Breaking Down Concerns for Credit Union Leaders

It’s an understatement to say that 2023 has been demanding for credit unions.

A flurry of interest rate hikes has created balance sheet challenges. The recent failures of two large banks, and the voluntary liquidation of another, have created questions about the public’s underlying confidence in the financial services industry.

SRM has been talking to credit union executives in recent weeks, including during CUNA’s annual Government Affairs Conference. We’ve been taking the industry’s pulse as we start the second quarter. Here are some of the key themes that have come from those discussions.

Deposits Remain Top of Mind

The collapse of Silicon Valley Bank and Signature Bank highlighted concerns with large deposit concentrations and the importance of clear communications with depositors.

The overwhelming majority of credit unions we’ve spoken to have a diverse array of member deposit accounts and are in a good place regarding insured vs. uninsured deposits. Still, it makes sense to continue outreach to ensure members understand how deposit insurance works and to do what it takes to address any concerns.

We continue to emphasize a strategic approach to maintain a diverse member base and pursue more transactional accounts to keep interest expenses in check and support the net interest margin. A successful long-term strategy will benefit credit unions when good lending opportunities arise.

Digital Transformation, Rate Inflation

Digital transformation remains a big topic for most credit unions, as the pandemic validated the importance of having an omnichannel experience to meet member expectations. Recent data indicates that nearly 40% of Americans use at least one fintech service, and almost three-quarters expect the same enrollment experience for bank and credit union products.

This trend is headed in one direction. Our conversations about the evolution of branch strategies and investment in solutions like interactive teller machines (ITMs) make it clear that credit unions understand the importance of keeping pace with member expectations.

Consumer Fees and Member Support

CUNA CEO Jim Nussle held a fascinating fireside chat during the GAC event with CFPB Director Rohit Chopra, addressing the high-profile subject of consumer fees. Although President Biden highlighted airline and hotel fees during his State of the Union address, the CFPB has been focusing on overdraft and nonsufficient funds (NSF) fees.

While Chopra focused on the notion that “the system is too slanted toward larger players” and consumers often lack control, his comments made it clear that the drumbeat against NSF/overdraft would continue. As the Durbin Amendment taught us, actions taken against the big players will have downstream effects on smaller institutions.

The conversation also coincided with the Supreme Court’s decision to consider the legality of the CFPB’s funding mechanism. Chopra said he welcomed the clarity such a review would bring – just as bank and credit union leaders crave regulatory clarity. SRM’s recent white paper details the impact of the CFPB’s many active endeavors.

The Bottom Line

Although the financial services environment continues to evolve and recent days have been wrought with uncertainty, credit union leaders are rising to the occasion and delivering transparency to their members. SRM (and our credit-union-specific Sievewright & Associates arm) provides the strategic and tactical tools credit unions need to manage the current headwinds and meet their goals.