Last month, I introduced Adolphe Quetelet; a 19th century mathematician who proved that complex systems (like credit unions, serving thousands of members with hundreds of solutions; and an entire cooperative movement, made up of thousands of said credit unions) and their outputs were predictable.

That predictability covers any system’s entire performance – including waste. In part 2 of this series, we’re looking at another prime culprit of credit union waste: friction loops.

Friction loops are the underlying conditions, processes and services that allow you, your teams and your members to just go round and round in relentless pressure-building circles without ever resolving the issue at hand.

Loan losses and how not to solve them

Meet Credit Union Y. $150 million in assets, 8,000 members, and they came to us because over four consecutive quarters, their loan originations had dropped 50%.

That’s a problem, but they were pretty sure they knew the reason: some 65% of their online loan applications were abandoned. And when two-thirds of your online loan applications are abandoned, that’s a flashing red light so you try and fix it, right?

The credit union starts shopping around to solve this issue of abandoned online loan applications. The first company they speak with says, “Hey, we have an AI bot that will follow up with people. If they started an application and didn’t finish it, we’ll chase them around and say, ‘Come back and finish the application!’” 

They also spoke to a marketing company whose solution was search engine optimization; the science of getting the Google Gods to put your credit union in front of people. “We’ll drive more traffic to your site and therefore increase your loan application volume,” they say. “Problem solved!”

What’s the real issue here?

When Mission Brands were asked, we said, “Well, hang on, if you’re seeing 65% of people dropping off of your loan application . . . let’s look at your loan application.” Occam’s razor, right?

What we found was that in the last rate cycle, due to some liquidity constraints, Credit Union Y adjusted their credit box. As part of that adjustment, they’d updated their loan form flow to include more qualifying questions, and they’d simply over-engineered the form. Now they were asking for over a dozen inputs, when what their underwriters really needed was just four or five.

The application was more complicated, took longer, and was clearly frustrating for users – so people were abandoning it. 

Friction loops create more friction loops

The bulk of those applicants are lost to the credit union – they’ve moved on to another lender that makes it faster and easier. 

The more loyal members, the ones who really want to work with the credit union, picked up the phone and said, “Hey, I need a loan. Can you help me out here?”

Now Credit Union Y doesn’t only have a problem with declining online applications; they have increased call volume, too. And what does any self-respecting credit union employee do when a member calls up, asking for a loan? They help.

So now, in addition to dropped app volume and increased call volume, Credit Union Y has employees circumnavigating the expensive auto-decisioning tech that sits behind online apps.

They’re processing loan applications over the phone, tying up staff, letting good tech die on the vine. Pressure builds, productivity slows, originations grind to a halt. And what happens when things slow down? More phone calls. “Where’s the loan, man? I called you two days ago.” 

Now member loyalty’s eroding, trust is going out the door. And when your loyalty and trust drop, your demand for loans plummets – and that’s how you see a 50% drop in origination over 12 months.

It’s all about that hockey stick swing

When you operate a complex, macroscopic environment, everything is connected and systems impact each other. And when the friction loops run unchecked and the pressure hits a critical point, your output doesn’t slow gradually any longer. You get that hockey stick upward swing. It’s unforgiving, and it’s a critical risk to your organization.

This is the same math used to predict traffic jams – when you’re driving and tap the break for a millisecond, the person behind you taps theirs for a whole second, the person behind them for two seconds, and so on until, suddenly, nobody’s going anywhere.

Now let’s do some math

What does all this mean in practice? Let’s look at the users who abandoned their loan application because of friction loops. 

For Credit Union Y, let’s say they were originating 1,000 loans (down from 2,800 before performance dipped) and say they managed to bring back 20% of those abandoned applications. That still leaves 1,230 lost applications.

If the average loan value is $12,000 with a 3.5% margin, that means the credit union lost out on $517,000 in interest income.

The fix, by the way, was to go through their loan origination system and update the application, which cost them nearly $20,000.

They broke even in four weeks. 

Here’s your friction loop homework

Use your credit union like you’re a member. Go to your website. Apply for a loan. Open a CD. Get a credit card. Whatever it is, I promise you, the experience will be eye-opening.

Make notes along the way, take screenshots, record every confusing step and broken link. Then go back to your team and ask questions like you’re the new kid. Do we really need this input? Can we better explain why we’re asking this? Is it clear what happens next? 

Any disparities – like asking 12 questions on an application when you only need four answers – are causing friction loops. This is where you are driving waste and hurting your members. And this is your chance to fix it.

This article has been adapted from a presentation Sam Plester gave at America’s Credit Unions’ Small Credit Union Conference, New Orleans, May 2026. To discuss a speaking opportunity or book Sam for your next session, please contact us.