October 25, 2023 – The National Association of Credit Union Service Organizations, Inc. (NACUSO) was pleased to learn that former CEO, Jack Antonini, was recognized in America’s Credit Union Museum this month. In 2018, the interactive “Impact of CUSOs” exhibit was added to America’s Credit Union Museum. The CUSO exhibit showcases the value of CUSOs to the credit union movement and outlines the foundation on which CUSOs were built. Key CUSO pioneers are given rightful recognition within the exhibit. Jack was added as the fourth CUSO Pioneer to this special exhibit. The other honorees include Dave Serlo, former president and CEO of PSCU; Guy Messick, former partner of Messick Lauer & Smith PC; and Sarah Canepa Bang, credit union industry expert, former president of Shared Branching at CO-OP and NCUA Senior Advisor. Jack said, “I was surprised and thrilled to be included in America’s Credit Union Museum with the other honorees. It has been such a privilege to work with so many wonderful people in my role at NACUSO to help credit unions and CUSOs in their mission of helping their members.”
Jack retired this past August after serving over 13 years as NACUSO’s president. Prior to joining NACUSO, he was President & CEO of USAA’s banking businesses. Much like credit unions, USAA is owned by its members, and this gave Jack a unique perspective on serving members and the successes USAA had experienced. While Jack was CEO of the USAA Federal Savings Bank, it was recognized as “The Best Bank in America” by Money magazine. USAA Bank was also recognized as one of the “Best of the Best in Customer Service” under Jack’s leadership. Jack also had experience in the greater business world, including being president of Cardtronics and a director on the Mastercard Board. He encouraged credit unions to look both within the credit union industry and outside the credit union industry to find solutions to better serve their members. Becky Reed, NACUSO Chairperson, said “NACUSO is honored to know that our story through Jack Antonini’s leadership will be forever recognized in America’s Credit Union Museum”. Jack was a visionary leader in the credit union movement and left an indelible mark during his tenure at NACUSO. His profound impact on NACUSO and the credit union industry solidifies his place as a CUSO Pioneer and a key figure in the credit union history. Link to view The CUSO Exhibit: America’s Credit Union Museum CUSO Exhibit
About NACUSO
The National Association of Credit Union Service Organizations (NACUSO) was formed in 1985 to help credit unions explore the use of CUSOs and the delivery of non-traditional products and services. Over the years, NACUSO’s focus has evolved to helping credit unions form multi-owned CUSOs and participate in collaboration and the cooperative business model. Today, NACUSO serves over 300 member organizations as an education organization comprised of a network for collaborators and innovators that embrace a positive industry message and amplifies the voice of credit unions and CUSOs by providing resources to help people collaborate, identify opportunities, build businesses, find solutions, and get things done. For more information: www.nacuso.org
Co-op Solutions Payments Trends Report (Spending Data from September 1-30)
October 17, 2023 – As we head into the last quarter of a tumultuous economic year, consumers are eyeing multiple storm clouds on the horizon, dampening their confidence despite largely positive economic returns in September. The result has been mostly flat spending on a month over month basis.
Inflation rose just 0.4% in September from the prior month, contributing to a slowing trend that has prices just 3.7% higher than a year ago. Core inflation, which removes volatile components like gas and groceries, is up 4.1% over September 2022. The government also announced that Social Security benefits would increase by 3.2% in 2024 to help offset inflationary pressure for seniors on a fixed income.
With price increases moderating, the Fed held its benchmark interest rate steady in September, but left the door open for further increases later in the year.
Meanwhile, the labor market showed remarkable resilience in September, with the U.S. Bureau of Labor Statistics reporting that the economy added 336,000 jobs – much higher than forecasted. The unemployment rate held steady at 3.8% for the month.
In spite of these positive economic indicators, The Conference Board’s Consumer Confidence Index declined for the second straight month in September to 103.0. The Conference Board attributes the lower confidence rate to growing fears among consumers of an impending recession, along with lingering concerns with high prices – especially for gas and groceries – along with a tenuous political situation and high interest rates.
Overall, Co-op credit union portfolio data shows that September transaction volume rose by 4.2% in Credit and 0.6% in Debit on a rolling 12-month basis.
1. Strong Year-Over-Year Results in Credit: Whereas September’s month-over-month spending was muted in both the Credit and Debit portfolios, Credit posted strong year-over-year results in several categories, including Amazon, Digital Goods, Education, Financial Services and Travel.
“We are seeing more everyday purchases moving toward eCommerce sites in general, and Amazon specifically,” says Ryan Prentice, Director, Consulting Services at Co-op. “This includes household essentials like groceries, cleaning supplies and toiletries.”
2. Education Spending Jumps in September: Whereas consumers completed much of their higher-education spending – including tuition, housing, textbooks and supplies – by the end of August, September saw a big increase in spending at the elementary level. Per Co-op portfolio data, spending in the Elementary category jumped by 58% in Credit and nearly 80% in Debit for the month.
“Elementary spending really carried the Education category in September,” says John Patton, Co-op Senior Payments Advisor. “Look for such spending to tail off through the remainder of the year, as back to school expenses and fees normalize.”
3. Pre-recession Spending Shows Uptick: Among the big month-over-month risers in September were categories like Government Lottery Tickets, Government/Postal Services, Convenience Checks, Debt Collection, Employment Agencies and Bus Lines.
The common element among these merchant categories is that they are considered leading indicators of a potential recession – an alarming sign that the American consumer is facing stress. Much of that pressure is stemming from stagnant household income growth, which has lagged inflation over the past year. The result has been an increase in household borrowing, including more consumers dipping into their credit lines.
Of course, not all of these economic worries may come to fruition, as the Fed is betting on achieving an ideal “Goldilocks” scenario, where it is able to maintain higher interest rates over the next few years to moderate inflation, while still seeing steady economic growth in the form of low unemployment and solid consumer spending and GDP growth.
4. Credit Debt Continues to Grow: Year over year, Credit transaction volume continues apace, with 4.2% growth on a rolling 12-month basis compared with just 0.6% for Debit. Month over month tells a different story, however, as overall Credit transaction volumes declined by -5.7%, and Debit transaction volume fell by -3.3%, reversing a positive trend in both portfolios in August.
Despite this short-term decline, consumers are continuing to rack up credit card debt. Per Co-op portfolio data, credit balances grew by 14.18% from September 2022 to September 2023, including a month-over-month jump of 2.78% from August 2023. Post-COVID, this monthly increase in September balances is on par with prior years – average balance growth month-over-month in 2023 through September is 1.25% against a comparative .99% in 2022.
More telling may be the increase in average total balances through September from 2019 to 2023. In 2023, total average balances through September increased 6% over the same period in 2019, 12% over 2020, 25% over 2021 and 14% over 2022.
The combination of this growth in credit balances and high interest rates has JPMorgan Chase & Co., Citigroup, Wells Fargo and Bank of America preparing to write off large amounts of consumer borrowings in their portfolios. The country’s four largest banks are expected to report total charge offs of $5.3 billion in bad debt, double the charge from a year ago. According to data from Callahan and Associates, credit card loan delinquencies for all U.S. credit unions reached 1.54% in the second quarter of 2023, the highest rate seen in the past 10 years.
“Once consumers reach 35-40% of their credit line usage, their Credit spending tends to tail off dramatically,” said Patton. “They will switch to other lines, shift to using Debit or may curtail their spending completely.”
“The unprecedented combination of COVID stimulus packages that boosted cash-on-hand, double-digit inflation and a year of interest rate hikes has created a whiplash effect on many financial institutions, which are now struggling to adjust to large swings in their payment portfolios,” said Prentice. ”It’s more critical than ever to maintain consistent price and risk management to ensure the health of your program – and support your members’ financial wellness.”
Year-Over-Year Category Level Spending (Rolling Year Average, and Comparing September 2022 to September 2023)
Credit #Transactions
Debit #Transactions
Category
(Oct’21 – Sep’22) vs (Oct’22 – Sep’23)
Sep’22 vs Sep’23
(Oct’21 – Sep’22) vs (Oct’22 – Sep’23)
Sep’22 vs Sep’23
Agricultural
-3.2%
-6.0%
2.9%
1.3%
Amazon/Bookstores
24.7%
18.7%
51.7%
4.4%
Auto
1.9%
3.1%
-1.6%
-2.9%
Campers & Camping
-8.3%
-10.1%
-12.4%
-0.6%
Computers
-15.0%
-11.6%
-16.2%
4.8%
Digital Goods
16.1%
21.6%
11.4%
3.0%
Dining & Entertainment
5.1%
4.8%
1.9%
1.8%
Education
12.4%
3.2%
13.5%
3.7%
Financial Services
13.4%
16.7%
3.6%
0.6%
Furniture
-13.0%
-14.6%
-15.3%
-1.5%
Gas
0.8%
3.1%
-2.3%
-0.3%
Grocery
5.2%
6.9%
0.5%
3.2%
Home Improvement
-3.6%
-2.9%
-6.9%
-1.2%
Medical
0.9%
2.2%
-2.3%
6.7%
Office
-5.0%
0.9%
-6.7%
-1.0%
Organizations
1.9%
1.2%
0.3%
0.6%
Other
6.1%
3.5%
10.3%
1.7%
Pet
-0.4%
0.3%
-3.7%
-1.1%
Professional Services
2.2%
3.0%
1.3%
-0.3%
Retail
0.0%
3.1%
-3.6%
5.6%
Subscription services
-4.8%
-3.2%
-10.1%
5.5%
Specialty Retail
-3.3%
-4.2%
-6.6%
3.7%
Antique shops
2.2%
4.2%
-2.9%
8.9%
Florists
-8.8%
-4.1%
-8.4%
-2.7%
Jewelry
-3.7%
-0.9%
-8.6%
2.0%
Other
-4.1%
-5.1%
-7.4%
3.8%
Pawn Shops
7.5%
4.3%
-4.7%
2.2%
Religious Stores
5.8%
0.2%
25.1%
0.5%
Second hand stores
7.5%
5.1%
3.6%
4.6%
Tobacco/Cannabis
0.0%
0.0%
0.0%
14.0%
Travel
39.0%
30.0%
31.0%
1.5%
Sport/Recreation
1.6%
0.0%
0.3%
3.6%
Bicycle Sales/Service
-3.7%
2.2%
-6.8%
-4.1%
Boat Dealers
-8.6%
-7.0%
-18.2%
-1.0%
Boat Rental
-0.2%
11.5%
0.7%
1.3%
Clothing
4.7%
-2.3%
-0.5%
0.1%
Commercial/Professional Sports
28.9%
16.7%
17.9%
-1.6%
Golf courses
2.6%
1.6%
1.6%
0.3%
Recreation Vehicle Rental
0.9%
-8.5%
-4.6%
-5.6%
Sport/Recreation
-0.2%
-1.1%
-0.1%
5.7%
Travel
16.5%
10.6%
6.8%
0.0%
Agencies
27.7%
7.7%
13.7%
-0.3%
Airline
5.8%
2.5%
-4.1%
-2.1%
Auto Rental
7.2%
9.0%
0.5%
5.3%
Bus Lines
30.6%
12.2%
-5.1%
3.7%
Cruise
54.9%
16.3%
59.4%
-2.2%
Lodging
0.3%
-2.0%
-8.2%
0.1%
Other
35.7%
10.7%
31.3%
7.8%
Passenger/Commuter
37.5%
21.3%
21.4%
-2.1%
Taxi/Limo
21.6%
17.0%
10.2%
0.7%
Utilities
4.0%
4.9%
-0.2%
13.2%
Grand Total
4.2%
5.1%
0.6%
2.5%
What Credit Unions Should Do Now
With a potential recession on the way, members are growing increasingly concerned with their financial wellness. Credit unios are perfectly positioned to provide them with the help they need.
As credit unions begin preparing for 2024, they should consider updating their credit card program to include risk-based pricing. Also, plan to initiate regular cardholder account reviews and adjust credit lines and pricing as needed.
Considering the high credit balances that many members are struggling under, offering a balance consolidation at a low interest rate to qualified cardholders will create loyalty. And for those who are truly struggling to make ends meet, credit unions may wish to offer debt consolidation services, or a skip-a-pay to help them get ahead on their monthly obligations.
“Credit unions are well positioned to help their members with all of their financial needs,” said Patton. “During a time when purchasing a new home may be a stretch for many, home equity loans and lines can be leveraged to buy a car, finance needed home repairs or perhaps fund larger improvements like a new back deck. Members are also seeking advice on retirement planning, career changes and saving for their children’s college expenses. Credit and Debit are means to an end, but now is the time to focus on assisting members with navigating challenging economic waters and achieving their long- and short-term financial wellness goals.”
More information on the Co-op SmartGrowth Consulting Team can be found here.
About Co-op Solutions
Co-op Solutions is the market-leading financial technology platform whose mission is to connect credit unions to the technology, strategic partnership and scale they need to best serve their members now and into the future. Co-op partners with credit unions to unlock their potential so they can compete; does the hard work of innovation, creating a one-stop opportunity to help credit unions grow; and offers knowledge and expertise in a world where everything must be integrated. For more information, visit coop.org.
September 28, 2023 —PSCU, the nation’s premier payments credit union service organization (CUSO) and an integrated financial technology solutions provider, is pleased to announce Horizon Credit Union (Horizon) has selected the CUSO to provide services and support for its debit and credit card programs and ATMs following an extensive RFP process.
Originally established as Kaiser Employees Federal Credit Union in 1947, the credit union was renamed as Horizon in 1981. Today, Horizon now has over 30 branches throughout eastern Washington, Idaho, western and central Montana and eastern Oregon. With $2.1 billion in assets, the rapidly growing regional credit union is dedicated to helping its nearly 113,000 members achieve their dreams.
Horizon engaged with a consultant to identify a vendor capable of supporting all aspects of plastic card and ATM processing, as well as provide after-hours support to members. Additionally, it was important the new processor be committed to growth and development and able to quickly adapt to changes in the industry.The credit union evaluated multiple vendors based on rigorous criteria, prioritizing system effectiveness and member satisfaction.
“It was important to identify a partner who could support Horizon’s current card volume and future growth, as well as offer essential features our members have come to expect. In PSCU, we found a partner that provides some of the most innovative offerings in the industry, including digital issuance, robust analytics and state-of-the-art fraud detection, all of which we believe will take our card programs to the next level,” said Horizon Director of Payment Services Wendie Ellis. “The fact that PSCU is owned and operated by credit unions was also a big plus – the CUSO really understands credit unions and listens to their needs.”
PSCU will begin providing processing and ATM services in July 2024.
“Horizon places the same value on providing exceptional service that we do at PSCU, and they share our commitment to forward-thinking innovation,” said PSCU Chief Revenue Officer and EVP Scott Wagner. “We are eager to begin the onboarding process next year and look forward to partnering with Horizon to provide its members with the exemplary service they are accustomed to when working with their trusted credit union.”
About PSCU
PSCU, the nation’s premier payments CUSO and an integrated financial technology solutions provider, supports the success of more than 2,400 financial institutions and processes nearly 7.7 billion transactions annually. Committed to service excellence and focused on continuous innovation, PSCU’s payment processing, fraud and risk management, data and analytics, digital banking, strategic consulting and real-time payments platforms, along with 24/7/365-member support via its contact centers, help deliver personalized, connected experiences. The origin of PSCU’s model is collaboration and scale, and the company has leveraged its influence on behalf of credit unions and their members for more than 45 years. Today, PSCU provides an end-to-end, competitive advantage that enables credit unions to securely grow and meet evolving consumer demands. For more information, visit pscu.com.
About Horizon Credit Union
Horizon Credit Union is a growing not-for-profit financial cooperative with roots in Washington, Oregon, Idaho and Montana. Founded in 1947 as a member-owned credit union, Horizon now serves over 113,000 members with 32 branch locations across four states. Horizon is committed to meaningful community involvement across the Northwest.
Media Contact: Peyton Burgess French/West/Vaughan 919-277-1168 PBurgess@fwv-us.com
Ronaldo Hardy, President/CEO at NACUSO, joined us in the Studio Lounge to share his take on tech’s impact on credit unions today, as well as how credit unions and fintechs should prepare for the year ahead.
We applaud the National Credit Union Administration (“NCUA”) Board (the “Board”) for its sensible and well thought out approach to regulation. The amendments to Part 701.21, 701.22 and 701.23 of the NCUA Rules and Regulations, finalized today, are exactly what the credit union industry needs to thrive in the evolving lending environment. Over the last decade or so, financial innovators have sought to disrupt the lending landscape. Their actions are not with the intention to put credit unions out of business. Instead, like all innovators throughout the course of history, these financial technology companies are working to make the financial lives of Americans easier.
Credit union members are rarely in the market for a loan. They are in the market to buy a good or service. Financial innovators are using technology and ingenuity to be readily available to a member when they find they need money to buy something. Rare are the days that members come into the branch for a loan. In addition, financial innovators are using technology to make the lending process easier and faster. Members no longer want to sit and wait days or weeks for the credit union to make a lending decision.
Where does this leave credit unions in this ecosystem? Credit unions have been here before. Auto lending is a perfect example. There was a time when credit unions could expect that their loyal members would come to them first when looking to buy a car. A member would start at the credit union branch to obtain financing and then head off to the car dealership to look for their new or used car. This is now a rare event. Over the last twenty years or so, members started just going to the dealer to buy a car and financing was an afterthought. This meant that often the dealership was facilitating the loan for the car purchase and not a credit union. Credit unions were losing member loans to captive lenders at the dealership.
Credit unions adapted. Credit unions began to develop relationships with dealerships wherein the credit union would be an option for financing a car purchase at that dealership. Credit unions began to win back and maintain a portion of the member auto lending market. However, in many cases, it became difficult for a credit union to maintain or develop these relationships with the number of dealerships. This was particularly true for smaller credit unions, but it affected credit unions of all sizes. It just made sense for a third party to aggregate the dealerships and facilitate the connections to credit unions.
This was a perfect place for CUSOs to step in. There are third parties that assist with connecting dealers with lenders, but CUSOs are the only parties that are owned by credit unions and focus on helping credit unions win these relationships. Therefore, credit unions gravitated to CUSOs to help them manage these relationships.
However, the market is shifting again, and merely connecting credit unions with dealers is not enough. Members are no longer exclusively going to the dealership to buy a car. There are a multitude of car buying services and applications springing into the market. From the consumer perspective, this is good. Most people do not like the process of buying a car. They would rather enlist someone else to do it for them. In a way, these new players are looking to disintermediate the dealerships.
What happens when a member doesn’t go to the dealership or the credit union first to purchase that dream new car? How do credit unions continue to be the trusted financing partner with their member on this life achievement? Credit unions must adapt again and develop relationships with these new car buying services. The challenge is that a large nationally focused car buying model is not going to want to secure relationships with thousands of credit unions throughout the country. Furthermore, the process of linking a member with a credit union lender at the time of purchase is seen as unnecessary friction in the car buying process. Once again, this is an opportunity for CUSOs. CUSOs are now permitted to be the lender in a relationship with these national services and can work to keep these auto loans in the credit union industry. The CUSO can be the lender up front and then, just as they do today, get those loans to their credit union partners. It is a solution that will make the car buying process for members simpler and make sure credit unions of all sizes are not cut out of this portion of the auto lending market. The auto lending example is not an isolated one. One consumer need that financial technology companies are filling is unsecured lending. These originators are capturing an enormous amount of smaller dollar loans. These types of loans are exactly the types of loans credit unions have made for years. These are your holiday loans or your small loans to pay a car repair, a home repair/improvement, or a medical bill. These members are so important to the credit union movement. In the same way that CUSOs can help credit unions gain access to more member auto loans, CUSOs can and will help credit unions gain access to more unsecured member loans. The types of loans that can often be lifesaving.
In 2021, NCUA finalized amendments to the CUSO rules and regulations. This was an important first step to allowing CUSOs to be a key tool in gaining access to more loans from financial technology companies. CUSOs have been a driving force to enable credit unions to gain access to loan types. CUSOs act as an important intermediary for credit unions. However, the question then becomes: what tools do CUSOs and credit unions need to make sure these loans can make their way to credit union balance sheets where these members can be properly served?
The new and final amendments to Parts 701.21, 701.22 and 701.23 will be instrumental in answering this question. Ultimately, these changes will make credit unions more successful in the changing lending environment giving them the proper tools to obtain member loans from non-credit union originators. Allowing credit unions to adapt to the new lending environment just like indirect lending adaptations in the past.
First and foremost, the amendment to the 5% limitation on purchasing eligible obligations under Part 701.23 is instrumental in allowing credit unions, possibly through CUSOs and other collaborations, to build strong relationships with financial technology companies. This is important because as outlined above credit unions need more tools to allow them to be a part of the lending system as it has evolved with the use of technology. The changes to the 5% limitation will garner more robust relationships with non-credit union originators because just like historical indirect loans, which are not subject to the 5% cap, credit unions can purchase more member loans from these third-party originators.
In addition, the amendments to the purchasing exception for inter-credit union loan sales/purchases under Part 701.23(b)(2) will be an efficient and valuable way to make sure small to midsized credit unions can also gain access to these loans. This change will create a healthy credit union system and not just create advantages for the largest credit unions. One of the best ways to manage safety and soundness risk is giving credit unions the ability to adequately manage their balance sheets. This amendment will give credit unions the ability to diversify their risk and provide much needed interest income to those that need it. It is likely that without CUSOs larger credit unions will be in a better position to develop lasting relationships with non-credit union originators; however, this amendment to Part 701.23(b)(2) will allow smaller credit unions to purchase loans from the larger credit unions and obtain some of the much needed return on assets that they need. Meanwhile, this amendment will also allow larger credit unions the ability to manage balance sheet risk by selling some of these loans to other credit unions without jeopardizing their relationship with a non-credit union originator.
About NACUSO
The National Association of Credit Union Service Organizations (NACUSO) was formed in 1985 to help credit unions explore the use of CUSOs and the delivery of non-traditional products and services. Over the years, NACUSO’s focus has evolved to helping credit unions form multi-owned CUSOs and participate in collaboration and the cooperative business model. Today, NACUSO serves over 300 member organizations as an education organization comprised of a network for collaborators and innovators that embrace a positive industry message and amplifies the voice of credit unions and CUSOs by providing resources to help people collaborate, identify opportunities, build businesses, find solutions, and get things done. For more information: www.nacuso.org
