Where Lending Is Going in 2018 and Beyond

Credit union loan growth is staying strong in 2018, increasing at a faster rate than last year. This is welcome news for credit unions, as lending likely is a vital component of their service offerings and overall growth strategy. With advances in technology, the lending space is constantly evolving to become faster and more efficient – as a byproduct, it’s also becoming more competitive.

Looking ahead to the second half of the year and beyond, here’s what credit unions can expect in the lending space.

2018: A Year of Expansion

Because of the solid economy, loan growth is predicted to remain strong throughout the year. Auto lending and mortgage lending are both steady thanks to low interest rates. The Fed is likely to continue raising interest rates this year, but the competitive rates that credit unions provide will mitigate any potential decrease in overall demand for lending.

Enhanced Technology

Loan technology is focused on creating efficiencies for both the member and the credit union. Members are increasingly filing loan applications online or via their smartphone, and credit unions need a technology partner that can make this process as streamlined as possible. Big data is also paving the way for a more customized member experience, as credit unions leverage data to target members for other services based on their recent behavior. As data analytics usage becomes more prevalent, there will be more opportunity for cross selling.

Demand for Automated Processes

Members don’t want to wait to hear whether or not they’ve been approved for a loan, and credit unions don’t want to go through an arduous process to determine if someone is qualified – this is where automated decisioning is key. Automated decisioning allows credit unions to close loans in minutes. Furthermore, loans can be automatically funded once approved. If a non-member walks into a branch (or more likely, visits your website or mobile app) and decides to take out a loan, they automatically can become a member once approved. Clearly, the name of the game is automation.

Potential for Small-Dollar Lending

The regulatory landscape for small-dollar lending is changing. In an effort to decrease predatory payday lending, regulators are considering loosening regulations on small-dollar loans – this could open the door for more credit unions to enter the space. The NCUA is currently awaiting comments on a new payday lending rule that would eliminate the minimum loan amount, set a maximum loan term and remove the time restriction on the number of loans a person can receive from a credit union.

More Competition

Although changes in small-dollar lending rules may weed out some payday lenders, there is still stiff competition in the lending space. Fintech startups are emerging and using the latest technologies to process and underwrite loans quickly. It’s essential that credit unions stay ahead of the technological curve in order to compete.

Credit unions looking to compete with other financial institutions need to be aware of these trends as they formulate and evolve their growth strategies. The loan landscape is looking positive for now; however, to truly thrive, credit unions must continue to not only provide the competitive rates they are known for, but also stay on the forefront of technology and focus on customizing the lending experience.

Mark Shaddix is Director of Lending for EPL, Inc. He can be reached at 205-408-5300 or mark.shaddix@epl.net.