Disruptive technologies

Disruptive technologies are innovations which can significantly change the way industries, businesses and consumers operate. And, since new technology attributes are often better than legacy systems or processes, it becomes “disruptive” and replaces a well-established process, product, or technology.

Most technology is considered sustaining rather than disruptive. Sustaining technology evolves slowly and steadily over time. A disruptive technology is usually one that enters the mainstream and changes the way most people and consumers think or behave.

The disruptive technologies that are making the biggest impact in the credit union space are driven by artificial intelligence (AI) and include the subsets of machine learning (ML) and robotic process automation (RPA). Other notable disrupters include open banking applications, big data analytics and quantum computing.

Risk managers should work with senior leaders to develop an explicit statement of risk appetite in relation, specifically, to innovation. Consider including directives related to which risks are negotiable and where the credit union will draw a hard line.

• Determine within which business areas you’ll seek to be an earlier adopter of innovation and where you are comfortable joining later.
• Where will you take on risk, what forms of return are acceptable and how are these tracked?
• Is the cost of risk management for a particular product or service reflected in its business case?

As credit unions and financial institutions embrace disruptive technologies, the importance of a robust and scalable infrastructure can be key to successful implementation.

Disruptive technologies often require significantly more computing power, data storage, network bandwidth and integration capabilities than traditional systems. Without the right infrastructure in place, organizations risk underperformance, security vulnerabilities and operational inefficiencies.

Consumers and regulators expect organizations to identify, address, and mitigate risks such as privacy and protection of consumer data associated with new technologies. This means keeping abreast of current and upcoming consumer protection legislation and regularly evaluating its impact on new products and services.

As disruptive technologies, particularly those powered by AI continue to become more widely adopted by credit unions, the regulatory landscape unfortunately remains fragmented and underdeveloped. Currently, AI operates in a largely unregulated environment, though efforts are underway at both state and federal levels to establish clearer guidelines. Some courts have begun addressing the legal implications of AI, and future regulations may result in certain technologies being restricted or banned.

Risk managers should contribute to innovative development through risk identification, analysis and control. To ensure that risk controls are fully integrated into the final product, they should be engaged at all stages of development, testing, validation, implementation and ongoing monitoring.

With any change, moments of crisis can occur, which usually generate chaos. Specific efforts must be made to maintain control and resume operational standards. Having adaptive leaders and an agile team can help your organization respond positively to pressure, setbacks, challenges and change in order to achieve peak performance.

Ownership of disruptive technology adoption in an organization typically spans multiple roles and departments, depending on the organization's structure, strategy and maturity level. Executive leadership should set the strategic vision and ensure alignment with organizational goals.

Many organizations form dedicated innovation councils or digital transformation task forces that include representatives from IT, operations, compliance, HR and member services to help evaluate, pilot and scale disruptive technologies collaboratively.

Successful adoption balances innovation with responsibility and keeps member needs at the forefront. Organizations should begin by developing a strategic plan that aligns new technology initiatives with their broader goals, operational capabilities and risk tolerance.

Define clear objectives for how the technology will solve a problem, enhance member services, improve efficiency or support compliance for example. Assess current infrastructure and talent to identify gaps and readiness before beginning adoption work and incorporate ethical and regulatory considerations to ensure responsible deployment.