How Credit Unions Can Make the Most of 2022’s Uncertain Market

Not a day goes by without a new wrinkle being added to the furrowed brow of 2022’s market outlook. Even as the U.S. job market remains strong and employers strive to match wages with the rising cost of living as well as meet demands caused by the Great Resignation, daily headlines bearing new dimensions of uncertainty have left consumers and financial institutions equally rattled.

The problem – if it can even be referred to as a single problem and not an all-consuming swirl of snags – is pervasive. Whether it is inflation hitting a four-decade high of 9.1%, the continual upward creep of interest rates, compounding supply chain woes or the fierce chill being felt in the crypto market, members do not have to squint too closely to spot volatility.

All of these aggravating factors have fueled fears of a full-blown recession. However, even with these elements in play, it is impossible to definitively state whether a recession is in the cards or not. Uncertainty often causes markets and consumers to act erratically, creating a vicious cycle that could culminate in the very recession all parties involved are trying to stave off.

Nervousness about the present moment may be understandable, but it does not justify straying away from tried-and-true tactics. With that in mind, credit unions are well-positioned to provide members with the financial guidance so many are searching for right now.

The widespread economic anxiety that has defined 2022 thus far has produced an environment where prospective members stand to be especially receptive to hearing credit unions out on their myriad benefits. Given the generalized reservations many banks and major financial institutions are facing externally, credit unions have a meaningful chance to generate goodwill by underscoring their cooperative nature, competitive interest rates and personalized approach.

This last point deserves particular emphasis, as bringing attention to credit unions’ community-oriented style and personalized touch can only bolster their collective reputation. By communicating to borrowers that they are trying to make sense of the market right alongside them and leaning into individualized advice for clients, credit unions can project an air of stability few banking institutions can match.

Besides solidifying existing member relationships, the one-on-one interactions offered by credit unions can augment communications and marketing initiatives. Consumers are looking for people with expertise who can contextualize how mortgage and auto lending trends are going to affect their own finances; the in-person rundowns occurring in physical branch locations ought to be taking place in multiple channels through a comprehensive, omnichannel approach as well. We live in an information age where it is all but second nature for people to scope out a brand’s website and online presence before doing business with them. Credit unions are not exempt from this paradigm, and a little educational content – such as providing practical advice on car payments within the context of current auto lending developments – can go a long way in establishing trust among potential and existing members.

Despite the volatility and uncertainty permeating the market, there are some trends credit unions can keep in mind while advising borrowers and brainstorming how to best market their services.

The problems plaguing auto financing do not appear to be going away anytime soon. Although prices have slightly dropped, new and used car costs remain at historical highs. While the supply chain issues that spurred these increases have improved, they have remained high due to reverberations from the war in Ukraine and the compound of rising interest rates.

Likewise, mortgage rates have quickly jumped back up following a steep decline. Many mortgage companies have concurrently begun laying people off, intensifying worries about the housing market in the process. With no solution to housing affordability and availability headaches in sight, there has been a reduction in cashback refinancing as people remain priced out of the market.

These conditions have prompted many property owners to reexamine their existing assets rather than venture out into real estate realms unknown. As a result, lenders are seeing more customers borrowing with the intention of renovating their homes as fewer and fewer people seek out new properties. Factoring in forecasts expecting as much as a 20% increase in home renovation spending, according to the Joint Center for Housing Studies of Harvard University, this not only represents a golden opportunity for credit unions to offer their services where they’re needed, but also provide personalized and specialized advice serving to reinforce their reputation among consumers.

Additionally, credit unions’ intimate knowledge of borrowers’ deposit and payment histories allow them to extend lines of credit on a more informed basis than other lenders. With more data about their members at their disposal than fintechs and other financial institutions, credit unions can expand relationships with their members with more flexibility than entities that may be scared off by uncertain economic outlooks. By assessing potential borrowers more holistically and accounting for factors like deposit history, credit unions are not limited by the relatively narrow insight provided by credit scores, a feature that ought to be emphasized in consumer outreach.

It is no coincidence that credit unions are enjoying one of their best lending seasons in years. Even with the unsteadiness of the current economic moment, credit unions’ unique position in the intersection of the worlds of finance and consumers allows them to offer one of the most valuable, durable assets of this day and age: Stability.

Rutger van Faassen is responsible for Industry Ecosystems, Innovation & New Markets at Curinos, a New York, N.Y.-based global data intelligence business serving global financial institutions across lending, deposits and digital banking solutions.