Technology – A Panacea to Mutuals’ Challenges?

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Technology – A Panacea to Mutuals’ Challenges?

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How can Mutuals harness Technology to address their 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.

“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.”


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
  • Regulatory Concerns: Mutuals due to their smaller scale have to put in significant efforts into meeting statutory regulations adversely 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
  • 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 intent on extending the same to its Retail Lending business as well. Multiple Mutuals in UK are investing in cloud technology to compete 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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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 joining Nucleus, he held a variety of roles in strategy and product management with leading companies including CISCO, IPValue and Mphasis.

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About Nucleus

At Nucleus Software we are committed to providing efficient, modern yet proven software solutions for the global Banking and Financial Service industry. We have been pioneers in developing Retail Banking Software, Corporate Banking Solutions, Transaction Banking, Cash Management and Internet Banking Software since 1986. Our success spreads across more than 50 countries, and we serve our customers globally through our direct and partner operations across US, Europe, Asia-Pacific, Africa and the Middle East. We are known for our world-class expertise and innovation in lending and transaction banking technology. Our two flagship products, built on the latest technology are: FinnOne™ and FinnAxia™.