By Allied Solutions,
July 29, 2024
Explore the mid-year challenges and opportunities for credit unions in 2024. Learn about the impact of ransomware attacks like CDK, economic turbulence, rising delinquencies, industry trends, and the importance of tailored solutions and innovation for sustained growth and resilience.
This article was first featured on CU Insight.
As we move beyond the midpoint of the year, it’s an opportune moment to reflect on the challenges and opportunities that have defined the first half of 2024. For credit unions, the landscape has been particularly complex, and the road ahead requires a combination of creativity, resilience, and strategic foresight.
Multifaceted risks
First and foremost, it’s crucial to acknowledge that there is no panacea for the multifaceted risks faced by the financial sector today. Recent events have underscored this reality. Credit unions, banks, and other financial institutions face significant disruptions due to issues like ransomware attacks. These risks highlight the importance of prevention, quick action, compliance, and recovery. Credit unions are not immune. The prevalence of these issues, along with incidents like the CDK event1, emphasizes the ever-present threat of cybersecurity breaches and the need for a comprehensive approach to address them.
Although there is no way to completely prevent a ransomware attack, credit unions must invest in state-of-the-art cybersecurity measures and foster a culture of vigilance among employees and members alike. Regular training and awareness programs are essential to staying ahead of increasingly sophisticated cyber threats.
Economic turbulence
Market conditions have also presented substantial hurdles. Despite efforts to stabilize, high prices and elevated interest rates persist, exerting pressure on both credit unions and their members. Over the past 12 months, car insurance rates have surged by 22.6%, contributing to an overall 47.08% increase in auto insurance costs. Additionally, repair costs have risen by 7.6% due to more expensive parts and increased labor expenses.2 This financial strain is reflected in the rising delinquencies, with 30-day delinquency rates climbing from 2.01% in Q1 2022 to 2.72% in Q1 2024, marking a 35.22% increase.3
In this environment, creative collaboration in financial products and services is key. Credit unions should explore innovative loan options, offer competitive savings rates, and provide financial education to help members navigate these turbulent economic waters. Flexibility and responsiveness to member needs will be critical in maintaining trust and loyalty.
Insights from industry leaders
Earlier this year, we hosted our Credit Union Advisory Board consisting of credit union CEOs. These discussions highlighted several key issues of paramount importance to industry leaders:
- Industry trends: Mergers and acquisitions, delinquencies, charge-off rates, asset quality, and liquidity were at the forefront of our discussions for stability and growth.
- Technology: The impact of AI and other technological advancements is reshaping the industry to enhance efficiency and member experiences.
Product innovation: Continually innovating to meet evolving member needs by seeking new solutions and strategies is essential for staying competitive. - Balance sheet management: Maintaining robust balance sheets by growing non-interest income, peer collaboration, and leveraging partners are key strategies for financial health.
- Legal/regulatory issues: To help mitigate risks, understand and comply with regulatory changes, such as CFPB positions on ODP/NSF fees, junk fees, open banking, and interchange fees.
Power exchange
Adding another layer of complexity, as erratic conditions often do, the political climate is highly polarized, with unprecedented developments as we approach a pivotal election year. Legislative and regulatory changes can have profound impacts on credit unions. Staying informed and engaged with policymakers is vital to advocate for favorable regulations and to anticipate and prepare for potential shifts. Credit unions must be proactive in adapting to new regulatory requirements while continuing to champion the best interests of their members.
Solutions for unique challenges
One-size-fits-all solutions are ineffective. Credit unions must adopt a tailored approach, crafting specific strategies to address the unique issues encountered time and again. This requires a deep understanding of the local community, member needs, and the broader economic and political context. By leveraging data analytics and member feedback, credit unions can develop targeted initiatives that resonate with their member base. Are you listening to your members?
Looking ahead
Despite the perpetual challenges, there is reason for optimism. By remaining steadfast in their commitment to these principles and by embracing innovation and adaptability, credit unions can navigate the uncertainties ahead.
As we move forward through the second half of the year, let’s reaffirm our dedication to creative collaborations, steadfastness, and specificity in our solutions.
1 CDK hack upends U.S. auto industry, sending dealers back to paper forms (nbcnews.com)
2 bls.gov
3 Experian
