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THE LUMIN LAB

Banking on Digital: How Banks and Credit Unions Differ in Their Platform Needs

In today’s world, every bank and credit union needs a digital banking platform. But what they require from their digital banking solution is far from identical. Find out what sets them apart and why that matters.

It’s a tale of two cities… banks and credit unions. Comparing them to each other is like comparing Paris to Tokyo—while both aim to provide top-notch financial services to their customers, they each have their own banking traditions, practices, and appeal.

But the differences between banks and credit unions are not just limited to their form and function; they also extend to their approach to digital banking and what they require from their digital platform. Although both banks and credit unions strive to provide their customers with reliable, flexible options for managing their finances, their digital solution requirements can differ significantly–much like the contrast between Paris and Tokyo.

See what separates them and why it matters when finding the right digital banking solution for your financial institution.

Banks vs. credit unions: What’s the difference?

First, it’s essential to understand the fundamental differences between banks and credit unions. Banks are for-profit financial institutions owned by shareholders, while credit unions are not-for-profit organizations owned by their members. As a result, credit unions tend to focus on providing more personalized services and building relationships with their members, while banks often prioritize profits and shareholder returns. These core differences drive how banks and credit unions approach digital banking solutions.

It’s all about the customer (or member).

It’s no secret: banks and credit unions have different customer bases. Banks typically serve a large and diverse customer base, including individuals, businesses, and corporations, making their digital needs significantly more complex. On the other hand, credit unions usually serve a smaller and more local customer base, including individuals and small businesses. This main difference in customer base can influence the features and functionalities they require from their digital banking platform.

By and large, banks need a flexible and scalable digital banking platform that can serve their sizeable and varied customer bases, making their range of service requirements much more complicated. In contrast, credit unions want a digital banking platform that caters to its members. Their solution has to be easy to use and personalized, capable of providing a seamless experience to a more localized customer base and has features that help to foster a sense of community among members.

It’s all about security.

While both banks and credit unions need robust security mechanisms, their requirements couldn’t be farther apart when it comes to compliance. The different regulatory requirements impact not only their digital banking solution needs but also the level of complexity and cost involved in implementing such platforms.

As they’re subject to a wide range of federal and state regulations, banks typically invest heavily in compliance measures, such as AML and KYC checks, which are critical components of their digital banking platforms. They also need the ability to conduct robust reporting and analytics and produce paper trails of all their activities.

On the other hand, credit unions have more specific and localized regulations set by the National Credit Union Administration (NCUA), including the ability to perform member verification and authentication. Still, they may require a different level of complexity and investment than banks. While they’re generally subject to less stringent regulatory requirements than banks, this doesn’t mean that compliance is any less critical.

It’s all about goals.

When it comes to priorities and business models, banks and credit unions often have starkly different goals. As a credit union, your primary goal is to provide financial services to your members at a reasonable cost. This means you may need a digital banking platform that focuses more on member experience and satisfaction than maximizing profits. For example, you might be more interested in offering personalized service and support rather than trying to sell additional products or services to your customers.

As a bank, you’re beholden to shareholders, and your primary focus is to maximize profits. In other words, you exist to grow. Banks are always looking to innovate and evolve, and they expect (and need) a platform that will advance with them and do so at their accelerated pace. And, with a more diverse customer base, banks require a platform that can support their wide range of financial products and services—and those that are yet to come—to help them meet their profit and revenue goals.

It’s about finding the right partner.

Despite their differences in priorities, directives, and goals, both banks and credit unions ultimately want the same things from their digital banking platform…they want the right solution for their institution. There is no one-size-fits-all solution for either banks or credit unions; every institution will need a platform tailored to its unique requirements.

Selecting the right digital solution is just as much about the technology as the partner providing it. At Lumin Digital, we approach each engagement as a solution tailored to your unique needs. Our goal is to support your goals, today and in the future. From initial deployment to continued customization and future innovations and upgrades, we provide our partners with a digital banking solution that’s precisely what they need to succeed. Contact us to learn more about how we can illuminate your success.