What 'CU' Can Also Stand For, and Another Lesson Learned This Week - By Frank J. Diekmann - CUToday

 By Frank J. Diekmann - Frank is a Keynote speaker at this year's New Orleans Conference.

As I was placing my bag in the trunk of my Uber at the San Antonio airport last week, I couldn’t help noting his license tag began with “CU.” Occupational hazard, I suppose, but I immediately wondered if he was a member or had worked at a credit union, or, who knows, maybe a CU had financed the car.

Two minutes into the ride downtown—thank you, San Antonio, for not only not burying your river in a pipe but also for having an airport that isn’t another flight away from the city center—the driver asked the Uber-driver-mandated question about why I was in town.

“I’m here to speak to a credit union conference,” I responded.

And given the license plate, this is where I expected him to start talking all things credit union. San Antonio is, after all, among the strongest markets for credit unions in the country, with major CUs such as Randolph-Brooks, Security Service, United Texas, PenFed, Firstmark, and, fittingly, Alamo City among the high-profile brands in the market, along with many others.

“Oh. Are there credit unions in San Antonio?” he asked. 

We were driving past the office tower headquarters of Credit Human Credit Union at the time, by the way.

Realizing the “CU” on the license plate was not some sort of endorsement for financial co-ops (or even knowledge of them), and perhaps an abbreviation for Clueless Uber, I explained that there are indeed quite a few credit unions in the San Antonio market and that he might want to try one.

The moral of the story (once again): You just can’t tell your story often enough.

One more thing: As we approached my hotel a commercial came on the radio in which the announcer in a car commercial—as required by law--shouted, “Buy American! Buy Dodge!” Which was interesting, since Dodge is now owned by Stellantis, which is based in Amsterdam. 

The moral of that story, as we’ve all sadly come to learn in recent years: If you say something false often enough, it becomes true.

The Importance of Story Telling

A day after speaking the Education Credit Union Council meeting, I had the additional pleasure during NAFCU’s Strategic Growth Conference in Greenville, S.C., of getting to moderate a very interesting panel session on how credit unions are using social media.

While there, I had lunch with a group of credit union leaders, one of whom had only recently joined Truliant FCU in North Carolina. 

When I mentioned that his credit union had been the linchpin in one of most consequential events in U.S. credit union history, an event that changed the course of the entire industry in ways both positive and negative, he admitted he had no idea what I was talking about. (And I admit, I get that a lot.)

So, I explained the credit union’s history, back when it was still known at AT&T Family FCU and when in the early 1990s it had expanded its “field” of membership outside of the core sponsor. That led, of course, to a lawsuit filed by the banking industry that went all the way to the Supreme Court, where credit unions lost their case after the high court ruled the FCU Act said “group,” not “groups” when it came to field of membership. 

The decision was followed by a massive grassroots lobbying effort by a rather inexperienced credit union community that still fought and scraped and rallied enough support in Congress for a landslide vote to pass the Credit Union Membership Access Act, opening the way to the widely expanded charters we see today and a roadside littered with the bodies of CUs that never adjusted and a road full of multi-billion-dollar CUs that did.

That’s another story worth telling, and not just to the newbies at Truliant.

Can’t Be Forgotten

History should never be forgotten, as that’s where all the lessons lie. I thought about that again this week with the news Jim McCormack had died. Mr. McCormack was the president of the then Pennsylvania Credit Union League and was invaluable in working with then Rep. Paul Kanjorski (D-PA), who co-sponsored the CU Membership Act and who helped shepherd it through Congress (where it got out of committee by one vote).

Had McCormack and Kanjorski and so many countless, countless others who stuffed envelopes and held signs and made phone calls not pushed the stone up the mountain against a banking industry always working to kick it back down, then it wouldn’t just be the occasional Uber driver unaware of what credit unions are, it would be an Uber XL fleet of Americans also ignorant of the same.

That history and those people must never be forgotten.

Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of  several new book, including the brand new “The Last Lyric,” a humorous satire about a murder investigation at the Rock & Roll Hall of Fame in which every line of dialogue is either a classic pop/rock song title or lyric. Available on Amazon, Apple iBook, Barnes & Noble and Smashwords.  Mr. Diekmann is also author of a non-fiction compilation of the very best & worst he has seen and heard in covering more than 500 CU meetings and conferences, “501 Name Tags: How Everything You Need to Know About Business Can Be Learned at a Conference & Forgotten in the Trade Show.” It is available on Amazon, Barnes & Noble, Apple, Lulu, and Smashwords.   

Dialing Into Your Member-Centric Mission - It’s time to ask yourself: is your organization truly member-focused?

Have you ever stopped and thought about how remarkable cell phones are? With so many new models emerging on the market, it’s easy to take for granted how much of an impact they’ve had on our lives. With this small, powerful tool, we have unlimited access to networks, information, and relationships – all in the palm of our hand. Technology continues to shape much of who we are as a society today, and your association is no exception.

In the late 1990s, Larry Page and Sergey Brin were two Ph.D. students at Stanford, who began collaborating (in their garage!) on a new piece of technology after it appeared to Page in a dream. When they started telling others about their revolutionary idea for a “search engine,” they were mocked and often disregarded by corporate investors.

Despite the lack of faith and support, they persevered. Three fundamental beliefs would drive Page and Brin as they began to expand their company:

1. People want to do meaningful work.
2. They want knowledge about what is happening in their environment.
3. They want the opportunity to shape that environment. 

For those of you familiar with this story, you know that Larry Page and Sergey Brin went on to found Google, pioneering the field of search engine optimization. Their invention would have a resounding impact on the workforce and pave the way for other tech companies. Today, Google is widely considered to be one of the happiest (and most productive) workplaces in the world. Following Google’s launch, corporate giants followed Google’s model, vowing to put their employees first. When we look back on these models today, they make sense, but we have struggled to adapt many of the practices to our membership organizations. 

Many associations like to think that they put people first, but in actuality, they have lost sight of their membership mission. It’s time to ask yourself: is your organization truly member-focused?

To answer this question, you may be searching for the answers (perhaps even on Google!). Association technology companies have started to help provide answers by specifically creating content on how to build community, recruit members by creating a membership strategy. This, of course, is helpful, but if you think about the fact that a future-focused approach is working for so many companies, the solution may be more obvious – start mirroring what they are doing. You can begin by adopting the mindset of Larry Page and Sergey Brin’s and applying their three key principles:

1. People want to do meaningful work.

Undoubtedly, people in associations want to connect to something meaningful. This is your cause, your mission – the reason your members join your community.  

2. They want knowledge about what is happening in their environment.

Your members want to be informed about what is happening within your association. Create open lines of communication using a host of channels, including online tools and platforms. Be sure to update your website regularly and create opportunities for your members to learn more about your organization’s mission. 

3. They want the opportunity to shape that environment.

Putting your members first means giving them a seat at the table. By volunteering for leadership roles and serving on your board or committees, they want to help shape the environment within your organization. We must be willing not just to let them take a seat but also to allow them to shape the culture and direction of the organization.

The first associations were founded in the 1600s, and it could be argued that their initial model hasn’t changed much since. Board members or leaders held their seats for long periods, and members who had “paid their dues” would be ushered in as the next generation of leaders. Many organizations are used to hierarchies and traditions, ultimately becoming conditioned to rely on dated systems. To make sustainable change and truly put your members first, you have to be willing to innovate, modernize, and collaborate. 

Bring on new leaders who can bring fresh perspectives and ideas to the table. To stay a generation ahead, you want your leadership to be representative of your entire membership community. Survey your members regularly or get insight via interviews, think tanks, or task forces. No matter what you do, remember that your members’ voices should be louder than any other. 

It is a critical time for your association to consider the following: in every area where you interact with your members, in every aspect of your offerings, your value proposition, your mission – are members the priority? With a few simple changes, they can be. I guarantee that as a result, your organization will be one step ahead of the rest and on track for a more prosperous future.

Consider working with us to make your organization one that members flock to.

Americans whose primary checking account is with a digital bank has skyrocketed since 2020

Consumers and businesses have settled into new digital banking patterns that are disrupting the primary financial status of legacy banks and credit unions, impacting growth and longstanding relationships. To respond, financial institutions must consider new targeting and product development alternatives that may include a national footprint.

One of the major impacts of the pandemic is the increased comfort level consumers have with digital interactions and the decreased reliance on bank branches. This has significantly impacted the array of financial institutions a consumer will consider when they want a financial solution, and where they are opening new accounts. The result is a dramatic increase in the number of consumers who have their primary banking account at a fintech and/or big tech organization.

To respond to this shift in banking loyalties, traditional financial institutions must decrease their reliance on branch footprint, and consider a much broader digital account acquisition strategy to generate new deposit, loan and payments growth. For organizations smaller than the largest megabanks, there will also be the need to target specific customer segments at scale, building differentiated offerings.

Wake-Up Call for Traditional Banks

Financial institutions are realizing that the increase in digital banking use is not a temporary phenomenon caused by the pandemic, but a seismic and permanent shift in the way consumers and businesses conduct daily banking. This shift is impacting the way customer experiences must be enhanced and relationship engagement increased.

According to research from PwC, there’s a large and growing segment of the population that can be considered ‘digital natives‘, with a preference for avoiding branches and conducting all of their business on digital channels (32%). At the same time, there is a shrinking segment of consumers who prefer digital channels but also like having a local branch. The reduction in this segment was caused by some consumers shifting to a digital-only behavior, while others reverted to their pre-pandemic branch-based behavior.

The decrease in physical branch usage began way before the pandemic, with consumers in all age categories embracing digital alternatives to save time. What is different today is that this flight to digital is also beginning to impact the organizations consumers are choosing to conduct business with. More than ever, existing customer loyalty is being challenged by channel agnostic options where data and applied analytics allow a customer to get more personalized solutions when and where they

Consumers Moving to Alternative Providers

Over the past decade, non-traditional financial institutions have entered the banking ecosystem, offering digital-only specialized solutions. The pandemic served to accelerate the shift away from traditional branch-based banks to digital banks, suggesting an increased level of trust and overall comfort with big tech and fintech alternatives.

A study from Cornerstone Advisors found that the percentage of Americans whose primary checking account is with a digital bank has skyrocketed since 2020. According to the research, more than a quarter of consumers aged 21 to 26 (Gen Z) and nearly a third of Millennials (age 27 to 41) now call a digital bank their primary checking account provider. For those who think that only younger consumers are making the switch, the percentage of Gen X consumers (age 42-56) who have their primary account with a digital bank grew from 8% to 22% since 2020.

 “Digital banks aren’t the ‘challenger’ banks, anymore,” states Ron Shevlin from Cornerstone Advisors. “They won. More Gen Zers and Millennials call a digital bank their primary checking account provider than those that consider a community bank or a credit union to be their primary checking account provider – combined.” The research from Cornerstone found that six in ten Gen Z consumers and Millennials whose primary checking account is with a digital bank has that account with Chime, PayPal or Cash App.

The impact of this shift is not equal across all types of financial institutions. Interestingly, the most significant negative impact is being felt by the largest traditional banks. While the top megabanks dominated consumers’ primary checking account assignments as recently as 2020, the percentage of Gen Z consumers whose primary checking account is with a top five bank has dropped from 35% to 25%. Among Millennials and Gen X consumers, the percentages declined by almost half.

Beyond the changes in primary account growth at megabanks, credit unions have also been negatively impacted, with the percentage of Gen Z, Millennial, and Gen X consumers calling a credit union their primary checking account provider declining by roughly 30% between 2020 and early 2022. Interestingly, community banks actually gained share in primary checking account status across four generational segments during this same period, with regional banks being somewhat unaffected.

By Jim Marous, Co-Publisher of The Financial Brand, CEO of the Digital Banking Report, and host of the Banking Transformed podcast

If Your Credit Union Wants a Future, Plan for It - By Todd M. Harper

The old Benjamin Franklin saying, “if you fail to prepare, you are preparing to fail,” rings true even today when credit unions fail to plan for their futures.

For far too many credit unions, especially smaller ones, the failure to adopt and implement a succession plan needlessly exposes them to the whims of outside interests and the potential that a merger is their only option when senior leaders leave. An NCUA analysis found that poor management of succession planning was either a primary or secondary reason for nearly one-third of all credit union consolidations. While the pandemic initially slowed the pace, the number of mergers is now, once again, increasing. And the lack of a succession plan is a primary reason why.

A succession plan allows an organization to prepare for the unexpected and thereby minimize service disruptions during management transitions. A credit union board’s failure to plan for the transition of its management could come with high costs, including the potential for the unanticipated merger of the credit union upon the departure of key personnel.

Previously, I served on the board of a small non-profit organization and saw firsthand the benefits of succession planning. At the time, that organization had annual revenue of approximately $650,000, and it underpaid its leader. The board’s foresight in developing a succession plan, including what would happen if the leader departed suddenly, and increasing the salary structure allowed the organization to withstand the uncertainties created during a management transition. At approximately the same time, another non-profit with a similar mission, in the same vicinity, and more than twice the revenue folded when its chief executive abruptly left. What was the difference? That organization lacked a succession plan.

Having a succession plan in place is even more important today because of several external factors underway. First, there is the steady, long-standing decline in the number of credit unions. This trend has remained relatively constant across all economic cycles for more than three decades. We are losing credit unions much faster than we can replace them with new charters. Small credit unions are the core of the credit union movement, and we must find ways to keep them viable over the long term.

Another reason for a heightened focus on succession planning is the ongoing retirements of the “baby boomer” generation. The COVID-19 pandemic has accelerated the pace of retirements among this generation. And according to a leading mutual insurance company spokesperson, even before the pandemic started, approximately 10% of credit union CEOs were expected to retire between 2019 and 2021. Succession planning is critical to the continued operation of those credit unions for the board members and executives who are part of this retirement wave. It is no coincidence that the word success appears so prominently in the word succession.

The NCUA has long touted the benefits of succession planning in its guidance to credit unions, which includes considering succession planning in the management component of the CAMEL(S) rating. However, given the extent of credit union mergers, we must consider a new approach. The NCUA board recently proposed a flexible rule requiring succession planning. Although the proposal would only apply to federal credit unions, this rulemaking at its core would help ensure credit unions of all sizes have strategies in place to fill crucial positions and remain viable for generations to come.

Instead of applying a rigid methodology for such strategic planning, this proposed rule would provide credit unions the flexibility to develop succession plans that best meet their needs. If the rule is adopted as proposed, it would at a minimum, require that the plan identify key positions, necessary competencies and skillsets for those positions, and strategies to fill vacancies. It would also require the credit union’s board to be aware of the plan and review it annually. Those credit unions with a succession plan already in place would not be required to alter their existing plans.

Succession planning is a top priority for the NCUA, and it must be for all credit unions, regardless of size. I encourage credit unions and other stakeholders to review the NCUA’s proposed rule and provide comments and feedback by April 4. We want to understand what the industry thinks, so we can finalize a rule that is effective and useful for credit unions and the credit union system, and one that ensures an unplanned, last-minute merger is not the only viable option.

We want the credit union system to succeed. We want to keep small credit unions. We want to get this right.

Todd Harper (Source: NCUA)

Todd M. Harper is Chairman of the NCUA in Alexandria, Va.

What’s New In The 5300 Call Report? Major revisions to the call report take effect in the first quarter of 2022. Here’s what you need to know.

Callahan's Creditunions.com 

The NCUA approved major revisions to the 5300 Call Report that take effect in the first quarter of 2022. These changes involve substantial reorganization and restructuring of most sections of the call report, including the removal, addition, and modification of more than 1,000 combined account codes.

The changes are part of the Call Report Modernization Project that began in 2016. The project aims to reduce the reporting burden for credit unions by:

• Streamlining the call report process.
• Reorganizing and improving data collection.
• Accommodating the complex credit union leverage ratio (CCULR) and the risk-based capital (RBC) schedule.

CCULR Versus RBC? Which One Is Right?

Credit unions with less than $500 million in assets are considered non-complex credit unions. The regulatory capitalization rules for these credit unions remain unchanged.

Credit unions with more than $500 million in assets are considered complex credit unions. They must choose between regulatory capitalization formulas — CCULR and RBC.

Complex Credit Union Leverage Ratio (CCULR)

The CCULR was designed to provide a simpler measure of capital adequacy for complex credit unions. If an institution meets the qualifications listed below, it may elect to use the CCULR.

CCULR qualification criteria include:

• A net worth ratio of 9% or greater.
• Off-balance sheet exposures of less than 25% of total assets.
• Trading assets and liabilities less than 5% of total assets.
• Goodwill and other intangible assets less than 2% of total assets.

If  an institution qualifies for and elects the CCULR method, it does not have to complete the RBC schedule.

Risk-Based Capital (RBC)

If an institution has more than $500 million in assets and does not qualify for CCULR or elects not to use the CCULR option, it must complete the more complex RBC schedule on pages 24-28 of the new call report.

A credit union is considered “well-capitalized” if it uses the CCULR method or has an RBC ratio higher than 10%.

Of note: Complex credit unions with more than $500 million in assets are now allowed to issue secondary capital as subordinated debt and count this value toward their RBC calculation. Secondary capital issuance was previously limited only to credit unions with a low-income designation.

  Notable Changes To The First Quarter Call Report

The call report changes that took effect between the fourth quarter of 2021 and the first quarter of 2022 are substantial and represent the bulk of the Call Report Modernization Project.

The major areas of change include:

• Expanding information on foreclosed and repossessed assets.
• Removing commercial loans from the real estate lending detail.
• Reducing delinquency and charge-off categories and aligning them with loan types.
• Adjusting indirect loan and participation reporting requirements.
• Restructuring categories for investment portfolio reporting.
• Providing new information on off-balance sheet exposures.
• Adding CCULR and RBC calculation schedules.

Many of these changes involve separating, offering additional detail, and aligning information related to commercial lending.

In addition to these changes, the NCUA reorganized much of the call report. Many schedules moved to new pages and areas, although the account codes themselves remain unchanged.

Will This Impact Performance Analysis?

Most of the commonly used account codes in Callahan & Associates’ software programs remain unchanged. Additionally, Callahan is working to ensure all pre-built displays and formulas are minimally affected by the call report changes.

However, not all displays will be cleanly updated. For account codes that have been removed entirely, displays containing them might be retired or relocated. Some displays will no longer be able to accurately trend across time periods pre-and-post these changes.

Reporting areas that are unchanged or insignificantly changed from a reporting standpoint include:

• Top level balance sheet items like assets, loans, shares, and all major loan and share categories.
• Income statement and earnings metrics.
• Commercial lending categories.

Displays related to the following categories might be relocated, retired, or trend inconsistently between the fourth quarter of 2021 and the first quarter of 2022.

• Detailed mortgage information — originations, fixed/adjustable/balloon, etc.
• Delinquency and charge-offs — commercial loans are now broken out separately by loan type.
• Investment portfolios — investment categories have adjusted and been regrouped.

Additions to the 5300 Call Report provide new insights for displays. These include:

• Indirect lending and participation breakdowns.
• Foreclosed asset breakdowns.
• Pullable CCULR and RBC ratios for all complex credit unions.

Callahan understands these changes can be overwhelming. If you have questions or need assistance, reach out to analystsupport@callahan.com or contact Callahan through the chat feature within Peer Classic or Peer+.

Are you interested in learning more about the changes with the 5300 Call Report? Register today for our webinar on April 7th where we will discuss the 5300 and its implications for credit unions moving forward.

No Fooling: Change from CAMEL to CAMELS Goes into Effect April 1

 WASHINGTON—Changes to NCUA’s rating system—to CAMELS from CAMEL—start April 1.

Credit unions with examinations beginning on or after April 1 will fall under the new system.

The CAMELS system, which stands for Capital adequacy, Asset quality, Management, Earnings, Liquidity, and now, Sensitivity to market risk, was approved by the NCUA board in 2021.

CUNA reminded that under the CAMELS rating system:

• The “S” component addresses sensitivity to market risk and interest rate risk (IRR) governance. It documents a credit union’s market sensitivity level and how the credit union measures, monitors, and manages market sensitivity. 
• The “L” component evaluation has been modified to only consider available sources of funds and liquidity risk management It documents a credit union’s liquidity risk level and the credit union’s liquidity risk management program.

NCUA Letter Published

NCUA issued a Letter to Credit Unions (22-CU-05) recently with appendices, including the updated CAMELS rating system and addressing common questions regarding the updated system

CUToday

Visa, Mastercard Revisions Will Cost Merchants more Than $475 Million Annually, Economist Says

 NEW YORK—The two biggest U.S. card networks are preparing revisions to their interchange schedules that at least one research firm says will cost U.S. merchants an estimated $475 million in additional transaction fees.

Though Visa Inc. and Mastercard Inc. have historically revised their rate schedules each April and October, “this April is particularly significant,” Callum Godwin, the Atlanta-based chief economist for CMSPI, a United Kingdom-based research firm, told Digital Transactions.

The firm’s estimates indicate the changes in Visa’s rates will add up to a net $145 million in additional cost to acquirers. For Mastercard, the impact will net out to $330 million. The networks do not collect interchange. Merchant processors pay interchange to card-issuing banks and then pass the cost along to their client merchants.

E-Commerce Merchants to be Hit

In general, e-commerce merchants can expect the heftiest impact, according to CMSPI estimates, which Godwin said are based on new rate schedules circulating among processors. Meanwhile, Mastercard’s new rates for small grocers will see increases that “are quite substantial,” according to the firm’s review.

On the other hand, Mastercard is lowering rates for passenger transport, travel and entertainment, and day care. Visa, meanwhile, is reducing rates for small businesses. “Individual merchants have a fairly challenging task to figure out how [fee changes] impact them,” Godwin said.

The new rates represent the first significant set of changes to the interchange schedules since 2019, as the global networks largely left their rates alone in 2020 and 2021 in view of the impact of the COVID-19 impact on businesses, according to the report.

The latest round of changes also represent a softer net impact than the one CMSPI estimated for rates the networks originally intended to introduce a year ago, Digital Transactions said.

‘More Valuable’

“Electronic payments have proven even more valuable since the start of the pandemic, and that’s why we’re seeing merchants encouraging their customers to use electronic forms of payment,” a Mastercard spokesman told Digital Transactions, adding Mastercard is reducing rates for hotels, rental-car companies, and casual-dining establishments “to encourage recovery in the merchant categories that were hardest hit by the pandemic.”

For its part, Visa is “lowering key in-store and online consumer credit interchange rates by 10% for more than 90% of American businesses,” according to a Visa spokesman. As for rate increases, he adds, these are “largely avoidable and apply to transactions that are sent to Visa with insufficient data, are coded incorrectly, carry increased risk, or are processed without using a Visa EMV payment token.”

5 Mortgage Processes Credit Unions Should Automate Today

Credit unions, like all mortgage lenders, are under pressure to meet member expectations for fast, secure and convenient digital experiences across the board. Credit unions must meet and exceed their members’ demands to remain competitive. And to do that, credit unions need to automate the lending process. To help credit unions on their automation journeys, here are five mortgage processes they should automate now:

1. Appraisals

Typically, appraisals are among the longest, most expensive and most essential pieces of the mortgage process. Automating appraisals offers benefits to both credit unions and their members. For example, credit unions can use data analysis tools to analyze such factors as comparable home sales to determine home valuations in seconds, saving their members the cost of hiring appraisers. Automating the appraisal also accelerates the mortgage process, as members don’t have to wait weeks for their credit unions to receive their appraisals.

2. Cross-Selling

As competition for new members is heightened from traditional and non-traditional financial institutions, integrating cross-selling products has become advantageous for creating revenue and increasing member retention. Credit unions are more likely to know their membership base, and there has never been a better time to leverage this knowledge to deepen existing relationships.

Debt optimization is an example of an automated process a credit union can tap into prior to a mortgage loan closing. This automation analyzes a member’s financial data to determine if there is existing consumer debt that can be consolidated or refinanced within the credit union, allowing the possibility of a lower mortgage loan rate or better loan.

While this option may not benefit everyone applying for a mortgage loan with the credit union, there is still an opportunity to cross-sell during the post-closing process. Through the click of a button in the mortgage loan origination system (LOS), the member’s information is automatically populated into the consumer LOS to promote other consumer lending products such as credit cards, pre-qualified auto loans and personal loans.

Collaboration is only possible if credit unions implement automation technology that enables integrated operations. With automation, credit unions can work together across product lines to provide their members with more efficient, top-notch homebuying experiences.

3. Disclosures

Delivering accurate disclosures to borrowers at the right time is a critical part of the homebuying process. As such, credit unions depend on their loan officers to get the closing documents ready and send them to their members. However, relying on humans to complete this step in the process can often result in errors. For instance, credit unions pay the price if their loan officers underestimate or overestimate any of the fees associated with the loans.

Credit unions that automate the disclosure process can send accurate disclosures to their members almost immediately.

4. Document Collection

It takes borrowers a lot of time and effort to manually collect and send the necessary paper documents to their credit unions. From there, credit unions have to deal with the time and effort it takes to manually review the documents their members submit. This takes credit union employees away from their core jobs and increases the loan processing time.

Automating the process of collecting all the necessary mortgage documents helps credit unions cut costs and stay competitive. Automated document collection systems enable credit unions to set up customer portals to process, track, share and collect required documents.

Automation lets credit unions more easily approve documents and allows their members and loan officers to view the status of the applications and quickly approve or revise document requests. Additionally, automation helps credit unions comply with federal, state and industry regulations by providing standardized templates for communication, automated file management and eliminating the need to send sensitive member documents via email.

5. Loan Validation

Data-driven decision-making holds the key for credit unions that want to improve operations and better serve their members. However, manually collecting financial data and other mandatory member data, including government monitoring information, is labor-intensive, time-consuming and challenging to complete. What’s more, the greater the volume of data that credit union employees must enter and re-enter, the greater the risk of introducing transcription errors.

Credit unions can alleviate the delays and inconsistencies associated with manually collecting financial and other mandatory member data by automating data collection. And after they receive this data, credit unions can also create business rules that can automate the next steps in the process.

Ensuring the Right Tech Stack

A key component of automation is ensuring a credit union has the right technology stack in place to support these processes, most importantly a configurable LOS with an intelligent, open application programming interface (API) enabling integrated solutions.

For the processes mentioned, an API-enabled LOS will allow third-party vendors to integrate and assist in providing a point-of-sale platform, optical character recognition and robotic process automation amongst other components.

Automating processes that are repetitive, high volume and require little interaction from employees allows these workers to focus on improving member interactions and developing and using innovative technologies, which in turn drives increased approval rates, grows revenue opportunities and empowers credit unions to create lifelong financial management relationships to support a member’s entire financial journey.

Ian Goldsmith

Ian Goldsmith is SVP of product at MeridianLink, a Costa Mesa, Calif.-based provider of loan origination systems for financial institutions.

Staying Competitive: 5 Strategic Priorities

Over the last decade, the function of a credit union branch has shifted and there have been two contributing factors: The global pandemic and expedited digital transformation.

First, the pandemic has drastically changed the way members expect to bank. At the height of the pandemic, many branches closed or reduced traffic. Members that wouldn’t typically have chosen digital banking opted for it to meet their banking needs. The shift away from branch-based services during the pandemic helped baby boomer and Gen X members adopt digital banking when they may not have otherwise.

Even without the impact of the pandemic, the transformation to digital-first processes and products has been underway for some time. This transformation has steadily been shifting the branch’s purpose away from basic transactions to more sophisticated member interactions. The pandemic merely accelerated this shift, and it is becoming vital for credit unions to embrace digital transformation to stay competitive.

Competing for Business

Over the last several years, credit union competition has evolved and expanded. Banks were once the primary competition for credit unions. Now multiple, non-traditional, digital banking options are making it increasingly difficult for credit unions to compete. Some of these branchless competitors include:

• Fintech companies;
• Neobanks;
• Digital-only financial institutions;
• Digital-first lenders and investment firms; and
• Mobile payment platforms.

As competition increases and continues to expand into new markets, there are resources and strategies that credit unions can leverage to maximize member service and profit. Here are five growth strategies to help credit unions of all sizes maintain their competitive edge.

1. Fast track digital transformation. Some may say that digital transformation is beginning, but we argue that it’s already here. Although the pandemic highlighted the need among credit unions for digital transformation, it was already apparent that credit unions needed to adapt digitally.

Digital transformation in 2022 is being fueled by artificial intelligence. Conversational AI is becoming the norm in both business infrastructure and consumers’ daily lives. AI deploys data to replace and improve business functions and is impacting the credit union industry by improving operations, member service and digital tools. Amplifying AI technology will enhance member relationships and can help credit unions prepare for future branch disruptions.

2. Centralize member data. Your members’ data can help your credit union identify the most profitable members and predict their behaviors, as well as uncover red flags for potential risk.

Prioritize member relationships and continue to generate revenue while mitigating risk.
By Traci Mottweiler CUTimes

Centralizing member data is crucial for digitally transforming your credit union, and to enhance and streamline risk determinations, growth opportunities and member communication. Once data is centralized through a single data engine, it can then be automated to predict member behaviors, giving you a 360-degree view of your member.

These analytics can also point to increased or decreased loan risk for specific members or groups of members.

3. Mitigate lending risk. In a turbulent market, identifying and avoiding loan risk is vital for portfolio health and growth. While it is promising that the average FICO has increased since the pandemic, according to FICO, this cannot determine future payment ability or overall loan risk. Relying on the FICO score alone could lead to missed opportunities for underserved markets or additional risk for high-risk borrowers. Using member data and a proven forecasting solution can help mitigate lending risk. Additionally, consider adopting new protection solutions that can be bundled with loan products, such as unemployment protection and loan warranty, to protect both your members and your portfolio.

4. Drive alternative revenue. It is necessary, but challenging, to balance revenue growth with risk protection. Offering deposit solutions and enhancing online banking capabilities (such as remote deposit capture) growth can offset loan risks.

In addition to loan and deposit revenue, noninterest income can help drive income and maintain profits. Protection products for auto loans and mortgages can help protect members during financial crisis and uncertainty while addressing margin compressions and liquidity concerns.

5. Evaluate industry partnerships. As credit unions look for ways to streamline processes and leverage human capital, review what new solutions are available in the marketplace to outsource. Since the pandemic, many credit unions are outsourcing aspects of business that previously wouldn’t have been considered, including AI, data analytics and modeling, the call center, collections and recovery solutions. Outsourced solutions should always support your credit union’s strategic objectives.

Despite a turbulent market and shifting member expectations, the credit union mission holds fast. Prioritizing member relationships and continuing to generate revenue while mitigating risk are strong growth strategies that will help credit unions maintain their competitive edge.

Strategies for Rebuilding Consumer Loans Post-Covid

 

Here are strategies recommended by Kremer and D’Acierno for making the comeback:

1. Meet credit-ready consumers where they are looking for credit.

Traditional outbound marketing, even in digital forms, depends on grabbing the right eyeballs at a time when the consumer is actually seeking credit. That’s a tough challenge, according to Kremer. He suggests that financial comparison sites, such as Bankrate.com, The Ascent and NerdWallet, present a better opportunity for exposure.

Today’s consumers, should they not have an offer of financing directly with their prospective purchase, are not going to wait to stumble across a web banner promoting loans, suggests Kremer. Proactively, they go hunting the best credit deals, he says, and the comparison sites are the first stop.

2. Seek opportunities where people are seeking new credit.

Even as the “new normal” continues to unfold, a key opportunity for lenders is the home improvement market, which began during the pandemic, and continues to grow, according to D’Acierno.

D’Acierno points out that home equity credit, a classic source of home improvement funds, continues to erode for two reasons. First, consumers have found it cheaper to include remodeling funds in a cashout refinancing over the last year or so. Second, unsecured personal loans don’t have the hassle that home equity credit does and are relatively cheap at today’s rates.

The consultant says the banks and credit unions need to give more thought to new product design as competition heats up. A nonbank player that he points to as a trend of the future is PowerPay. The company offers unsecured credit at purchasing time through both home improvement contractors and dealers, and decisions are rendered quickly. There is nothing this fintech is doing that couldn’t be done by a bank or credit union, even on a more local basis. The innovation here is in packaging and distribution, D’Acierno adds, rather than in the loan itself.

3. Stop bringing paper to a digital fight.

There’s no going back from the reality that shutdowns and social distancing accelerated demand for digital services. Kremer believes many consumers have grown more used to conducting financial business online, so financial institutions that don’t offer digital ways to apply for credit will be competing at a disadvantage.

“You have to make it as seamless as possible to get a loan,” says Kremer. “So it is even more important now to be prepared and have the systems in place as more people begin borrowing again.”

Where institutions can form partnerships with ecommerce players, that will add entrée to an institution’s digital credit capabilities. D’Acierno points out that the companies behind the “buy now, pay later” trend started out as “fly specks” and grew and grew. So ecommerce partnership doesn’t exclude smaller financial institutions. Some of the most active banking-as-a-service players are community banks.

Automation grows increasingly important because consumers want fast responses nowadays. D’Acierno thinks the desire for instant gratification can’t be overstated.

The Financial Brand

How Financial Institutions Can Fire Up Their Lending Engine

With consumer borrowing returning gradually to normal levels, banks and credit unions have a limited opportunity to rethink how they offer credit and build the systems to make new strategies possible.

As U.S. consumer lending climbs from the depths it fell to in 2020, signs are strong that banks and credit unions that want to regain, maintain, or even grow market share will have their work cut out for them.

Facing a combination of new competitors, new forms of consumer credit like “buy now, pay later” and increasing digital expectations from consumers, financial institutions will have to bolster their marketing, add distribution channels and partnerships, and consider new forms of credit.

These challenges will run through 2022 and at least into 2023 in some aspects of consumer credit.

The challenge for traditional lenders like banks and credit unions will be staying in the game as demand grows sufficiently to drive credit appetite. Andreas Kremer, a partner with McKinsey, warns that major e-commerce players like Amazon may represent a greater threat to consumer lending volumes than fintechs have, to date.

“The big players in e-commerce actually might just disintermediate the banks and bring customers not only the products but also the credit to buy it with,” says Kremer. “Remember, consumers don’t want to think about loans, they just want to buy something. If you can buy something and a loan comes with it, it’s just that much more convenient. And usually, it doesn’t have to be the cheapest option as long as it’s cheaper than most.”

Even traditional consumer loan rivals will present a growing source of competition. “The market will become twice as competitive as it was pre-pandemic — probably even more so — because banks have much more in deposits to put to work,” says Leo D’Acierno, Senior Advisor at Simon-Kucher and Partners.
Understanding Where We Are and Where We’re Going

Oxford Economics anticipates that consumers will begin tapping into the savings built up during the pandemic as 2022 approaches. That said, the firm’s research indicates that higher-income people hold most of the savings that remain from the Covid period. This suggests that many other people will need a healthy dose of credit.

“Many lenders are feeling good about the direction that things are going in and they think there is going to be growth ahead,” says Matt Komos, Vice-President of Research and Consulting at TransUnion.

“We are going through the valley of the credit cycle right now,” says McKinsey’s Kremer. He believes that after a few quarters of shakeout, during which usage will be growing, lenders will see a return to normal levels of consumer borrowing on most fronts. The trick will be getting their share of it as demand comes back.

Tomorrow: 

Strategies for Rebuilding Consumer Loans Post-Covid

What is a stand-up meeting?

Fact: Most employees hate meetings. Not only do they take up a large amount of time—the average professional spends three hours each week in a conference room—but they’re often not terribly productive.  

There are 55 million meetings every day in the United States alone. Many items on meeting agendas could be accomplished in a daily or regular stand-up meeting, which quickly gets your employees aligned and focused on overall goals. Not only do stand-up meetings reduce time spent in meetings by 34 percent, but they’ve also been shown to boost group productivity.  

What is a stand-up meeting?  

Stand-up meetings are regularly held gatherings—typically daily—during which team members share status reports on their work. They are often held while attendees stand, which helps ensure a short check-in rather than a lengthy discussion. 

Stand-up meetings (also known as daily scrum meetings) have long been popular in Agile software development processes like Scrum and Kanban, but they are starting to be embraced by all sorts of teams, from marketing to project management to product development.   

Nine rules for running a productive stand-up meeting  

Effective stand-up meetings are more than just team members taking turns talking about what they’re working on. These rules will help you to make the most out of your brief team gatherings. 

1. Choose the right meeting cadence for your team 

Many teams have stand-up meetings every day, while others opt for every other day or once a week. Every team is different, and choosing how often to meet depends on a variety of factors, including individual availability, workload, and deliverables. Request input from everyone who will be attending the meeting to get a sense of the cadence that would be most productive. 

2. Schedule the stand-up meeting for a recurring time 

No matter what your meeting cadence, it’s important that your stand-up meeting be at the same time whenever you do meet, so your team is able to plan around it. It’s also important to choose a time when everyone involved is generally available. Many teams opt for having stand-up meetings first thing in the morning, but if you have remote employees in different time zones, you may have to schedule it for later in the day.  

3. Give all team members ample ways to participate  

Even if all team members are in one location, there may be days when they need to work from home or while traveling. Ensuring that there is a way for employees to join by telephone or video conference will ensure that no team members feel left out. If you have a distributed team and getting everyone on the line is difficult, you could even choose to hold the stand-up meeting online using a platform like Slack. 

4. Have clear meeting leadership 

Someone should always be in charge of keeping the meeting productive, and all attendees should know who the leader is. It may be the head of the department, a project manager, or a stakeholder. Some teams prefer to rotate leadership to improve engagement and gain different perspectives. Soliciting ideas from your team on how leadership should be structured is a great way to get everyone invested. 

5. Keep it short 

Most experts agree that stand-up meetings should last no longer than 15 minutes, and that each team member should plan to speak for up to one minute, but no longer. Depending on the size of your team, your stand-up meeting may be shorter or longer.  It’s a good idea to set a timer for each speaker or to designate someone to be the timekeeper, to ensure that everyone has equal time to speak.  

6. Clearly define the goals for the meeting 

Stand-up meetings are generally informal, but it’s important that they still have structure. Most stand-ups consist of each team member sharing three key pieces of information: 

What they’ve completed since the last meeting

What they plan to complete before the next meeting

What obstacles they are facing in completing their deliverables

Time should be allotted to briefly addressing any obstacles faced by team members, but if a larger discussion is warranted, it should occur after the stand-up meeting. 

7. Stop unrelated or unproductive discussions 

Even the most productive, focused teams will find themselves going off on tangents from time to time. It’s up to the meeting leader to keep the stand-up meeting on track. This can be accomplished in several ways: 

Write unrelated topics on a whiteboard and invite team members who are interested in them to stay after the meeting for additional discussion

Post the topics on a team Slack channel so individuals can discuss them throughout the day

If topics warrant an additional meeting, assign a team member to schedule it after the meeting

8. Distribute next steps 

It’s important for someone in the stand-up meeting to take notes on any action items that come out of the discussion so that each member of the team knows what they need to do and there are tasks assigned to address any obstacles. This will also help any team members who were unable to attend to stay on the same page as the rest of the group. Ideally, this should be someone besides the meeting leader, so the leader can focus on keeping the meeting running smoothly.  

9. Be mindful of employees with physical challenges 

Just because it’s a stand-up meeting doesn’t mean that every team member has to actually stand up. You may have employees with back problems, those who are pregnant, or those with other physical challenges that make it difficult to stand for extended periods of time. Giving all team members an opportunity to voice any objections to standing will help further inclusivity.  

Effective stand-up meetings lead to more productive teams 

Teams in any discipline can benefit from short, focused meetings that help keep the group align on tasks, overcome obstacles, and meet goals. This fosters a collaborative, productive environment that can help boost creative problem-solving and output. 

WeWork’s collaborative workspaces offer teams the right space for every type of meeting, from casual, comfortable spaces for a daily stand-up or one-on-one meeting to fully equipped conference rooms for larger gatherings. Whatever your meeting purpose, you’ll find the right space to boost productivity, inspiration, and creativity. 

Only 14% of Young Consumers Favor Credit Unions

When it comes to the bank versus credit union (CU) debate, it’s clear where the loyalty of younger consumers lies.

A PYMNTS survey found younger consumers show a stronger preference for national banks than for CUs.

There’s a bright spot here for CUs, however, as more consumers between the ages of 18 and 24 use CUs than those 24 to 34 and 35 to 44, meaning CUs have an opportunity to see a comeback with the youngest generation of banking customers.

The survey showed that the greatest preference for CUs can still be found among baby boomers and seniors, with 60% of those ages 65 and older reporting CU membership.

In addition, 54% of those respondents between 55 and 64, and 35% of those between 45 and 54, are CU members, while just 19% of consumers ages 35 to 44 and 14% of those ages 25 to 34 said they turn to CUs for their banking.

While 36% of consumers ages 18 to 24 select national banks for their financial services, 26% said they belong to CUs. CUs have a disadvantage here, in that they tend to be far less visible than their competitors.

Still, the substantially higher interest from the youngest generation of banking customers suggests CUs have a chance to appeal to them if they can offer the digital tools that many expect, coupled with the member-focused mission that has long been a CU trademark.

PYMNTS’ research has found that 23% of CU members would consider switching their primary financial institutions (FIs) for the sake of innovative digital banking products. This included 38% of CU members who would switch for access to mobile check deposit, 38% who said they would switch for access to digital cards that can be issued directly to their digital wallets, 35% for peer-to-peer (P2P) payments and another 35% for cardless cash withdrawals.

Jerome H. Powell, the head of the Federal Reserve, told lawmakers the Fed was prepared to prevent a rerun of 1970s inflation.

Jerome H. Powell, the Federal Reserve chair, told senators on Thursday that policymakers were prepared to rein in inflation as they tried to fulfill their price stability goal — even if that came at an economic cost.

“We’re going to use our tools, and we’re going to get this done,” Mr. Powell told the Senate Banking Committee.

Mr. Powell has signaled that the Fed is poised to raise interest rates by a quarter percentage point at its meeting that ends March 16, and follow up with additional rate increases over the next several months. Fed officials are also planning to come up with a strategy for shrinking their vast holdings of government-backed debt, which will increase longer-term interest rates.

The suite of policy changes will be an effort to weigh on demand, tamping down price increases that are running at their fastest pace in 40 years. The Fed aims for 2 percent price gains on average over time, but inflation came in at 6.1 percent in the year through January.

Asked if the Fed was prepared to do whatever it took to control inflation — even if that meant temporarily harming the economy, as Paul Volcker did while Fed chair in the early 1980s — Mr. Powell said it was.

“I knew Paul Volcker,” he said during his testimony. “I think he was one of the great public servants of the era — the greatest economic public servant of the era. I hope that history will record that the answer to your question is yes.”

Mr. Volcker’s campaign against double-digit price increases pushed unemployment above 10 percent in the early 1980s, hurting the economy so severely that wages and prices began to slow down.

But central bankers are hoping they can engineer a smoother economic cool-down this time.

They are reacting much faster to high inflation than officials did in the 1960s and 1970s, and data suggests that consumers and businesses, while cognizant of inflation, have not yet come to expect rapid increases year after year. By cooling off demand a little, the Fed’s policies may work together with easing supply chain problems to bring inflation down without tossing people out of jobs.

“Mortgage rates will go up, the rates for car loans — all of those rates that affect consumers’ buying decisions,” Mr. Powell said of the way higher rates would work. “Housing prices won’t go up as much, and equity prices won’t go up as much, so people will spend less.”

The goal is to allow factories and businesses to catch up so shoppers are no longer competing for a limited stock of goods and services, creating shortages that enable companies to raise prices without scaring voracious buyers away.

“What we hope to achieve is bringing the economy to a level where supply and demand are in sync,” Mr. Powell said.

Asked whether the nation might be on the cusp of a wage-price spiral, in which wages and inflation feed on each other, Mr. Powell struck a cautious tone.

“That is a serious concern, and one that we monitor carefully,” he said. He noted that wage increases had been very quick — especially for lower-paid workers — and that whether they became problematic would depend on how persistent they proved to be.

“The big thing we don’t want is to have inflation become entrenched and self-perpetuating,” he said. “That’s why we’re moving ahead with our program to raise interest rates and get inflation under control.”

Mr. Powell underlined that the Fed’s plans for policy would be “nimble” in response to uncertainty coming from Ukraine. Economists have said the conflict is likely to push up gas and other commodity prices, further elevating inflation — already, oil prices have shot higher. But at the same time, a combination of higher fuel costs and wavering consumer sentiment could be a drag on economic growth.

But Mr. Powell made clear, repeatedly, that getting price gains back in line was key.

“We need to deliver price stability; we’re not currently doing that,” he later added, calling the central bank “very highly motivated to get the economy back to a place where we have inflation under control, but also a strong economy and a strong labor market.”

Jeanna Smialek writes about the Federal Reserve and the economy for The New York Times. She previously covered economics at Bloomberg News. @jeannasmialek

President Warns of Rising Potential for Russian Cyberattacks on U.S.

WASHINGTON—President Joe Biden has released a statement on domestic cybersecurity as he seeks to elevate his previous warning about the potential for Russia to conduct cyberattacks on the U.S.

The statement explained that the enhanced warning comes based on evolving intelligence that the Russian government is exploring options related to cyberattacks. The Administration has also issued a new fact sheet that includes actionable steps to harden cybersecurity, NAFCU noted.

"My administration will continue to use every tool to deter, disrupt, and if necessary, respond to cyberattacks against critical infrastructure," wrote Biden. "But the federal government can’t defend against this threat alone. Most of America’s critical infrastructure is owned and operated by the private sector and critical infrastructure owners and operators must accelerate efforts to lock their digital doors."

To help reduce cybersecurity risk across the United States, the Cybersecurity and Infrastructure Security Agency (CISA) compiled a list of free cybersecurity tools and services to help organizations better their security capabilities.

That includes CISA’s recently released an insights post, “Preparing for and Mitigating Foreign Influence Operations Targeting Critical Infrastructure,” providing necessary steps for organizations to assess and mitigate risks from information manipulation from malicious actors.

Additional Resources

In addition, the NCUA along with the U.S. Department of Homeland Security issued a response to the current events, encouraging credit unions of all sizes and their cybersecurity teams to “adopt a heightened state of awareness and to conduct proactive threat hunting.”

As CUToday.info has also reported, NCUA has been highlighting its Automated Cybersecurity Evaluation Toolbox (ACET) , which is aimed at helping credit unions to sell-assess their cybersecurity preparedness.

A Decline in Home Values? Four Experts Are Saying That is Exactly What Could Happen

MADISON, Wis.—In a housing market that has seen skyrocketing valuations over the past few years, could the real home price growth rate turn negative?

According to four different analysts, that could happen within the next two years—or even in 2022.

As part of CUNA Mutual Group’s February Trends Report, the company’s economists noted that real home prices (inflation-adjusted) increased 8.7% in 2021, the fourth-fastest pace in modern history, a trend line that concerns regarding affordability and home price bubbles.

Nominal home prices rose 15.7% in 2021, significantly faster than the cost of living as measured by the Consumer Price Index, which rose 7.0%.

“If we subtract this 7.0% inflation rate from the 15.7% nominal home price growth rate, we can calculate the real home price growth rate of 8.7%. This is the 10th consecutive year of nominal home price growth exceeding the rate of inflation of the goods and services,” the company stated.

A Cyclical Market

CUNA Mutual Group reminded the housing market moves in cycles.

“In the late 1980s, the housing market experienced five years of positive real home price appreciation, followed by approximately five years of negative real price growth rates in the early 1990s,” the CUNA Mutual analysis stated. “Then, there was a housing bubble for nine years from 1997 to 2005, which was followed by six years of negative real home price growth rates. Sometime in the next few years, we can expect real home price growth rates to turn negative as nominal home price growth rates fall below the rate of inflation for goods and services.”



Bill Handel

One possible economic scenario in which this decline might happen would be the byproduct of a rise in the inflation rate, which will push up long-term interest rates and the 30-year mortgage interest rate.

“This will, in turn, reduce the demand for housing and bring down nominal home price growth rates, the company stated.

CUNA Mutual isn’t alone in its forecast.

Bill Handel, SVP-research with Raddon, noted that in

Decline Could Happen in 2022

Raddon’s Bill Handel pointed out that in 2021, home prices rose—in nominal terms—by 16%.

“In 2022, the expected increase in nominal value across the U.S. is 5%,” said Handel. “If we continue to see inflation at its current levels, real home values will actually decline in 2022.”

What is the likelihood that inflation stays at current elevated levels?

“Unfortunately, it’s quite high for a few reasons,” explained Handel. Those reasons include:
“Elevated prices of goods are beginning to impact wage demands in a labor market that is very tight. Wage inflation is much more difficult to tame than is inflation in the prices of goods. Typically, only recessions are the cure for wage inflation,” he said.
Government actions in response to the pandemic, including stimulus and unprecedented growth in the money supply, have left people with ample funds in their checking and savings account and contributed to the growth in inflation.
“International instability…The war in Ukraine is putting further strain on the supply chain and this will continue to ratchet up the cost of goods and resulting inflation,” Handel said.

“All of these factors are leading to the notion that the real value of residential real estate could actually decline, as soon as 2022,” he concluded.



Robert Eyler

An Effect from War in Ukraine

Robert Eyler, professor of economics at Sonoma State University in Rohnert Park Calif., who consults with the California and Nevada Leagues, suggested the war in Ukraine could “easily” tip the scales in terms of the recent growth of home prices versus inflation rates.

“It could, in such that housing prices nominally growing at 5% may not outpace inflation this year if rising gas prices begin to move through already precarious supply chains and push up price pressure,” Eyler told CUToday.info. “However, it is more likely that housing prices will flatten faster than expected with general global and financial market uncertainty, especially if commodities look like they act as better short-term hedges against inflation or a short-term gold rush based on Eastern Europe.”

In the medium term, the forecast for housing—especially in California—remains positive as construction is likely to be slow and wealth converting from equities to real assets should continue to spur on global demand to live in the Golden State.

Feeling the Pressure

Eyler said to expect pressure on 10-year Treasuries and 30-year fixed and adjustable mortgage rates based on a combination of factors, now exacerbated by global risks.

“Though, for the U.S., there may be a race to safety in the short term to push down the long end of the market, so the puzzle the Federal Reserve has to solve just got a little weirder,” Eyler said.



Curt Long, NAFCU

A Deficit in Housing

NAFCU Chief Economist and Vice President of Research Curt Long agreed with Eyler that given where oil prices have been going, it is certainly possible that headline inflation could outpace home price growth in the foreseeable future.

“But the rapid appreciation of housing is a result of supply shortages, and that doesn’t look likely to improve any time soon,” Long said. “Freddie Mac estimates the housing supply deficit reached 3.8 million units in 2020, and it has only grown since then. There are numerous reasons why construction has failed to keep up with demand, including rising material costs, labor shortages, restrictions on land use, and local opposition.

“We are also in the midst of a demographic-driven surge in housing demand as Millennials age into their prime homebuying years,” continued Long. “The eye-popping price growth we have seen recently in the housing market is not being driven by speculation or easy credit, but by a fundamental mismatch between supply and demand. Unfortunately, there does not appear to be any relief in the near future.”

Consumers are most likely to consider lower fees, digital solutions and security when choosing or changing their bank or credit union.

MINNEAPOLIS —What’s being called the “Great Payments Disruption” is taking place as increasingly more consumers embrace digital payments, according to a new study.

The study, “The Great Payments Disruption,” was conducted by Entrust, a provider of trusted identity, payments and data protection solutions, and is based on a survey of 1,350 consumers from the United States, Canada, United Kingdom, Germany, Saudi Arabia, United Arab Emirates, Singapore, Australia and Indonesia, who have made or received digital payments in the past 12 months.




“This study highlights how more than ever, consumer banking is about digital interactions first, and that they must create that digital experience with security at its foundation,” said Jenn Markey, vice president of product marketing at Entrust. “Our study found both an overwhelming preference for online banking and a significant concern about fraud – in fact, more than two-thirds of consumers in our survey changed their bank or credit union after receiving a fraud or privacy alert. It’s clear that financial institutions must meld rich digital experiences with proven security measures such as biometric security solutions to increase consumer trust and loyalty.”

Key Findings

Among the key findings, according to Entrust:

• Omnichannel touchpoints are increasingly important in digital banking: 88% of respondents said they prefer to do their banking online in some form - clear evidence that digital banking is the new norm. “However, it is still essential to provide a variety of digital options, as 59% said they prefer using the app from their bank or credit union, while 29% prefer their desktop web browser,” Entrust said. “Some people do still prefer in-person banking, such as at a branch (8%) or at an interactive teller machine (3%). Overall, it is essential for banks to offer omnichannel, digital-first solutions to resonate with today’s consumers.”
  
  
• Customers are security-conscious and lack of security can have damaging consequences: 90% of respondents said they were concerned about the potential of banking or credit fraud as banking and credit become more digital. “Many respondents had personal experience with these fraud risks, with 42% saying they have received notification of a personal banking or credit fraud in the past 12 months. These incidents clearly damage customer loyalty, as 67% of respondents notified of fraud changed their bank or credit union as a result.”
  
  
• Fee structures and flexible payment options give banks an edge: Consumers are most likely to consider lower fees, digital solutions and security when choosing or changing their bank. “With consumers looking for high-quality, low-cost digital banking, challenger banks could add to their current disruption by offering things like fee-free overdraft protection and unlimited foreign exchange,” Entrust said. “There is widespread interest in the digital banking atmosphere, with 86% of respondents from the U.S. saying they would consider using a branchless online banking service for their banking. Additionally, challenger banks offer new ways to pay, and 52% of respondents said they would consider using digital currencies for payments.”
  
  
• More digitally issued cards could further fuel the rise of contactless payments: Respondents listed credit/debit cards with chips (50%) as their most preferred payment method, but contactless credit/debit cards (48%) were a close second. Additionally, 53% of respondents said they’ve received a digitally issued debit or credit card from their bank or credit union.

‘Effective Selling Point’

“Digital cards can be an effective selling point as almost two-thirds of survey respondents prefer to open a bank account digitally. This preference is high across generations as well: Gen Z (65%), Millennial (69%) and Gen X (54%),” Entrust said.

Big 3 Credit Bureaus to Change How They Report Medical Debt; Consumer Groups Hail Decision

WASHINGTON – Consumer groups are hailing an announcement by the big three credit bureaus-- Equifax, Experian, and TransUnion—that they will change how they report medical debt, which will result in the removal of nearly 70% of medical bills from credit reports.



The credit bureaus announced that, beginning in July, they will remove medical debt that has been paid off and unpaid medical debt less than $500. Going forward, they will wait a full year before adding new unpaid medical debts to credit reports.

In response to the announcement, numerous analysts praised the move:

• “We are thrilled that the credit bureaus are removing the vast majority of medical debt from credit reports,” said Chi Wu, staff attorney at the National Consumer Law Center. “Medical debt has damaged the credit reports of tens of millions of consumers for far too long.”
  
  
• Jenifer Bosco, staff attorney at the National Consumer Law Center, noted that the credit bureaus’ action comes on the heels of a report about medical debt by the Consumer Financial Bureau and statements by its director, Rohit Chopra, highlighting the problems of reporting medical debts. “This action shows that a strong CFPB with a strong Director can make transformational change for the lives of everyday consumers. The change will help most of the 15% of Americans with medical debt on their credit report.”
  
  
• “Removing 70% of medical debts from credit reports is an enormous improvement, though the medical debts that remain may be held by the consumers who are most vulnerable – patients who have suffered a catastrophic accident or illness that led to huge medical bills, or those who lack insurance or have meager coverage,” said Berneta Haynes, staff attorney at the National Consumer Law Center. “We have learned that Black and Latinè consumers are more likely to be uninsured and underinsured, and to carry significant medical debt, and Black people in particular are more likely to be contacted by debt collectors over medical debt.”

The NCLC had earlier put out a report examining the impact of medical debt on Black families.