Marketplace Newsletter

In this issue:

From Laura's Desk

Pre-Register for Discovery 2021

Credit Union Member Research Confirms: Payments is the Path to Primary Financial Relationships

Do You Have Solutions to Address the Urge to Splurge? 

Helping credit union members enjoy summer of 2021

What the strength in used auto values means for credit unions

Is your credit union ready for a channel-less future?

APIs: Integrate and innovate

Upcoming Webinars

Subscribe to Marketplace


 

From Laura’s Desk 

You have just entered the Exhibit Hall….empty swag bag in hand, name badge around your neck and a crisp new logoed shirt!  Is it overwhelming to look into a “sea” of booths?  

Most people feel intimidated with the view of long corridors of exhibit booths containing salespeople ready to strike up conversation.  You scan right then scan left and make a quick decision of where to begin.  Do you make eye contact with a rep or swim by in your school of credit union “o-fish-als” right to the coffee bar?  

Let’s face it…networking ain’t always easy.  

Here are a few tips to make your time at the Annual Meeting and Convention Hall more inviting and productive: 

  1. “Know before you GO.”  Take a look at the exhibitor line-up on the app before you enter the hall and make a list of booths you want to visit.
  2. “You do the Talking”  Prepare a few questions that will help you learn more about this vendor quickly. 
  3. “Sweep through Quickly”  If you like the vendor, leave them curious about you and ask for a more detailed follow up via zoom after the event is over. 

The Vision 2021 Annual Meeting and Convention is already a packed hall. Credit Union vendors are finally ready to surf the wave to help provide you with the products and services that you need to run your credit union.  

I’ll be available and ready to help make introductions and ease you into the exhibit hall!  I’m betting your chances are pretty good on picking up cool swag!  I’m thinking hand sanitizer will be plentiful!

“Sea” you soon!  

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Discovery2021 planning is in full swing and we’d like to offer you the opportunity to pre-register. Admission is free and the conference is exclusively virtual.

Join us for our 12th year of inspiring strategic planning by delivering topics such as credit union trends, post-pandemic recovery, leadership development, the economy, and more. Walk away from Discovery2021 with the information and tools to better serve your credit union and enhance your members’ experience. 

Block your calendar on August 12 for Discovery2021. 

We hope you’ll join us for a day of Discovery! 

PRE-REGISTER

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Credit Union Member Research Confirms: Payments is the Path to Primary Financial Relationships
CU Payments Outlook from CO-OP Financial Services Indicates Successful Payments Experiences Delivered by Credit Unions Spark Active, Engaged Member Relationships

New research conducted by EY and commissioned by CO-OP Financial Services finds that 88 percent of credit union members are now digitally engaged with their financial services providers. However, those providers are not necessarily credit unions and banks. 

The CU Payments Outlook shows instead that the pandemic dramatically accelerated a years-long trend towards the fragmenting of consumers’ primary financial relationships (PFR). The study of 3,000 credit union members and prospects found fintechs to be the greatest cause of consumers’ willingness to bank with multiple providers. 

The study outlining opportunities for credit union growth is now available to all credit union leaders at no charge via CU Payments Outlook, a CO-OP white paper accessible at www.coop.org/CU-PaymentsOutlook 

“There is a great opportunity for credit unions to build on their trust and gain more member engagement and growth through a strategic focus on payments,” said Todd Clark, President/CEO for CO-OP. “That is why CO-OP is investing heavily in an advanced digital ecosystem that helps credit unions bring elegant, personalized payments solutions to market quickly in alignment with post-pandemic expectations.” 

The fast-advancing service model from fintech competitors means credit unions have to revisit their experience and loyalty strategies to ensure they are on-par with modern consumer demands. The research indicates payments, reimagined and reenergized for today, are the mechanism to achieve this necessary evolution. That’s because payments products like contactless, P2P and mobile wallets are at the heart of transactional relationships, driving multiple engagements every day.In fact, payments represent 80 percent of a consumer’s interaction with their financial provider.

“Nearly 9 in 10 credit union members are now completely comfortable meeting their financial needs via digital channels, and notably, with non-traditional providers,” said Nikhil Lele, Financial Services Digital & Customer Growth Leader, EY Americas. “A lot of this is due to COVID-era insistence on remote, contactless and friction-free financial services. Consumers saw how quickly businesses can pivot to digital when they’re motivated. The resulting expectation for rapid, on-demand innovation is here to stay.” 

The survey data supports the strategic concept that payments is the path to primacy. These insights and many more are explored further in the CU Payments Outlook: 

  • Among current credit union members, just 34 percent have contactless payments with their credit union, while 45 percent have it with a fintech provider.
  • Thirty-one percent of members use P2P payments with their credit union, while 44 percent use P2P payments from a fintech provider.
  • Just 29 percent of members use their credit union’s mobile wallet as compared with 43 percent that use a fintech’s wallet service. 

“Being intentional about payments strategy calls for credit unions to consider the lifestyle of a member or prospective member, and that is a significant mindset shift,” said Samantha Paxson, Chief Experience Officer for CO-OP. “For decades, financial institutions – from major banks to small cooperatives – have been focused on the key milestones along a person’s life. While being there for life stage moments like buying a house is still important, it is no longer enough to cement PFR. Credit unions can gain significant market share of both members and prospects by investing in and offering lifestyle banking products, payments chief among them.” 

Data-backed action steps recommended in the white paper are collated into three overarching strategies: 

  1. Lifestyle Enablement: By adjusting product mixes to offer desirable lifestyle banking features, such as seamless digital payments coupled with personalized rewards, credit unions can retain, capture and recapture PFR across a broad swath of current and prospective members.
  2. Pathway to Relationship Primacy: Whereas credit unions are in a strong position in deposit/savings (ranked #1 for loans, savings and checking in the survey), fintechs have achieved the top slot in transactional relationships. The pathway to primacy for credit unions will require accelerating investment in digital capabilities, while being intentional about bridging the gap between digital and non-digital channels.
  3. Digital Ecosystem Acceleration: Members should not be expected to have to leave their credit union’s ecosystem to meet their financial needs. To maintain PFR status, credit unions must move closer to becoming the hub of their members’ entire financial lives. 

Access the CU Payments Outlook at no charge at www.coop.org/CU-PaymentsOutlook.

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Do You Have Solutions to Address the Urge to Splurge?

Consumers need advice and services they can trust when they overspend or face unexpected expenses 

By: Ed Wolfe, JMFA Executive Vice President 

After more than a year of limitations on travel, cancellation of group gatherings and restrictions on community interactions, consumers are ready to get back to pre-pandemic life. For many, this means increasing their spending to recoup the purchases and experiences they missed in 2020. According to a report by McKinsey & Company, more than 51% of U.S. consumers expect to spend more to treat themselves after months of pandemic fatigue. 

However, this can be troublesome for individuals whose jobs were impacted by business closures or reduced hours—or who weren’t able to build a savings buffer over the past year. In these situations, the temptation to ‘revenge spend,’ as the trend is being called, can lead to financial difficulties that will negate the temporary joy of a COVID-19-recovery spending spree. 

Community credit unions have gone the extra mile throughout the pandemic to improve the member service experience and support ongoing—and sometimes changing—financial needs. As the recovery gets underway, there is still a great deal of need among consumers regarding their financial well-being. At the same time, expectations for exceptional service standards remain high. 

As the uncertainty continues, here are five areas to consider that can strengthen your member relationships while alleviating some of the stress they are feeling about maintaining financial wellness. 

1.  Get to know your members’ needs
Based on account activity, are you able to position additional products to your members? Do you have a systematic process for offering a link to savings or line of credit? Can your team easily determine if there is a need for account management counseling? 

2.  Commit to total transparency
Do your members clearly know how their transactions are handled if they have a brief financial shortfall? Are they aware of the different overdraft protection options available to them? 

3.  Boost employee confidence with effective training
Do you rely solely on your employees to carry the entire training load? Does your training strategy include leveraging trainers with specific expertise? Does it sufficiently support your employees’ different learning styles?

4.  Eliminate uncertainty with consistent communications
Is the information about your overdraft service shared consistently, whether it’s by phone, chat or in-person? Do your members clearly understand how the service works, including fee amounts, limits and other available options?

5.  Utilize proven tools and resources to ensure optimal results
Are there tools and resources in place for identifying changes to program usage? How often does your staff take the time to evaluate program policies and procedures? Do you have someone on staff who is keeping up with potential changes in the regulatory environment and class-action risk? 

Transparent, member-focused service yields more balanced results
As the desire to return to normal grows, ensure you’re providing valuable services and advice that can help your members avoid risking their long-term financial well-being. 

A fully disclosed overdraft service reduces the stress caused by a financial shortfall for your members, leading to stronger relationships. And, when it is maintained correctly, it can be a catalyst to help you grow your business. 

JMFA can provide guidance on many areas that might be impacting your results or raising compliance concerns. We are available to develop a customized strategy to help you meet or exceed your performance and service goals with confidence.

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Helping credit union members enjoy summer of 2021 

By Phil Seely, LSC 

Last summer we experienced a priority shift that led many of our credit union members to a simple realization: they don’t have to go too far to have fun in the summer. Life in quarantine created the opportunity for at-home adventures by picking up old hobbies and developing new talents. Puzzles, painting, and backyard movie nights became the main event. This summer, with the vaccine roll-out well underway, credit union members will begin to expand their sense of adventure again and we predict spending on local travel and new forms of entertainment will rebound. How can your credit union help? 

SUGGEST LOCAL ATTRACTIONS AND BUSINESSES

From the local donut shop to a nearby beach, this summer there will be more options open for exploring the local area. Remember last year when just taking a walk was the highlight of the day? This year, there are more businesses open in need of support. Encourage credit union members to get out and support local businesses this summer. Partner with local businesses or highlight local attractions on social media. If you’re unsure where to start, try: 

  • Create a shop local day to support businesses in your area
  • Offer attractive rewards programs to encourage members to use their credit union credit card on local shopping or travel 

ENCOURAGE BUDGETING TO HELP MEMBERS SHOWCASE THEIR NEW TALENTS

Good old-fashioned hobbies saw a resurgence in 2020. Sewing, crocheting, puzzles, card games, and even traditional do-it-yourself projects saw an increase in interest across the country. Many folks picked up paintbrushes, pottery wheels, and photography. These hobbies, often personal passions, can get expensive. Create a unique new way to prepare for these expenses with a budgeting seminar or by offering free financial counseling to your members. 

While the pandemic isn’t entirely over, credit union members will be able to safely travel, explore, and showcase their new talents. Encourage your credit union members to tap into your credit card programs and prepare their budgets for this summer’s new expenses. Position your credit union as a partner to help your members clear their financial hurdles to experience consistent growth and deliver a positive customer experience. 

Need to get started with a credit card program? Reach out to LSC, we’re here to help!

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What the strength in used auto values means for credit unions 

By Dinny Lechman, 2020 Analytics 

The auto market has seen drastic shifts since the beginning of the COVID-19 pandemic. The impacts are being seen in auto values and on car lots across the country.  

There are several factors at play, all converging to shake up the market. Here’s what’s causing the shift and what it means for credit unions. 

Auto Values Have Hit Record Highs

Vehicle prices, both new and used, are at an all-time high. There are several factors—both pandemic and non-pandemic related—causing the spike.  

Shrinking New Car Inventory Levels 

Auto manufacturers have been fighting supply chain and labor disruptions since at least the start of the pandemic. At the end of April 2021, new vehicle inventory was 37% lower than 2020 and 42% below 2019, according to Cox Auto.

 

With fewer new vehicles being manufactured, prices have climbed. According to Kelley Blue Book, the average cost for a new car is up 4.3% year over year in March 2021.

  

Production has slowed and inventory is down thanks to two main interconnected considerations over the last 18 months:

  • Factories shut down or reduced production due to pandemic restrictions
  • Chip supply pipeline disruptions 

In mid-2020, during the height of the pandemic as the world was adjusting protocols on the fly, many auto manufacturers had to stop or slow production to follow COVID-19 safety protocols like social distancing, quarantine restrictions, and PPE requirements.  

As production ramped back up in early 2021, manufacturers found themselves in a supply crunch: a global shortage of microprocessor chips. So many products need microchips these days—picture the long virtual lines to buy a PS5 last Christmas—and without orders from auto manufacturers, chip producers sold off their supplies to other industries. 

The auto industry, and the entire world, is experiencing a chip shortage—a part that’s vital to each and every vehicle produced. The shortage is so extensive that the U.S. Congress is discussing allocating funds to build American chip factories.  

Fewer Used Vehicles

It’s basic economics: If demand stays the same (or increases) but supply decreases, prices go up. We’re riding the classic supply/demand curve. Used car inventory has shrunk for several reasons: 

  • Rental fleet disruptions
  • Loan assistance leading to fewer repossessions
  • Low inventory of new cars

Rental car companies make up a large portion of the used auto market by selling their 1-2-year-old fleets to used auto dealers. When COVID-19 hit and rentals all-but dried up, rental car companies had to sell off their fleets and slash new vehicle orders. Because of lower demand last summer, rental car companies did not sell their older vehicles as normal and put a dent in the used vehicle supply. 

Additionally, many people who were struggling financially through the pandemic, and may have been in situations that would have traditionally resulted in a car repossession, received assistance from lenders in the form of skip-a-pay or loan deferments.

Because of the new car inventory shortage, new car dealerships are buying up used cars to fill up their lots, putting more pressure on the used car supply. 

The Result: Higher Used Vehicle Values

COVID-19, the chip supply shortage, rental fleet disruptions, loan assistance, and a shortage of supply in the used car market are all working together to lead to higher used vehicle values.  

In 2020, depreciation hit an unprecedented low of 2%, according to Black Book, and is forecasted to be higher for 2021 but still well below depreciation values seen pre-pandemic. 

 

Used vehicle values are expected to continue to be higher than average, as used car supply is projected by Black Book to remain below 2019 amounts.

 

How Credit Unions Can Adapt

With the lower inventory in new cars, used car lending is expected to increase. Are you ready to capture a share of that market? Now is a prime time for credit unions to review their auto loan portfolios and take proactive steps.

First, take a look at your used auto portfolios. Compare your pricing, charge-off rates, delinquencies, and more with competitors—are your numbers in line? You can also look for additional lending potential—with higher asset values, there may be an opportunity to lend to members in lower FICO tiers. 

Second, you can look at your indirect auto program. Do you have data on charge-off rates and/or delinquency history by dealer? If so, you can analyze that data and identify potential issues before they become a problem. 

Third, you can use additional data points to make decisions about loan applications. Using debt-to-income (DTI) ratio and ability to repay can help in the loan decision-making process and potentially open opportunities to previously more-risky borrowers.  

Last, you can stress your existing auto loan portfolio for a drop in auto values of 10% or even 15%. Auto values are expected to remain strong through 2021, but as supply balances out, depreciation will increase and values will steady. Stressing your portfolio will help understand what will happen if the pendulum swings the other way. 

The Bottom Line

Even with the impact of COVID-19, the auto lending market continues to present opportunities for growth for credit unions. Higher used auto values combined with a lower interest rate environment may present an opportunity to refinance auto loans at lower loan-to-values, mitigating the potential increased credit risk presented by the pandemic.

Now is a good time for credit unions to evaluate existing loan collateral in your portfolio and to consider the cost-benefit relationship of making loans to borrowers with greater risk, based on the increased collateral value. 

For help reviewing your portfolio data analytics and making decisions based on our new COVID-19 world, contact Laura Parrish and the 2020 Analytics team.

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Is your credit union ready for a channel-less future? 

Your members don’t draw lines between channels—and they don’t expect you to either. 

By Jeffrey Dillon, CUNA Mutual Group 

This past year is widely seen as the time when everyone’s lives got at least a little more digital. The importance of undergoing a “digital transformation” has been recognized for years, even by credit unions that weren’t quite ready to tackle it. But closed doors and shelter-at-home mandates radically accelerated adoption and meant those who hadn’t gone digital yet had no choice but to dive in. 

Once consumers tried digital banking, a recent survey from Forrester1 found two things:

  1. They planned to keep using digital banking—59% of respondents said they’d keep using this tool, even when stay-at-home restrictions were lifted.

  2. They didn’t give digital solutions good ratings across the board—for instance, online customer support had a net satisfaction level of just 29%.

That first finding isn’t too surprising: Once someone’s discovered 24/7, anywhere convenience, they’re likely to continue to use it, at least some of the time. But the second? That tells us something important: The demand for digital is sufficiently strong that consumers are willing to put up with less-than-great resources to get it. 

Which means credit unions have an opportunity—and an obligation—to improve the digital experience. And part of that improvement should include creating a seamless experience between digital and the rest of your channels. 

The pain of the channel switch

Anecdotal evidence suggests a lot of dissatisfaction with digital comes at a critical moment: When a member moves from one channel to the next. What bugs members most about those moments? Starting over again. Sharing their story (and/or personal information) multiple times—and still not being able to get their problem solved. 

There can be a tendency to see each channel as a one-stop-shopping event: A member chooses to fill out an online application OR uses chat OR contacts the call center. The truth is that a member might not only need, but want, to use every one of those channels to manage a task. 

Consider a life insurance purchase. At CUNA Mutual Group, we’re rightly proud of the fact that a member can buy TruStage life insurance on a digital device, in minutes, start to finish. When a member can handle that transaction completely online and without help, we pat ourselves on the back. But how about when a member isn’t sure how to answer one of the online application questions and stops to contact the call center? Is that call a sign we’ve failed?

The answer is “no”—if that member called, was guided through the rest of the process by a friendly, knowledgeable agent, was able to make use of information they’d already provided and ended up with the protection their family needed. That was a successful experience because the member could easily access multiple, interdependent channels, when they wanted to use them, and accomplished their goal.  We helped protect another family and put them on the path to a brighter financial future. 

A quick side note: While we want members to be able to switch channels if they want to, it’s our job to ensure they never have to.  If website language isn’t clear, make it clear. If instructions are clumsy or it’s hard to find a button, revisit verbiage or page design. 

The secret to learning what members need? Data.

How to learn where members are getting stuck or frustrated? Data. Credit unions have access to a lot of it, but data quantity isn’t what matters, it’s what you do with the data. Your ability to quickly and efficiently turn data into insights, insights into tests and tests into features and products is what will speed up your ability to improve the experience for your members. Assess your current data collection and analysis protocols. Can you learn where members leave the digital process and whether they move to another channel or simply give up? 

Trust is critical, regardless of the channel

Members trust credit unions with a lot of data and most credit unions have earned that trust. Unfortunately, the market as a whole—not specifically the financial services industry—hasn’t done a great job managing data security and privacy. That’s put governing bodies in a position where they needed to act (e.g., the California Consumer Privacy Act or General Data Protection Regulation in the European Union) and has made it more challenging for credit unions to deliver member-preferred channels and services while staying compliant. 

Build-in safeguards for data integrity and compliance and make them visible to the member. If members are crossing from one channel to another, look for opportunities to seamlessly share data in a way that protects data security and reassures the member.  

Ready to deliver a robust, channel-less experience? You don’t have to go it alone.

While your credit union and members are unique, nothing your credit union is encountering on the digital front is completely new. Don’t waste time and energy trying to refine efforts on your own or managing the fixed costs of running big data alone. Lean on the market, the experts and your partners. We’re here to help erase the lines between channels and make every member connection easier and more satisfying.

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APIs: Integrate and innovate 

By Jordan Esbin, FIS 

Payments innovation and APIs come hand in hand. But having APIs is no longer enough. To ensure APIs result in a usable and viable service or product, they must be well-documented. In fact, the documentation must be as good as the functionality of the API.  

Today, an API platform needs to include an API gateway and catalog, developer portal, partner program, marketplace, and real-time events notification. It also needs to provide a central access point to integrate with other solutions via APIs, so financial institutions and fintech partners can easily integrate, leverage, and deliver solutions across any digital channel, and differentiate their experiences. 

But differentiation isn’t the only way APIs serve financial providers. The APIs must be dynamic and complex, and packaged in such a way that supports speed to market. This is where a conveniently packaged up API portal that can easily integrate with the other technology providers use can help developers easily search that API library to find the building blocks they need to move quickly. APIs are ultimately about the power to experiment, pivot and enter new markets. 

Through this type of technology, developers can access solution-based APIs in several usage categories, including Banking and Wealth, Payments, Institutional and Wholesale, as well as Corporate Solutions. This centralized access to APIs facilitates collaboration and partnerships with financial institutions and fintech companies across the globe to deliver cutting-edge solutions and enable new streams of value for clients, partners, and developers. This technology creates a collaborative ecosystem between financial institutions, and fintech developers, and allows for creation and delivery of a comprehensive suite of products, services, and experiences that go beyond traditional banking. 

Developers can expand their creative reach while focusing on business goals using development tools that enable them to connect to systems and applications that expose functionality through APIs. Leveraging the digital ecosystems that connect them, they can deliver more value to a wider cardholder base in less time than ever before. Sophisticated integration tools to play in the digital world are no longer needed. 

How Fintechs help credit unions achieve their omni-channel goals 

Credit unions who switch to these types of solutions, can experience incredible speed to market with a lower total cost of ownership. By actively consolidating platforms, organizations are beginning to benefit from the “develop it once, fix it once” mindset. Fintechs, like FIS, can quickly pivot to get products developed and in market quicker, and that means less cost internally and to our clients. 

Bringing together the total cardholder view into one best-in-class user interface has also equipped our clients with the ability to service their cardholders’ needs quicker and more efficiently, and to have a more in-depth view of their buying behaviors and to stay on top of fraudulent activity. This type of technology enables an experience for credit unions that will allow them to deliver on all the technology and solutions that they need to run their business, and at the end of the day, make it easier for members. 

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Upcoming Webinars

To register for any of these webinars, please go to https://www.cunamutual.com/resource-library/webinars

Risk and Compliance Webinars

Making Your Digital Transformation Safely**

7/14/2021 1:00 PM (CT)
Consumer behavior is telling credit unions that they want fast and simple solutions that link with their connected lives. However, be careful not to emphasize speed and application efficiency over fraud prevention. Outsmarting the fraudsters starts with having the right toolset, oversight, and a multi-layered fraud strategy.
Register at the Protection Resource Center(opens in a new window) | Download 2021 Schedule

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