3 financial trends credit unions should be aware of in 2023
2023 began on an already shifting financial landscape, with rates higher than they’ve been in decades and talk of a potential recession. As the 2023 financial trends begin to emerge, credit unions need to be prepared to adjust and adapt to these trends in order to continue to meet their members’ needs and expectations. Technology may be able to help mitigate some of the expected concerns headed our way in the coming year. Below are three financial trends we’re expecting in 2023.
Late or Defaulted Payments
With factors such as inflation, high rates and scarcity affecting the average American’s wallet, 5 major banks are predicting a higher rate of late or defaulted payments in the coming year and have increased their CECL (current expected credit loss) reserves in preparation.
What does that mean for credit unions? They should increase their own CECL reserves, if possible, and consider investing in predictive algorithms that identify those members most likely to default on payments, allowing the credit union to take steps to mitigate losses before the default occurs. Predictive AIs in general will be of particular benefit during the coming economic downturn, as they will allow credit unions to identify and prepare for a variety of behaviors, including late payments and members who are likely to leave the credit union altogether.
Increased Competition for Resources
As the economy continues to slow, there will be increased competition for financial resources within individual credit unions. Marketing, IT and HR will all be looking to have their budgets fully funded, and not everyone will get what they want.
Look for opportunities now to save money or increase profitability without sacrificing quality, such as moving away from on-premises hardware. On-prem set-ups require increased staff and upkeep that only add to the overall bottom line. Moving to a managed cloud-server that requires only a monthly or yearly fee could lead to long-term savings. Cloud servers provide their own staff, security and updates, and would require fewer staff from the credit union and fewer hours from IT after the initial set up.
Doing More with Less
Credit unions that plan ahead should be able to retain their staff even as losses begin to affect the credit union. That said, hiring new employees to increase the capabilities of existing staff or to work on new projects will be difficult. Credit unions will need to find ways to either increase their current staffs’ workloads or find other ways of accomplishing goals.
One potential option is outsourcing projects to staffing agencies. Staffing agencies can provide talent for a set number of hours that may be lower than hiring a full-time employee. If the agency utilizes offshore resources, there may be more opportunities for increased savings. If considering this route, make sure to select a company that specializes in aiding credit unions – their talent will likely already be familiar with credit union needs and be able to better adjust to projects and goals.
2023 is going to be a tight financial year. But being prepared for some of the eventualities of this year can help to ease the stress. Make sure your credit union is prepared to save where they can and spend where they have to. Trellance has offerings that can help with some of the coming trends in 2023. Go to www.Trellance.com to learn more about how your credit union can achieve more with Trellance.