'Tis the Season
Posted by Vicky Salkeld, Assistant Vice President, Credit Union Resources, Inc on 7/28/2014

‘Tis the season! No, not the holiday season – yet! ‘Tis the strategic planning season! The third and fourth quarters have historically been the most popular time of year for credit unions conducting their strategic planning sessions. As your credit union prepares for this important event, there is much data to be compiled and reviewed.

One of strategic planning tools available to credit unions is the Environmental Scan, prepared by the Credit Union National Association. The Environmental Scan is used to anticipate and explore trends that can affect credit unions’ plans. Here is a brief summary of the Top 10 Trends as identified in the newly released 2014-2015 edition.

  1. Mobile payments – Mobile payments by smartphone users jumped 150% from 2012 to 2013. Mobile payments are growing by 68% annually, from $16 billion in 2010 to a projected $214 billion by 2015. To remain the center of members’ financial lives, credit unions must increase member loyalty by giving them the ability to conduct any transaction – on any channel – at the speed they expect.

 

  1. Mobile banking – With more than one million interactions each day, mobile now dominates all channels of customer engagement. Consumers want and expect to access their financial products and services from handheld devices with ease, reliability and speed. Given current trends, mobile devices will soon surpass personal computers as the most common tool used to access the internet.

 

  1. EMV Card Standard – October 1, 2015 is fast approaching. This is the date when liability for fraudulent transactions will shift to the party with the least secure form of EMV – Europay, MasterCard and Visa – technology. Chip technology greatly reduces a criminal’s ability to use stolen payment card data by introducing dynamic values for each transaction. Even if payment card data is compromised, a counterfeit card would be unusable at the point of sale (POS) without the presence of the card’s unique elements. While EMV won’t prevent all fraud, it will greatly decrease card duplication fraud.

 

  1. Stronger Lending – Credit union lending is expected to grow 7.5% in 2014 and 8% in 2015 as credit unions expect a rebound in loan originations. These are the strongest growth rates since 2007 and will be very welcome as credit unions have struggled with loan growth for more than a few years.

 

  1. Key Operating Ratios – Credit unions‘ return on assets are expected to rise slightly from 0.77% in 2013 to 0.8% in 2014 and 0.85% in 2015. Improved loan growth will shift assets from lower yielding investments into higher yielding loans. This will push asset yields above the record low of 3.4% set in 2013. Operating expenses will continue their long-term downward trend, aided by the absence of corporate stabilization assessments.

 

  1. Life After Mortgage Refis – The mortgage refinancing boom has ended. Credit unions are now focusing on purchase mortgages. Another opportunity in the mortgage market will be home equity lending. Many real estate markets have rebounded and home values are approaching 2007 levels. This will provide the opportunity for home equity loans to make a comeback.

 

  1. Lower Fee Income – Fee income as a percent of average assets will continue its six-year decline as the economic recovery exerts a downward influence on penalty fees. The decline in mortgage refinances and the fees derived from these loans will play a part in the decline. Insufficient funds, overdrafts and courtesy pay fees from checking accounts, which have long been the largest source of fee income for credit unions, are expected to decline as members’ financial conditions improve.

 

  1. Interest Rate Risk – NCUA states that “interest rate risk is the most significant risk the credit union industry faces right now.” Expect examiners to ask more pointed questions this year about your credit union’s interest-rate risk program.

 

  1. Recruitment and Retention – Multiple surveys of human resource executives all point to the same finding – retaining top performers will be one of the most important and difficult challenges facing HR executives in the next decade. This comes during the same time period when the credit union industry is expecting a record number of CEO retirements.

 

  1. Big Data – Analyze your members’ use of your delivery channels. This will help your credit union understand how members currently access your products and services and how they will want to in the future. The challenge is to build bridges between the various systems to create a more member-friendly experience.

The credit union and financial industries are more complex than ever. Increased regulatory compliance requirements, ever-expanding technology options, non-traditional competition and economic consequences are among the many challenges credit unions face. As you prepare for your strategic planning session, utilize every available resource. Your credit union’s future depends on it!

 

                     

Categories: Strategic Planning & Consulting
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