CU leaders discuss trends in operations, payments, more amid COVID-19
Mission Federal Credit Union President and CEO Debra Schwartz, Webster First Federal Credit Union President and CEO Mike Lussier, Strategic Resource Management Senior Vice President Larry Pruss, and NAFCU President and CEO Dan Berger joined NAFCU COO and Executive Vice President Anthony Demangone for a wide-ranging discussion on trends in payments, lending, strategic planning, and more during a town hall Wednesday.
One of the core issues credit unions are facing is ensuring their technical capabilities are strong enough to support members as more adopt mobile payments and shop online during the pandemic. Lussier encouraged credit unions to review their mobile and online platforms to make sure they're quick, easy to use, and accurate, and to bolster that with strong customer support. Pruss doubled-down on that sentiment stressing the need for a frictionless payments process.
For Schwartz, one key decision her credit union made was to hire an employee that was responsible for digital strategy, rather than having various departments trying to implement different components. In addition to investing in technology on the member side, Schwartz and Lussier also advised fellow credit union leaders to have business continuity plans in place and test bandwidth to ensure employees can work from home and credit union operations continue without interruption in the pandemic environment. Berger noted that more credit unions are accelerating their tech investments and strategy in the wake of the pandemic.
Another trend credit unions are seeing is the increase in debit and credit card usage. While certain spending areas have been hit by the pandemic – such as entertainment and travel, which could continue into the future as people limit exposure to crowds – other areas have seen increases. Pruss highlighted that card-not-present purchases have increased 200 percent year-over-year globally. The group discussed how fraud is also changing with this trend, and Pruss shared how artificial intelligence can help credit unions understand their members' behavior to better detect fraud, though those models will have some catching up to do as consumers' spending behavior changes during and after the pandemic.
The economic stimulus payments sent to individuals to offset some of the financial hardships incurred during the pandemic have caused more consumers to use debit cards and prepaid debit cards more frequently, rather than credit cards, the group noted. The reduction in interchange fees and potential charge-offs for credit cards as members default or skip payments is something credit unions need to prepare for in their portfolios, Schwartz said. Lussier also highlighted that his credit union's increased liquidity has led them to readjust some of their underwriting standards. They also discussed the need to incentivize members to make a credit union's card product "top of wallet" when used for mobile and online purchases.
Across the country, the group discussed how auto lending is down, but real estate continues to be an opportunity with low interest rates. On the real estate side, Schwartz cited about half of her California credit union's pipeline is for refinancing loans and the other half is for new purchases. Lussier noted a similar split in Massachusetts, but also acknowledged that the real estate market has taken a hit with social distancing measures keeping potential buyers and appraisers out of houses. Berger also said geography is playing a part in the real estate trend, as some markets don't have the inventory available to meet demand.
Branches and staffing
As more credit union members adopt their institutions' digital offerings, the group discussed how this could impact branches. Lussier said Webster First is reviewing data on online utilization and operational inefficiencies to determine if a branch is still viable and how staffing can be adjusted to better serve members in needed areas. Schwartz called this an "exciting time to be in a branch" as more members come in for consultation, making employee and member interactions more helpful and meaningful. Berger said credit unions might look to have a smaller branch footprint, but also touted how credit unions are staples in their communities and having a branch available when members need it is a good marketing tool.
Schwartz and Lussier also discussed how the coronavirus pandemic has caused staffing adjustments as some employees have moved departments to support demand. Each of them touted the nimbleness of credit unions to be able to adjust to changing needs.
As credit unions look toward recovery and returning to normal, Schwartz recommended credit unions build out one-year strategic plans to be better situated to adapt to changing operational needs and trends. She also advised against scaping plans already underway, but each of group stressed the need to look at cost-saving measures and reprioritize. Pruss said the pandemic has given credit unions leverage to review and renegotiate contracts with vendors to ensure they have the right partner in place, while also potentially securing some cost savings.
To remain successful, Schwartz and Lussier said communication is key. While communicating changes in products or services to employees might be the first step, keeping members informed of how things might be different and what credit unions are planning for is also important. Pruss and Berger also stressed that having capabilities in place to capture and leverage data will allow credit unions to better serve members and grow.
The complimentary town hall is available on-demand. A previous town hall, also available on-demand, explored credit unions' response to the pandemic and expectations for recovery. These topics and more will be featured during NAFCU's upcoming State of the Industry, a complimentary virtual event. Learn more about the landmark event to bring together credit union leaders here.
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