WASHINGTON–Nearly two-thirds of credit unions say they are now using live decisioning in their consumer lending process, and are seeing lower delinquency rates than CUs not using loan decisioning.
The results were released by Callahan & Associates, which surveyed 333 credit unions regarding automated decisioning practices and found 63.66% employ the technology.
“Some credit unions worry their delinquency will be negatively impacted by implementing consumer automated decisioning; however, this survey found that the median consumer delinquency rate was actually lower at credit unions with a consumer LOS, at 49 basis points (vs) 55 basis points, (which was) the median consumer delinquency ratio of those credit unions that do not use automated decisioning,” said Liz Furman, an industry analyst at Callahan & Associates.
Respondents using automated decisioning technology have a median efficiency ratio of 79%, five percentage points lower than those that do not, Callahan’s reported. However, the median efficiency ratio for credit unions with less than $100 million in assets is four percentage points higher for institutions that use consumer automated decisioning, according to the survey.
“It’s an indication that executives at smaller credit unions are perhaps accepting the upfront costs of implementation with the expectation of future growth and efficiency,” the company said in its analysis.
In addition, the survey found credit unions respondents that use auto decisioning for consumer loans have higher rates of five-year consumer loan origination compounded annual growth rates (CAGR). The median for those that auto decision is 13%, compared to the 8% CAGR for those that do not, Callahan’s said.
Other findings in the survey:
- The median loan-to-share ratio for credit unions that report using automated decisioning is 81%. That's higher than the 73% that is the median loan-to-share ratio for credit union respondents that do not use automated decisioning.
- Average member relationship correlates positively with consumer loan origination systems. The median average member relationship for credit union respondents that auto decision is $16,971, with half of the results between $14,329 and $20,474. Comparatively, credit union respondents that do not use automated decisioning have a median average member relationship of $13,318, with half of the results between $10,861 and $15,937, Callahan’s said.