The sharing economy

The future of auto lending—the bread and butter of many credit unions—is high on many lenders’ minds as technology advances. Self-driving and longer-lasting vehicles, and fewer driver’s licenses, all seem to point to a future where fewer people buy and own cars.

In 1983, 92% of Americans ages 20 to 24 held driver’s licenses. In 2014, that figure dropped to 77%, according to a 2016 University of Michigan study.

While the trends seem to indicate auto lending will decline in the future, it’s increasing at credit unions in the short term.

“We’ve seen nothing but increases in lending at credit unions, particularly with auto loans,” says van Rijn. “It’s been growing dramatically, leading to some of the highest loan growth rates we’ve seen in decades.

A lot of people are going to credit unions because of the value credit unions offer, the lower rates. There also has been a lot more indirect auto lending among credit unions.”

While auto lending remains strong, Downin thinks credit unions should begin to imagine a future that doesn’t rely on individual auto loans. “I’m not suggesting credit unions abandon auto loans. But we’re starting to think about what it would look like to finance a pool of self-driving vehicles for our members, or to provide self-driving vehicles for members,” he says.

“You’re still financing access to transportation for members, but instead of a loan it’s a monthly fee for access to membership.”

Projecting the impact of self-driving vehicles, Ventura says financing a vehicle that spends most of the day

driving will be different from financing one that’s parked all day. The former vehicle will depreciate much faster, requiring lenders to adjust the loan terms.

If auto lending does decline, credit unions might be able to recoup lost revenue by investing in payments technology, says Theobald. Day Air has already aligned its debit and credit cards with Apple Pay to be competitive with other financial institutions.

Alternative payments systems like Square and Venmo now represent modern payments to most young adults, and they could easily expand to provide other financial services, Klavitter says. “And now Square is applying for an industrial loan charter,” he adds.

“Credit unions can’t afford to hit the snooze button. We must remain relevant for our members.”

The credit union difference

Credit unions should focus on telling their story in ways that resonate with millennials, because the prosocial mission aligns with young adults’ interests, even if they’re not fully aware of credit unions and their fundamental differentiation from banks.

Adding a millennial advisory board could be a way to address that disconnect. Those groups can discuss products and services that appeal to young adults, and build awareness of the credit union difference.