Seven Trends Affecting CUs' Future

Seven Trends Affecting CUs' Future

Despite challenges, futurist remains positive about direction CUs are headed.

February 9, 2016

Increased regulation, the rise of cyberthreats, and the seemingly endless flow of cutting-edge technology are changing some of the fundamental ways credit unions do business and lowering the barriers to entry for nontraditional competitors.

But futurist Bob Treadway remains unabashedly optimistic.

“So much about the future is so positive,” says Treadway, founder of Treadway & Associates.

He cites seven trends that most merit deliberation and action by credit union boards:

1. Regulation stays ramped up. The pace of new regulation might slow, but the level won’t decrease, particularly if a Democrat wins the U.S. presidential election in 2016. The major initial emphases of the Consumer Financial Protection Bureau (CFPB) and other agencies will mature between 2018 and 2020, which will affect credit unions’ net revenue.

“Credit unions will need to do more with less because of the ramp-up of regulatory pressure and erosion of fee income,” Treadway says.

Directors NL subscribe2. Fees most likely need to increase. Conceding this is a tough move for credit unions, which historically have insulated members from fees.

Treadway advises taking a “fair and transparent process” toward any changes. “If higher fees are coming, when do you need to start communicating with members? Now is not too soon.”

3. New investments. The expense ledger continues to grow, adding “must-have” items such as new delivery channels, data analytics programs, cybersecurity defenses and insurance, and technological upgrades ranging from apps to core conversions.

4. More transactions overall—and more conducted outside branches. Banking will continue to move from somewhere we go to something we do.

Americans can control delivery of services in almost every field, and when consumers can get what they want, when they want, they expect it from all systems.

“The buzzword for credit unions is 'omnichannel,' but you can refer to it as ‘entire channel,’” Treadway says. “Members want not just choices, but communication through all channels.”

5. Careful deliberation about new branch construction. Despite considerable membership growth in 2014, credit unions didn’t demonstrate a net gain in branches. Meanwhile, Chase, Bank of America, and Wells Fargo all have closed branches.

“Branches aren’t finished—they’re just undergoing a metamorphosis,” Treadway says.

Banks and major retailers alike now opt for smaller footprints, a trend fueled by Amazon’s ability to drive down prices and expense while carrying a larger inventory. Walmart, for instance, builds its stores 35% smaller than it did a few years ago.

“How much money will you have to throw at brick and mortar infrastructure in a changing environment in which consumer behavior could be much different five years from today?” Treadway asks.

6. Cybersecurity will be the top risk priority. “Cybersecurity is a risk that can’t be ignored, and you can’t wait for the regulator to step in,” Treadway says.

The board, senior management, and the audit function of the supervisory committee must build a strategy with specific goals in mind. Treadway advises ensuring you have proper cyberinsurance protection, developing detailed contingency plans, hiring cybersecurity expertise on staff, and appointing tech-savvy directors.

7. Data analytics is coming. Companies analyze less than 1% of their data and convert even less than that to any proprietary advantage, according to The Wall Street Journal.

Credit unions should strive for intimate knowledge of their members’ financial behavior. The tools for drawing value from big data will become more commonplace and less expensive.

“Look at advanced analytics as a journey—and start that journey now,” Treadway says. “Move from descriptive analytics to predictive, prescriptive analytics.”

Treadway addressed CUNA Mutual Group’s recent online Discovery Conference.

This article initially appeared in Credit Union Directors Newsletter, which provides strategic insights for policy makers.