The Financial Brand Insights - Fall 2022

No. 1: Broad Macro-Economic Trends With inflation at its highest level since the 1980s and the cost of labor increasing, credit unions – like their members – are facing rising expenses in multiple categories. Layer on a dynamic interest rate environment and currently higher savings balances, and it’s clear that now is a critical time to balance managing the margin with driving the mission.

named changing member expectations as a top-three trend which will have a high impact over the next three to five years

said it’s a top-three trend to act on 1

81%

40%

of credit unions listed the need for new revenue sources as a top-three trend in the next three years

No. 4: Fintech Synergy & Fintech Competition To date, fintechs have captured little U.S. retail banking revenue. However, McKinsey says they are starting to win a larger share in select areas. The pandemic appears to have been a strong catalyst for this momentum.

listed new revenue as the No. 1 trend to act on 1

44%

17%

2% ONLY

of retail banking revenue has been captured by fintechs

of new checking accounts were captured by neobanks in 2020

24%

No. 2: Auto and Home Lending Market Swings Increased demand and supply shortages are driving auto loan origination balances up sharply. According to Experian, in 2021, banks and credit unions owned a 53% share of the auto loan market. 2 In contrast, the mortgage market is cooling, coming off a record high driven by a prolonged period of low interest rates. Winning borrower business across all loan categories is naturally top of mind for traditional financial services companies, especially as they compete with fintechs, captive finance companies and other lenders. In the CUNA Mutual Group survey, credit unions reported making investments in several areas to draw in more business. These included enabling digital loan applications, interest-rate and no-fee promotions, new indirect partnerships and new home loan types. 1

No. 5: Changing Role of the Branch Over the past several years, and especially since the outbreak of COVID-19, we’ve seen the physical branch decrease in importance to consumers. As a result, the largest financial institutions are making enormous, at-scale investments in the overall customer experience, distributions channels and partnerships. Credit unions that shared their branch evolution strategies with CUNA Mutual Group mentioned the following strategies: Increasingly, financial institutions are viewing fintechs as potential partners, rather than just another category of competition. The largest credit unions to participate in the CUNA Mutual Group survey, each with assets exceeding $1 billion, indicated they are tackling fintech trends via partnerships . Goals in doing so range from maintaining relevance with consumers to growing loan volume. Smaller credit unions (between $100 million and $200 million) are interested in doing the same. However, many remain in exploratory mode at this point. These partnerships offer financial institutions the ability to address consumers’ shift to digital channels, access a wider pool of borrowers, grow loans and increase productivity, especially if the fintech partner has access to artificial intelligence (AI) underwriting technology.

No. 3: Changing Member Expectations According to McKinsey, consumer preference for digital engagement has reached an inflection point. The increasing willingness to purchase financial products in digital channels is most pronounced in 3 :

Savings and/or term deposits (up 10%)

Investments (up 15%)

Cash loans (up 11%)

69%

68%

75%

Across the financial services industry, a digital mindset is driving the creation and enhancement of three specific types of business models: 1. Big brands offer digital-only platforms • Laurel Road by KeyBank NA • Light Stream by SunTrust Bank • Marcus by Goldman Sachs 2. Big Tech/fintech partnerships with financial institutions offer digital lending and payments • Peloton, Apple, Amazon 3. Branch-light models focus on target segments • First Republic • PurePoint Financial

• Implementing new branch models that are less transactional and more consultative and educational • Deploying universal teller machines, video teller machines or chat capabilities • Reducing square footage • Adding new technology at the drive-thru

of those surveyed indicated the changing role of the branch was a top-three trend to act on 1

20% ONLY

23

24

THE FINANCIAL BRAND INSIGHTS FALL 2022

THE FINANCIAL BRAND INSIGHTS FALL 2022

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