Yogi Berra supposedly once said: “Predictions are hard — especially about the future.”
In an interview with PYMNTS, PSCU President and CEO Chuck Fagan acknowledged the challenge of knowing what’s ahead. But some trends can provide a roadmap to what’s next for financial institutions (FIs), and for credit unions in particular.
Throughout the pandemic, the shift to doing things digitally was all-encompassing and changed how consumers connect with their FIs.
As Fagan noted, it takes 21 days to create a habit, and more than 65 days to cement a behavior. Three years in, it’s safe to say that consumers have gotten used to managing their financial lives online.
The Digital Lending Opportunity
Among the most seismic shifts we’ll see over the next three years: There’s a huge opportunity within lending to consumers and businesses, said Fagan, who added that the traditional risk scoring factors no longer apply in the age of Big Data. Simply relying on static data such as current income and debt and employment history are decidedly “old school” and lending in the 21st century demands a more personalized approach.
The advent of instant payments, as the Federal Reserve rolls out its FedNow service next year, will also be a game changer — and will help transform lending, too. There’s some precedent here, as Uber, for example, has enabled faster payments to its drivers.
“Financial institutions are going to have to recognize the impact [of FedNow] on ACH, on debit cards and other ways of moving funds. Over the next three years they are going to have to be ready to go ‘real time.’” Against that backdrop, said Fagan, CUs have an advantage in helping get funds to the small businesses and merchants that line Main Street and power the U.S. economy.
“The traditional ways of disbursing a loan can be displaced in favor of these faster methods,” said Fagan.
The Branch Transformation
The branch experience will continue to change as a result, he said, and three years from now will look markedly different than before the pandemic.
“The branch evolution should be really fully ingrained by then so that life-changing events [like] buying a house, planning for education, retirement,” he said, will find value through the in-person consultation. The transactional side of the equation will be left to the digital channels, with blockchain in the background as a tool that can replace some of the manual processes and paperwork.
For the FIs themselves, the digital channel is no longer just a box to check. Consumers have gotten used to banking with their mobile devices and tablets in hand. In crafting new and surprising ways to keep banking customers digitally engaged, said Fagan, FIs will have to offer clients new ways to transact. That includes crypto, which is moving from being an investment vehicle toward mainstream commerce.
And though some of the particulars of crypto-based commerce are still being hammered out, CUs will need to stay abreast of current trends, regulations, and consumer demand. To that end, he said, PSCU has set up a microsite on its own website to help educate CUs on crypto trends.
No matter the payment method, data will be the means by which CUs can make all manner of services relevant, safer and personalized for their members.
“The digital channel must be as efficient or more efficient than the more traditional means of connecting and utilizing a financial institution,” Fagan told PYMNTS, adding that with the great digital shift, “there’s no going back.”
