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Filene 2025: Optimism for CUs in Whole New FI World
Monday, November 9, 2015 6:45 AM

Technological disruption, increased regulation, changing consumer behaviors, and asset growth will all contribute to the reshaping of the global financial ecosystem, according to Filene Research Institute's new report, “Trending: Credit Unions in 2025.”

“Credit unions will be seen as apps on a smartphone more than as a physical location,” said Bruce Cahan, a visiting scholar at Stanford University. “They will include video chat for dialogue and financial counseling, but for all but the most complicated transactions, a credit union will have to deliver service excellence without the human interactions.”

According to the report other areas that will see the most dramatic changes include:

  • Consolidation: An estimated 150 to 250 U.S. credit unions close each year. Institutions of all sizes will be challenged to make the necessary investments to satisfy younger members;
     
  • Payments: By 2020, card and cash usage will decline rapidly as digital payment methods become more practical and mainstream;
     
  • Lending: Core lending services are at risk. Sophisticated start-ups are nibbling away at unsecured loans, auto loans, mortgages and business loans; and
     
  • Regulation: Small financial institutions are increasingly challenged by new mandates, while compliance costs drain away profits. But regulation is also a moat that keeps some competitors out. The next 10 years will be crucial in developing sustainable internal and collaborative ways to deal with it.

“Credit unions should focus first on the incremental changes that can be made today to ensure sustainability and growth in 10 years and beyond,” advised Ben Rogers, Filene research director.

As part of this project, Filene asked credit union CEOs nationwide for their predictions for 2025. An example question: If we were to start on just one thing right now to prepare credit unions for 2025, what would that one thing be? Among the answers:

  • “Enhanced electronic marketing to keep our remote members engaged.”
  • “Make sure the personal touch does not get lost in the rush to technology.”
  • “Migrating everything to the cloud.”
  • “Easy virtual lending and loan closing process.”
  • “Eliminate Dodd-Frank and the CFPB.”
  • “A great mobility product with e‑access for debit and credit cards.”

Researchers also examined four possible economic scenarios: continued moderate growth, a credit explosion, rampant inflation, and another financial crisis. Good news for credit unions: Even in the worst scenarios the credit union system holds up.