics/Business Intelligence (BI) solutions for lending can be harnessed for improving customer lifetime value of its existing
customers by providing business loans to its members. World Council of Credit Union’s Vision 2020 of reaching out to 50 million
new members can be achieved cost-effectively by having a mobile presence as compared to physical branches which are often more
expensive to operate. These measures are highly effective in a digital world where customers opine technology as a key component
of experience but Mutuals don’t have the manpower to address the same.
Mutuals across the globe are adopting technology, albeit at a slower pace compared to banks. A US based credit union has invested
in a lending solution as a means to improve customer experience through omni-channel presence for its lending portfolio, reporting
increase in loan originations and decrease in service costs. Another credit union is developing internal processes for faster loan
processing for its business loans. It also invested in technology to support its sales team in originating business loans faster, now
intentonextendingthesametoitsretaillendingbusinessaswell.MultipleMutualsinUKareinvestingincloudtechnologytocompete
with bigger banks by providing higher interest rates on deposits and lower borrowing rates as a competitive advantage.
In a nutshell, Mutuals are transforming their business model and technology is enabling the same at a rapid pace. The rise of FinTech
lenders – Alternative Tech lenders who are harnessing the power of internet to provide small but higher risk loans is another catalyst
for cloud adoption, which is driving rapid adoption in the Mutuals segment. These trends suggest that it won’t be too long before
technology becomes pervasive globally as an integral part of Mutuals’ business model.
Nucleus Software’s state-of-the-art mobility and analytics solutions, part of the FinnOne NeoTM
lending product set, equip Mutuals,
banks and other financial institutions to not just meet evolving customer expectations, but to drive growth through customer
satisfaction. It has been designed to be delivered specifically via public or private cloud as well as on premise. Nucleus Software
continues to monitor the evolution of technology as leveraged by banks and financial institutions worldwide, to proactively build
and provide robust solutions that empower banks and Mutuals’ to stay ahead of the curve.
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