Author: Amanda Reed

At their December Board Meeting, the NCUA proposed a modernization to their regulations covering Loan Participations, Eligible Obligations and Notes of Liquidating Credit Unions. We see this as a significant improvement in helping credit unions to not only better serve their members, but to enable them to compete in the highly competitive environment we are operating in with so much fintech innovation. Fintech innovators have made it easy for consumers to obtain financing right through their phones that previously would have been provided to members by their credit unions. In order to compete, the industry has been working with some of the fintech innovators, but it has been cumbersome and challenging. The proposed amendments to Part 701.21, 701.22 and 701.23 will allow credit unions to remain innovative and give credit unions the ability to adapt to continuously changing lending markets. 

We wanted to share our comment letter in support of the proposed changes in NCUA’s regulations, in hopes you will take the time to pro-actively support these changes in the regulations. You can read NACUSO’s comment letter to the NCUA Board here.

We have also provided a simplified and shorter sample comment letter (see attached) that you can use if you’d like a template to help you with writing a comment letter in support of these positive changes in the NCUA’s lending regulations. We encourage you to personalize your comment letter on your letterhead and include examples of how this will help your credit union or CUSO in your mission of providing member loans and service. Ideally a comment letter that simply indicates you support the proposed rule changes is all that is required by the NCUA. Comment letters are due to the NCUA by February 28, 2023. You can submit electronically here.

Should you have any questions, please do not hesitate to contact us at NACUSO. 

Jack M Antonini

President & CEO – NACUSO

• Download: Template of Comment Letter to NCUA
• View: NACUSO’s Signed Comment Letter 1-26-2023 to NCUA
• View: NCUA Electronic Portal For Submitting Comments
• View: More info on the proposed amendment to the CUSO rule

As we stated on last week’s blog on “rent-a-banks,”  the battle against the slippery predatory payday lenders is a long one; like a costly game of Whack-A-Mole, their wealthy backers and Washington lobbyists continue to find loop-holes to take advantage of vulnerable, underserved Americans. Only this time they’re utilizing digital payday loan ads on social media to form a narrative by making dishonest claims promising immediate cash without credit checks, late fees, or interest rates. In many instances, they’re getting around the rules of the social platforms themselves.

Digital payday loan ads always know who to target

A late-2022 PYMTS report surveying 4,000 individuals between December 8-23 found that the number of Americans living paycheck-to-paycheck increased over the course of 2022, with almost two-thirds of Americans – or roughly 64 percent – claiming they do so. The report discovered the number is about 9.3 million more than 2021 and includes around 8 million people earning more than $100,000 per year. Does that last number surprise you? It probably shouldn’t; Nearly one in three American workers earning more than $100,000 per year run out of money before payday, according to an October 2022 CNBC report. 

Looking ahead, about a third of respondents in the report believe their financial situation will stay the same while 27 percent believe their situation will get worse, citing inflation and present economic uncertainties floating around. About 75 percent believed inflation was or will be the main culprit. It’s a frustrating state to witness: So many consumers don’t trust the mainstream financial system, yet that system – particularly the member-owner credit union infrastructure – is specifically structured to benefit its members’ financial health and inclusion goals.

So it stands to reason that if a consumer represents one in three Americans who lack financial literacy – or, for the purposes of today’s topic, too young to understand the difference – they may believe the appeal of a payday loan. Easy money, right?! More than that, the slick digital payday loan ads lenders feature on TikTok or any other social media platform are marketing small, short-term loans to a younger, impressionable  audience – another generation to indoctrinate into believing the flickering neon lights and “accessibility” of funds: **NO CREDIT SCORE REQUIRED!!**

The ol’ bait and switch, just different packaging

When 12 million Americans who need an immediate infusion of cash every year find themselves with more month than money, a digital payday loan ad coming across their phone screen almost feels predestined. Unfortunately, that lack of financial awareness can be costly for those consumers, particularly for impressionable minds who don’t know any better. 

Now, video ads have begun popping up on sites like TikTok promoting small, short-term payday loans to the platform’s newer, younger audience, framing the product as “cheap” and “easy.” Just because it appears simple doesn’t mean it is. These predatory payday lenders are using social media companies to fabricate false claims vowing quick cash without credit checks, late fees, or interest rates. In fact, such “lenders” found a way to get around the rules of the platform. Ironically, both TikTok and Meta – parent company of Facebook – contain rules restricting ads for short-term/payday loans. Unfortunately, a few seem to have gotten through.

First of all, those ads may not label their charges as an “interest rate,” however what they are charging is still what you have to pay. It’s just the language. A lot of the lenders that promote themselves on TikTok attempt to evade regulations and interest rate laws in different states by changing the wording for the services they provide. When they re-phrase their interest rates as a “tip” or a “fee,” these predatory lenders are banking on the idea the consumer won’t notice just how much you’re actually going to pay. 

Remember, their entire business model is predicated on roll-overs and debt-traps, as opposed to the support and financial counsel a member would receive from a credit union. At a cooperative, terms can be readjusted to suit any unforeseen changes. Also keep in mind – responsible and accountable small dollar lenders, be it a mainstream financial institution like a credit union, for instance, always disclose the annual percentage rates for their loans from the jump.

The destructive consequences of these subversive TikTok digital payday lending ads are far-reaching in their impact. Young minds, upon seeing these quick-cash promotions, may begin believing them to be the norm for consumers everywhere and into the future. Impression by impression, those ads can set a dangerous precedent for when that pre-teen, teen, or young adult reaches the workforce. 

Don’t know about you, but the days of playing Whack-A-Hole with predatory payday lenders is over. Social media and online channels represent another front in the battle for financial literacy awareness and education in this country. With the help of credit unions like yours, we can bring the era of financially-destructive and corrupt payday lending to an end, regardless of the media platform. 

Part of that financial education is ensuring our nation’s consumers are aware of the strength of the credit union member relationship and the wisdom to offer them responsible, affordable, and accessible products like QCash’s Life Event Loan platform that can establish and then build upon the financial health of the member for the long-term. 

Does your cooperative see itself as a forward-thinking solution for financial inclusion and responsible small dollar lending? If so, QCash’s Life Event Lending suite of services is for you and your members. We look forward to working with you! 

Original Post

By 2028, the global digital banking market size is estimated to surpass $10.3 trillion—an omnipresence that regional banks and credit unions cannot afford to ignore. Financial institutions (FIs) need to step up their digital game now if they want to meet account holder expectations and simultaneously grow revenue.

Great Expectations

Today’s consumers have been conditioned to expect a seamless digital experience, regardless of whether they are ordering something from Amazon, banking at a $100B mega bank or dealing with their local credit union. They want convenience, and they expect a sophisticated digital banking solution that supports everything from depositing funds to making payments and managing their wealth portfolios. The message is clear: FIs need to offer not only a digital banking solution, but one that also meets the high expectations of account holders. 

The good news is, as Cornerstone Advisors’ 2022 What’s Going On in Banking study reports, 75% of banks and credit unions have launched digital transformation initiatives, and another 15% plan to do so this year. But what does true digital transformation mean and what does it look like for FIs? 

The Digital Transformation Dilemma

Digital transformation isn’t just slapping functionality on a banking app and calling it a day. It means thinking about replacing legacy technologies and embracing artificial intelligence tools. And, if seeking to turn it into a revenue generating machine, it means taking advantage of transaction data flowing through the core to uncover important insights about account holders’ needs and using it to optimize their digital experience. 

The hard truth is that digital transformation is a strategic commitment that can be lengthy and intensive, and often requires traditional banks and credit unions to stretch beyond their comfort zone to get the right technology. FIs who look at digital banking, not as a ‘cost of doing business,’ but as an ‘investment in future growth,’ will be rewarded with satisfied account holders and new revenue streams.

Optimize for Success

Now that three in four Americans bank from their phones, FIs with an optimized digital banking experience can rely on their platforms to bring them closer to their users and leverage digital banking innovation to quickly take advantage of new ideas. The biggest threat remains for those FIs who decide to maintain status quo with a less-than-impressive digital banking platform or an ineffective homebrewed solution.

To compete, FIs need to find a partner that takes an outside-in approach, rethinking the user experience (UX) from the account holder’s perspective with data-driven insights. By creating an ecosystem that brings together the right partners, advanced technologies and capabilities, FIs can deliver a differentiated and compelling offer for retail and business users. 

Best-in-Class Components

As FIs search for the right partners and technology for their digital banking transformation, we have identified several best-in-class components that FIs can use to stand out from the competition, including:

1. Data-Driven Insights. FI leaders who find ways to execute on transaction data can deepen user relationships, build profitability, and institutional loyalty.
2. Seamless User Experience. Now more than ever, it’s important that banks and credit unions understand what UX is and how it can improve digital banking experiences for users. 
3. Cloud-Forward Thinking. The cloud can help FIs enhance features, security, and UX while improving uptime, performance, and quality. 

Access all 6 best-in-class components inside of our eBook:

Drive Revenue with Data

When defining a best-in-class digital banking experience, it’s crucial to take into account the ever-changing economic landscape, which can impact account holders’ spending and financial wellness. FIs that are well capitalized and good at lending will be the winners in this uncertain environment. In particular, those who can excel at cross-sell and up-sell, leveraging data and technology to find the right targets, will come out on top.

Digital banking can and should be seen as a potential revenue driver. By pairing data insights and marketing automation with a digital banking platform, FIs can target their account holders with compelling, timely, and relevant offers directly in the FI’s mobile banking app, effectively transforming what once was just a cost center, into a revenue center. 

BOTTOM LINE: Digital banking is mission critical to FIs. Catalyzing this platform with data insights and marketing automation creates a utopia within the banking space that can be a revenue driver for FIs, ultimately transforming the digital banking investment into a profit center. 

To learn more about turning your digital banking platform into a revenue generator, download our eBook or request a demo on our Data & Marketing Automation solutions today.

Original Post

“In the end, I’m hoping that one day digital assets will actually become boring. And that’s actually one of my aspirational goals.”

Of all the virtual ink spilled on the crypto economy, particularly in recent weeks, no one is accusing it of being boring. But that’s what Linda Jeng, the chief global regulatory officer for the Crypto Council for Innovation, believes could happen if new regulations are eventually written to make digital currencies safer.

In the latest episode of “What’s Next In,” the Mastercard podcast that explores technology, innovation and ideas, host Vicki Hyman discusses digital currency regulation and crypto innovation. Her guests for this episode are Jeng, whose organization encourages responsible crypto regulation, and Jesse McWaters, Mastercard’s head of regulatory advocacy.

“Even the most libertarian of folks within the crypto space has recognized the fact that using a highly volatile asset as your sort of means of pricing and your medium of exchange can be really challenging,” McWaters said.

But boring?         

“I don’t know that it’s ever going to happen,” McWaters said.

Listen on Spotify above or Apple Podcasts here. 

Original Post