Wouldn't all of our jobs be easier if we could look into a crystal ball? Year-end predictions are usually pretty interesting to read. Predictions for the where the credit union landscape will be in the year 2040 highlights some very noteworthy challenges and bright spots. Let's look at the future according to the current and emerging trends making up the predictions that Credit Union Times is reporting on for the year 2040:
CU Times Predictions
"There are fewer than 3,000 credit unions serving more than 150 million members. Credit unions are also in fierce competition with P2P lenders that emerged after the Great Recession of 2008.
Consumers commonly use wearable virtual reality devices to shop for everything – including financial services – to support their lifestyles. It will be more common for people to live beyond 100 years.
With fewer than 3,000 credit unions in existence, the majority of them will be very large in 2040, but still quite small compared to mega banks, according to Bill Hampel, CUNA’s chief economist."
Analysis
So far we are starting out kind of doom and gloomy. But as the article points out, in 1990, there were 14,549 credit unions, and the surviving 6,000 credit unions of 2015 managed to somehow overcome the challenges and relentless attacks stemming from the commercial banking industry. So all hope is not lost! And least we forget that credit union memberships now tally more than 100 million members, compared to just around 67 million just 25 years ago.
As long as credit unions continue to stay in tuned with technology demands from members, then you should survive the next 25 years. Mobile banking via smartphones will likely evolve as devices change. They've even thrown out "virtual devices," which take a wearable like a smart watch or smart ring to the next level. It's almost unimaginable to think about where technology will be, but the take home is that credit unions will lose members if they ignore technology trends and expectations from the younger generations.
An area of risk that this predictive article warns against is in the core lending area:
“No credit union service is at more risk than core lending,” concluded the Filene report “Trending: Credit Unions in 2025.” “In addition to the traditional competition among financial institutions, sophisticated start-ups are nibbling away at unsecured loans, mortgages and business loans.”
Peer-to-peer lenders like Prosper and Lending Club have made the borrowing process drop-dead simple. But right now, they’re doing it in a market that most banks and credit unions don’t really care that much about – personal lending.
Experts caution that once these P2P lenders get really good, they'll move to the next level. So as they are perfecting the art of personal lending, they may then start perfecting auto, mortgage or business lending. "Of the $843 billion in consumer loans outstanding, a Goldman Sachs report estimated $209 billion is at risk to move to fintech companies (a line of business based on using software to provide financial services). Though they hold less than 2% of the market today, Goldman Sachs projects the new players could eat up 14% of the market within 10 years." So losing members' interest in credit union loans will signal big trouble if these threats are not taken seriously.
More warning on loans, "...millennials won’t own the two to three cars that their parents did. That means the demand for auto loans will decline." In addition, the self-driving cars market is expected to reach $42 billion and 25% of the automobiles on the road will be self-driving ones by 2035, according to Barclays analysts.
“Credit unions need to think about it because we’re still very dependent on auto loans for profitability, and when that changes materially, and we’re not part of the financing that comes behind that, then that would be a big deal for credit unions.”
The bottom line is that we don't know what will happen in one, five, ten or even twenty-five years. But the take home message is that for the future of credit union success, heed warnings on trends in loan origination. And be sure to extend your value through technology. Generations from now on will only become more dependent on technology.
