MADISON, WIS.—The financial landscape of 2025–just a decade away–will bear “little resemblance” to the financial system of today, according to new research from the Filene Research Institute.
The research, “Trending: Credit Unions in 2025,” forecasts that technological disruption, increased regulation, changing consumer behaviors, and asset growth will all contribute to the reshaping of the global financial ecosystem.
“Our analysis paints an overall optimistic picture of the future,” said Ben Rogers, research director for Filene Research Institute. “Assets will grow and the number of institutions will shrink, but credit unions should focus first on the incremental changes that can be made today to ensure sustainability and growth in 10 years and beyond.”
According to Filene, areas that will see the most dramatic changes include the following:
- Consolidation: An estimated 150–250 U.S. credit unions close each year. Institutions of all sizes will be challenged to make the necessary investments to satisfy younger members.
- Payments: By 2020 card and cash usage will decline rapidly as digital payment methods become more practical and mainstream.
- Technology: Physical branches will still play an important role, but there will be an increased emphasis on delivering service excellence via digital interactions.
- Lending. Core lending services are at risk. Sophisticated start-ups are nibbling away at unsecured loans, auto loans, mortgages, and business loans.
- Regulation: Small financial institutions are increasingly challenged by new mandates, while compliance costs drain away profits. But regulation is also a moat that keeps some competitors out. The next 10 years will be crucial in developing sustainable internal and collaborative ways to deal with it.
As part of the project, Filene said it asked CEOs from around the country for their predictions for 2025. For example, we asked them: If we were to start on just one thing right now to prepare credit unions for 2025, what would that one thing be? The answers included:
- “Enhanced electronic marketing to keep our remote members engaged.”
- “Make sure the personal touch does not get lost in the rush to technology.”
- “Migrating everything to the cloud.”
- “Easy virtual lending and loan closing process.”
- “Eliminate Dodd-Frank and the CFPB.”
“A great mobility product with e-access for debit and credit cards.”
The researchers also examined four possible economic scenarios: continued moderate growth, a credit explosion, rampant inflation, and another financial crisis. Good news for credit unions, said Filene: Even in the worst scenarios the credit union system holds up. Readers are encouraged to test their own assumptions.
For info: www.filene.org.