4 Credit Union Topics Worth Watching

Like vampires, I’m not much for reflection. I tend to spend my energy looking at trends and patterns for what is likely to come. Story ideas, hairstyles – those types of things.

As we launch ourselves into the third year of the 2020s, I wanted to share four items we are watching potentially come together inside the continued pandemical world that remains with us.

Pot Banking

This topic has been a cliffhanger item for years now. It’s like a real will-they or won’t-they Sam and Diane storyline, but with marijuana and banking regulations. The credit union industry has made some steady strides in pot banking, such as when the Albuquerque, N.M.-based U.S. Eagle Federal Credit Union became the first financial institution to be certified for marijuana banking. That’s great for New Mexico.

While these one-off situations technically indicate progress, we’ve yet to see anything to solidify regulatory issues, much less the passage of a federal law to cover all of the credit union industry.

As I shake my Magic 8-Ball, I see that nothing will change on this front on the federal side of things. It’s 100% politics and not the need of an entire industry that’s taking priority at this point. I think for a few more years at least, marijuana banking will continue to bring the credit union-by-credit union progress we’ve seen.

If we had the current administration and Congress and we weren’t going through a global pandemic, I think our chances of having a federal marijuana banking law passed would be in the bong … bag. In the bag.

Omicronferences

You are welcome to use that pun – I’m very proud of it. Puns aside, the credit union conference vision for at least the first half of 2022 appears to be in jeopardy for in-person gatherings. I know, it’s a drag to think about and a bigger drag for event planners.

As of this writing, the omicron variant hasn’t fully overwhelmed the United States yet – except for in New York, Minnesota, Wisconsin, Indiana, Illinois and parts of New England. The Rockettes cancelled their holiday shows. Hundreds of professional and college athletes have tested positive for COVID. NFL, NBA and NHL games have been rescheduled or cancelled and travel restrictions have come back into play in the U.K., Canada and France. Apple announced its return-to-office plans are on hold indefinitely and they’ve given every employee $1,000 to create a home office. We are recording 120,000-plus new COVID-19 cases and more than 1,300 deaths each day.

God knows what the situation will be once this is published.

Health officials stated that we should now expect to live in this ebb and flow of COVID variants at least through 2024.

It’s all about risk at this point and what risks people are willing to take.

For credit union conferences, I expect the risk will be too high for many shows to go on as in-person events.

I think a deciding factor for holding in-person conferences will be if public schools close down again, and some already have. Once kids are stuck at home for virtual school, the parents will be stuck as well. And those parents won’t be able to go to conferences. Another happy hour on Zoom, I guess? Blah.

Let’s Stop Saying Fintech

What is fintech anymore? While some believe the term was first used in the early ’70s, some think it came out of the creation of the Financial Services Technology Consortium in 1993. Whatever the case may be, fintech came into its own in the 21st Century and it seems fintech doesn’t mean what it did then, whether it was coined 50 or 20 years ago.

Credit unions have a love/love you more/behind-the-scenes envy relationship with fintech organizations. While fintechs once were known as the nerdy saviors for helping create back-end systems for credit unions, they’ve also become a consumer-focused group that still provide the kind of technology that most credit unions can’t create themselves, such as mobile apps, mobile banking and AI technologies. Fintechs have changed so much in recent years that many have created other divisions of the fintech business that are going after those precious lending dollars. You’re familiar with those cries of “Regulate fintech lenders!” and “Don’t regulate my precious third-party provider of the technology we use!” They are one in the same.

I do not have a problem with fintechs at all. They’ve done a great job of reading the room and evolving as they have in our mobile-first world, while creating the technology we all use.

We are existing in a fintechs-need-credit unions and credit unions-need-fintechs world. I suspect soon that the relationship could become one-sided and fintechs might stop talking to us while they’re at their locker before heading to third period. And in my mind, that’s OK. Competition is great. Also, we could start passing around mean notes about them in Biology if it gets ugly.

However, continuing to call them fintechs is like referring to AOL in the early-Internet days. I don’t know what they should be called, but I feel like a new term is coming and honestly, they deserve a new moniker.

Many Mergers or the Most Mergers

As we’ve reported, credit union-to-credit union mergers have been numerous this past year. While we’re still waiting on final numbers from the fourth-quarter reports, as of the third quarter, the NCUA approved 117 mergers. We don’t have the official numbers for credit unions acquiring bank assets for the year, but that number also is higher than what we saw in 2020. Of the 16-plus credit union-bank acquisitions announced in 2021, a handful were called off and at least one deal is tied up in court.

What is happening is credit union mergers are getting bigger, which makes sense since there are fewer smaller-sized credit unions. The big credit unions are getting bigger and they are going after the mid-sized credit unions, while the smaller ones are getting smaller and/or disappearing and/or merging.

Late in the year, we dropped below that threshold of fewer than 5,000 credit unions. We’ve gone from a peak of 23,866 credit unions in 1969 to 4,990 today. The thing is, assets are growing rapidly and membership continues to climb. The industry, if you judge it by those two items, is very healthy.

We believe this M&A trend will hit a high mark in the next two years and that the accelerated downslide of the number of credit unions in existence will continue.

I don’t think that’s 100% a bad thing. I do think it means we have some adjusting to do with our cooperative thought process. Can we grow that large with much fewer credit unions and still exist under the cooperative umbrella? I do. But I’d expect once we’ve reduced the industry down to fewer credit unions that it could trigger the end of the tax-exempt status.

Michael Ogden is editor-in-chief for CU Times. He can be reached at mogden@cutimes.com.