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It’s the start of a new decade, and while it’s certainly tempting to wish the 2010s well and dance off into the roaring ’20s, let’s not forget the journey we went through to get here. The 2010s was a great decade. We saw the rise and fall of popular trends like planking, the ALS Ice Bucket Challenge, and Pokémon Go. The world failed to end in 2012 (thanks to the Avengers), the dress was simultaneously blue and gold, and Netflix redefined our lives.

More seriously though, in the credit union industry the decade saw new measures taken to recover from the economic recession while working to draw in members and opportunities for growth. It saw the innovation of new, creative methods and technology, while simultaneously improving on current products and services. The industry grew, changed, and evolved though still remaining loyal to its principles.

While this is certainly not a complete list, here are some of the industry’s game-changing moments, technologies, and trends from the last decade:

Mobile Remote Deposit Capture

Long gone are the days where you had to drive to the bank to deposit your checks, thanks to Remote Deposit Capture (RDC). While this service was technically introduced in 2003, when the Check 21 Act declared that scanned images of checks held the same legal standing as paper checks, the process was expensive and complicated; only large businesses were able to take advantage of the new law. However, with the growth mobile banking, Remote Deposit Capture made its way to smartphones near the end of 2009 and into the hands of the everyday consumer. Where members once had to drive to the bank in rain or shine to deposit their checks, they could now simply snap a photo for an instant deposit.

While it’s easy to assume a large bank was the first to introduce this service, it was WV United Federal Credit Union (now Element Federal Credit Union), who released the first mobile check deposit in 2009, beating USAA – who planned on releasing a similar mobile app – to the punch. The system was much less complex when compared to modern RDC apps, requiring members to take a photo and hit the deposit button. The photo was then sent to the credit union, who used the phone number to link the deposit to the right account. Fairly simple, but groundbreaking nonetheless.

In the last decade, the use of this service has skyrocketed. In 2013, over 40 billion dollars were deposited via smartphones using RDC, and as of 2016, there were over 80 million retail users of RDC with over 2,600 financial institutions offering RDC on mobile apps. Providing this service is no longer a competitive offer, but an expectation among credit union members, and that expectation will continue to grow in the coming years as RDC becomes more and more commonplace.

Interactive Teller Machines let members be self-servicing

Raise your hand if you’ve heard someone complain that the advent of smartphones and new technology has ruined face-to-face interactions, or that people would rather interact with their phones than with each other. While those people can often elicit an eye roll from younger generations, they may not be completely wrong. According to the Financial Brand, over 50% of Gen Z would rather do their banking through virtual means than face-to-face. For those who don’t enjoy interacting with people, Interactive Teller Machines (ITMs) will be your new best friend in banking.

First introduced in 2013, these machines allow credit union members to do many things a teller can do. Without needing an actual teller, members can now service themselves and perform a number of transactions including opening new accounts, ordering replacement cards, issuing money orders, and dozens of other things. If the member does have a question, ITMs can place a virtual call to a teller at any time, day or night, who can walk that member through their transaction. There are many benefits to using this technology, including reduced costs, higher efficiency, and convenience. However, since ITMs are still pretty new, it could be a few years before they become an industry standard.

Considering ITMs for your credit union? Here are some things to know before making the leap.

The rise of eServices 

At this point, we’ve officially established that consumers love convenience and not having to leave their houses to get errands done. Credit union members are no different. Whether depositing a check, transferring money, or paying bills, doing so from the comforts of home or on-the-go is much easier and far preferable to the alternative of traveling to a credit union branch. In fact, according to Cisco, a whopping 78% of consumers prefer to do their banking through mobile and online services.

Now, certain aspects of eServices have been around since the ’90s (e.g. online banking and e-statements), but the last decade really saw an increase in demand for credit unions to offer expanded eServices including mobile apps, bill pay, loan applications, and instant money transfers. The end of the decade saw the start of newer eServices such as eNotary and remote notaries, as well as mobile wallets, which allow users to pay with their phones.

While eServices haven’t completely wiped out paper yet, we can expect the industry to find news ways to make even more services accessible online and through smartphones in the future.

P2P payment apps redefine currency

In the last decade, cash has transformed from a common method of payment to an inconvenience. It takes up more room in your wallet, paying with it takes longer, and handing over a few bills with a chunk of change when paying feels inconsiderate (especially when you can just swipe a card). However, the disuse of cash has made it increasingly difficult to trade funds between people.

Thankfully, person-to-person (P2P) payment services made it possible to instantly send money anywhere to anyone. Whether you were paying a friend, sending money to the babysitter, covering your share of the Uber, or getting paid, person-to-person payments have made it unnecessary to carry cash or promise to pay at a later time.

While PayPal has allowed people to send money over the internet since the 1990s, it wasn’t until the introduction of P2P mobile services such as Venmo, Cash App, Zelle, or Apple Pay that it became popular, increasing in use around 2015. The appeal was obvious: you could now pay anyone instantly over your phone, and your recipient could have the money in the account in minutes. No wait time and no fumbling for change.

(Just ask Nicole Cooper, she sees the convenience.)

In 2017, Venmo alone processed over $155 billion worldwide with a total of 227 million active accounts. These fast, convenient, and easy-to-use services will most likely only see an increase of use in the coming decade as they find ways to improve and grow. While we probably won’t see cash completely disappear anytime soon, I think it’s safe to say it should be worried.

Technology expands the field of membership

So far in this article, we’ve covered quite a few different technologies that have made banking in the last decade more convenient and more mobile. With P2P services, RDC, mobile apps, online banking, and with ITMs, there is much less of a need to go into a credit union branch. Thus, the end of the decade brought about virtual financial institutions. Take Superbia Credit Union for example; with no brick and mortar location, they will serve their members through completely virtual means.

Some credit unions, while not completely virtual, do still allow you to join virtually from anywhere, even if you live across the country. This opens the door for expanded fields of membership, or alternatively, more selective fields. Credit unions now have the potential to create a membership commonality that is not related to location but to interests, age, identity, etc. In the coming years, it’s entirely possible that we might continue to see more specific and targeted fields of membership through virtual means. Yet another reason why people might stray from creating physical branches.

Occupy Wallstreet – Bank Transfer Day (2011)

Shortly following the end of the economic recession that began in 2008, consumers became fed up with the greed of the big banks, having received a bail-out from taxpayers, only to make more money than ever, fire more employees, and charge fees to increase executive pay. In September 2011, Bank of America announced it would add a five-dollar monthly fee to all debit cards – a decision they would later repeal due to public outcry – prompting many customers to leave their banks to join credit unions. This movement, dubbed Bank Transfer Day, was a day dedicated to inspiring bank customers to switch over to credit unions.

Bank Transfer Day saw an unprecedented number of new credit union accounts, with a total of 650,000 new members in one day, more than the whole of 2010, which gained 600,000 members total. According to HuffPost, in one year (from June 2011 to June 2012) credit unions amassed an impressive 1.2 million new members. Many who switched expressed a desire to move back to their community and get away from big corporations, while others claimed they weren’t aware credit unions were so easy to join, open to the public, and had all the available technology the banks did. Not only did the day bring a wave of new accounts, it educated a number of people on the benefits of credit unions, bringing a lasting impact to the industry.

Credit unions buy banks left and right

In the last half of the decade, credit unions began snatching up banks where they could. From 2012-2015, credit unions purchased a total of six banks (including one year where they didn’t purchase any). However, in recent years, this number has largely increased. In 2018 alone, credit unions bought nine banks (more than double their previous record of banks acquired in one year) and went on to gain twelve in 2019, reaching a total of 28 credit unions in the second half of the decade; a huge increase compared to the first five years.

While absorbing community banks not only demonstrates how competitive credit unions have become, it allows them to continue growing. However, credit unions must meet higher requirements and standards when looking to buy a bank. Due to the required field of membership, credit unions must be sure that all customers of the bank they are looking to acquire fit into that field. They also cannot acquire the bank if the acquisition will result in the credit union hitting a business lending limit.

But how are credit unions beating out competing offers for these banks? When placing bids, credit unions have a number of advantages. Due to their lack of shareholders and their tax-exempt status, they are able to offer higher cash bids – something competing banks cannot top. Understandably, this has caused a lot of frustration among banks, who want stricter regulations placed on credit unions to even the playing field.

This trend is expected to continue in the next few years, (Chip Filson however, has some issues with the practice) though it’s possible to see growing tensions with competing banks and potentially stricter guidelines placed on credit unions looking to acquire banks, as competing financial institutions look to find a way to limit credit union growth.

Over $1 trillion dollars in member savings balance (2015)

Back in March 2015, CUNA Mutual Group reported that for the first time in history, credit union savings balances rose above one trillion dollars. This milestone was announced in June, in their monthly Credit Union Trends Report. The bump in savings was believed to be related to the timing as members were getting their tax refunds and annual bonuses, along with higher household income and lower gas prices. Since then, that number has climbed, reaching $1.54 trillion in the third quarter of 2019 and will hopefully continue to grow.

The trend of merging 

While mergers have always been present withing the industry, the last decade saw a large number of consolidations and mergers (Barb Cooper knows, she’s well-versed on this trend). Since 2014, there have been over 1,000 credit union mergers across the US, the majority of which consisted of a larger credit union absorbing a smaller one (either to increase their product offerings or due to poor financial condition). These mergers have largely impacted the industry, steadily decreasing the total number of credit unions in the country. According to the NCUA, there were 7,339 federally-insured credit unions at the end of 2010, but by the end of 2019, there were only 5,281 federally-insured credit unions; this means a 28% decrease in credit unions in only ten years.

There are a number of reasons a credit union may look for a merger, but the main reason is to expand services offered and drive economies of scale. This however, does warrant concern, as the industry sees more and more “mergers of equality,” meaning two equally-sized and healthy credit unions merging into one another seeking to increase their size.

On the other hand, the decrease in credit unions has not led to a loss of assets or members, as those number have continued to climb in the last decade. In 2010, federally-insured credit unions held $914 billion in assets and nearly 90.5 million members. In 2019, that number had risen to $1.5 trillion in assets and 119 million members. Looking forward, it would be great for these numbers to continue to grow, but hopefully the merging trend slows down and credit unions carefully consider their options before choosing to merge.

NCUA closes Temporary Corporate Credit Union Stabilization Fund (TCCUSF) (2017)

Back in 2009, near the end of the economic recession, the NCUA created the Temporary Corporate Credit Union Stabilization Fund. This fund, approved by Congress, granted the NCUA with funds to “accrue the losses of the corporate credit union system and assess insured credit unions for such losses over time.” Essentially, this fund kept credit unions from suffering economically due to the insolvency of five large corporate credit unions, which would have exhausted the NCUA’s Insurance Fund, requiring the remaining credit unions to contribute more money to maintain the fund’s equity ratio.

While the original closing date for this fund was scheduled for September 27, 2016 (90 days after the seven-year anniversary of the original loan), the NCUA board voted to extend the life of the fund in 2010, which was approved by the U.S. Treasury, and the new mandatory closing date was moved to 2021. So why did the NCUA decide to close the fund four years prior to its scheduled end-date?

Their plan was to move the Stabilization Fund into the Insurance Fund while also returning any excess in the Insurance Fund to credit unions. The NCUA board approved a distribution of approx. $600 million to the credit unions while moving about $2 billion into the Insurance Fund. Such a distribution would not have been possible had the Stability Fund remained open. However, the NCUA retaining $2 billion while also raising their normal operating level from 1.30% to 1.39% has been hailed a very controversial move, as many in the industry claim more should have been returned to the credit unions.

So long, farewell

Thus, we can finally say goodbye to the 2010s and prepare ourselves for what the ’20s will have in store. As we look to the future and find new ways to innovate in and improve our industry, let’s not forget to take a look back every now and again to appreciate the work that got us here.

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Comments
  • Melissa Fulgenzi#1

    January 24, 2020

    Emily,
    I really enjoyed this article! I agree it’s important to look at where we have been and what we have done to help with future growth opportunities and learning lessons.

    Reply
  • chip Filson#2

    January 27, 2020

    Wonderful succinct and well balanced description of various kinds of success and innovation of the last decade.

    However I have a more dystopian view of the decade when viewed from the impact of the regulator-NCUA. Starting with the 2008/09 financial crisis all of the legal and precedent- setting guardrails were removed on NCUA behavior. They neutered the role of the corporate network, especially with smaller credit unions; they destroyed the unique cooperative safety net called the CLF; they closed five of the most important corporates, imposed new rules that required another ten or so to merge. Instead of the much publicized projected resolution costs of $1.5-$16 billion, there was a $5.2 billion dollar surplus when the stabilization fund was merged in 2017. The $3.1 billion retained by the NCUSIF were members’ funds; they circumvented the FCU act to do this, created a phony process for raising the NCUSIF’s net operating level, etc etc. etc. The industry is overseen by board members with neither a background in coops or credit unions; They have squandered the rich legacies they inherited; several have openly treated their position as a motel-room assignment waiting for higher “callings” in government or to maximize their retirement benefits with part time performance. This is just a part of the slow moving disaster that is descending event by event upon credit unions. In the meantime some of the industry’s leaders believe the future is buying banks or in convincing their fellow CEO’s to sell out their legacy through mergers and a few pieces additional silver for their retirement years.

    Among hopeful signs are the emergence of CUSO’s and their ability to steer clear of the regulator’s darkening shadow; and the lessons of the past in which in times of crisis, the person and the moment have been joined to relaunch the cooperative model and its postive impact on the American economy. Somewhere that leadership is waiting.

    Reply

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