Like vampires, I’m not very reflective. I tend to spend my energy watching trends and patterns for what’s likely to come. Story ideas, hairstyles – that sort of thing.
As we embark on the third year of the 2020s, I wanted to share four elements that we are seeing potentially come together in the continued pandemic world that remains with us.
bank of jars
This topic has been a cliffhanger item for years now. It’s like a real Sam and Diane story, but with marijuana and banking regulations. The credit union industry has made steady progress in pot banking, such as when the U.S. Eagle Federal Credit Union, based in Albuquerque, New Mexico, became the first financial institution to be certified for banks of marijuana. It’s great for New Mexico.
While these one-off situations technically indicate progress, we have yet to see anything to solidify the regulatory issues, much less the passage of federal legislation to cover the entire credit union industry.
As I shake my Magic 8-Ball, I see that nothing will change on that front on the federal side of things. It is 100% politics and not the need of an entire industry that takes priority at this stage. I think for a few more years at least, marijuana banks will continue to bring the advancements we’ve seen from one credit union to another.
If we had the current administration and Congress and we weren’t going through a global pandemic, I think our chances of passing a federal marijuana banking law would be in the bong…bag. In the bag.
You can use this pun – I’m very proud of it. Puns aside, the credit union conference’s vision for at least the first half of 2022 appears to be in jeopardy for in-person gatherings. I know, it’s a drag on thinking and a bigger drag on event planners.
As of this writing, the omicron variant has yet to completely overwhelm the United States, with the exception of New York, Minnesota, Wisconsin, Indiana, Illinois, and parts of New England. The Rockettes have canceled their holiday shows. Hundreds of professional and college athletes have tested positive for COVID. NFL, NBA and NHL games have been postponed or canceled and travel restrictions have returned to effect in the UK, Canada and France. Apple announced that its return-to-office plans are on hold indefinitely and that it has given each employee $1,000 to set up a home office. We are recording over 120,000 new cases of COVID-19 and over 1,300 deaths every day.
God knows what the situation will be once this is released.
Health officials have said we should now expect to live in this ebb and flow of COVID variants at least until 2024.
It’s all about risk at this point and the risks people are willing to take.
For credit union conferences, I expect the risk to be too high for many shows to be held as in-person events.
I think a deal breaker for in-person conferences will be if public schools close again, and some have already. Once the kids are stuck at home for virtual school, so will the parents. And these parents will not be able to go to the conferences. Another happy hour on Zoom, I guess? BLA bla.
Stop saying Fintech
What is fintech? While some believe the term was first used in the early 70s, some believe it originated with the founding of the Financial Services Technology Consortium in 1993. Either way, fintech has taken it all its meaning in the 21st century and it seems fintech doesn’t mean what it did then, whether it was invented 50 or 20 years ago.
Credit unions have a love/love you more/envy relationship behind the scenes with fintech organizations. While fintechs were once known as the nerdy saviors for helping create back-end systems for credit unions, they have also become a consumer-focused group that still provides the kind of technology that most credit unions credit cannot create themselves, such as mobile applications, mobile banking and artificial intelligence technologies. Fintechs have changed so much in recent years that many have created other divisions of the fintech enterprise that prey on those precious loan dollars. You know those cries of “Regulate fintech lenders!” and “Don’t regulate my valuable third-party provider of the technology we use!” They are one in the same.
I have no problem with fintechs at all. They’ve done a great job of reading the room and evolving as they have in our mobile world, while creating the technology we all use.
We exist in a world where fintechs need credit unions and credit unions need fintechs. I suspect the relationship might soon turn one-sided and the fintechs might stop talking to us while they’re at their locker before heading into the third period. And in my head, it’s fine. The competition is great. Plus, we might start circulating mean notes about them in biology if it gets ugly.
However, continuing to call them fintechs is like referring to AOL at the very beginning of the internet. I don’t know what they should be called, but I feel like a new term is coming and honestly they deserve a new nickname.
Many merges or most merges
As noted, there have been many credit union mergers over the past year. While we are still awaiting final numbers from the fourth quarter reports, in the third quarter the NCUA approved 117 mergers. We don’t have official numbers of credit unions acquiring bank assets for the year, but that number is also higher than what we saw in 2020. Of the more than 16 credit union and bank acquisitions announced in 2021, a handful have been cancelled. and at least one agreement is related to the court.
What’s happening is that credit union mergers are gaining momentum, which makes sense since there are fewer smaller credit unions. Large credit unions are getting bigger and attacking medium-sized credit unions, while smaller ones are getting smaller and/or disappearing and/or merging.
Towards the end of the year, we fell below the threshold of less than 5,000 credit unions. We have gone from a peak of 23,866 credit unions in 1969 to 4,990 today. The fact is that the assets are growing rapidly and the number of members continues to grow. The industry, judging by those two things, is in very good shape.
We believe this M&A trend will peak over the next two years and the accelerated decline in the number of existing credit unions will continue.
I don’t think that’s 100% a bad thing. I think that means we have some adjustments to make with our cooperative thought process. Can we get as big with far fewer credit unions and still exist under the umbrella of cooperatives? I do. But I expect that once we reduce the industry to fewer credit unions, it could trigger the end of tax-exempt status.
Michael Ogden is editor of CU Times. He can be reached at [email protected]