Throughout history, unexpected events and significant milestones — from natural disasters and economic downturns to regulatory constraints and the advent of new technologies — have tested the financial services industry. Time after time, credit unions have adjusted their operations and service delivery strategies in order to address changing business environments and deliver services to fill critical member needs.
As we reach the mid-point of 2020, COVID-19 is the latest challenge to place pressure on consumers and financial institutions alike. In the first quarter, the U.S. economy shrank nearly 5%. Since then unemployment has reached levels not seen since the Great Depression. What’s more, the economic outlook ahead is clouded by uncertainty, with predictions of further contractions, prolonged low interest rates, and falling loan demand which will further impact income.
While there is no way to predict when the uncertainty will end, there are steps that can be taken now to maintain or grow reputational capital, strengthen your operations, and enhance your bottom line to prepare for the changes that lie ahead for your credit union, your members, and your community as we work through this ongoing crisis.
Improve the member experience
Stay-at-home orders have been lifted across the country and most businesses are opening, at least partially. However, record unemployment and under-employment persist across a broad spectrum of the population. Uncertainty about how long the virus will pose a threat increases the anxiety for millions of Americans who are looking for some peace of mind and financial security.
Are you taking steps to address your members’ financial service needs? A fully disclosed overdraft privilege program can provide a user-friendly solution to your members’ occasional financial insecurities—both now and throughout the pandemic—until more stable financial conditions return.
Just make sure that the important details of your program—like overdraft limits and fees—are fully explained to your members at account opening and through on-going interactions. Your program also should provide on-going communication regarding member account status and the availability of alternative solutions that can help them maintain their finances through economic uncertainties.
By taking a proactive approach to identifying user-friendly initiatives and strategies that take into account individual circumstances, you can be the solution for your members’ most pressing financial needs and protect vital sources of revenue for your credit union.
Maintain compliance awareness
With all of the new challenges that financial institutions are currently experiencing, it’s imperative not to become complacent when it comes to maintaining compliant programs and procedures. Litigators across the country continue to target credit unions for activity that negatively impacts consumers. This includes class action lawsuits and demand letters against institutions whose overdraft policies are deemed to be confusing.
Are you utilizing best practices to manage your overdraft program? Do you have access to the latest advice on regulatory and consumer protection expectations? If not, you are risking increased examiner scrutiny and possible legal action.
When your members are aware of how to access your overdraft solution—and the other services you provide to help them when they are faced with a financial downturn—there is no guesswork and no surprise fees to further complicate their situation. Using the service becomes a clear choice they can make to avoid having transactions denied or checks returned on necessary purchases and emergency expenses.
If you are managing your overdraft strategy in-house, now is a good time to have a compliance expert review your policies and procedures to make sure they are in line with regulatory expectations and pose no threat of legal scrutiny or penalties.
Take control of your expenses
At a time when you may still have employees working from home or have reduced staffing in place, it can be tempting to push some less member-facing tasks to the back burner. But don’t overlook the long-term financial consequences of not staying on top of your existing service contracts — you could be missing out on significant benefits.
For example, the changing business environment brought on by COVID-19 has increased the need for digital capabilities and more enhanced services, like contactless cards and virtual ATMs, that simplify members’ ability to complete financial transactions. As upgrading your service options becomes a higher priority, evaluating vendor contracts can provide the funds your credit union needs to reinvest in operational improvements and new technology.
What’s more, changing financial needs caused by the pandemic have created more demands for employees to be engaged with new ways to address individual member challenges. Having an expert to help with evaluating contracts that are coming due or finding ways to save money, or add revenue, can be a valuable solution for improving efficiencies, as well as your service capabilities and your bottom line.
When was the last time you had a professional take a look at your service contracts? Re-negotiating vendor agreements can uncover savings and improved contract terms on the services you use every day. In many cases, a no-cost expert review can have a positive impact right away on contracts that are expiring between now and early 2022 on such agreements as card processing, card brand, core data processing and much more.
Utilize tools and resources that support successful results
Since the onset of COVID-19, consumer use of contactless methods for obtaining financial services has increased, due to limited access to branch facilities, work-from-home requirements and social distancing recommendations. In this unsettling environment, it’s imperative to examine how effectively you are providing consistent financial services and support to strengthen existing relationships and attract new ones.
For instance, does your overdraft program include continuous member communication and on-going evaluation to make sure it is providing the best results for your members and your credit union? The combination of the right technology and sound expert advice is essential to ensuring your program is supplying accurate account tracking, analysis and reporting that is necessary to ensure a responsible solution for your members and a reliable source of revenue for your institution.
Effective utilization of data to identify individual members who may be affected financially during the pandemic allows you to match your services to their needs. This, in turn, increases the likelihood that your institution will be seen as a trusted financial ally.
In light of existing staffing situations, it is essential for your employees to have access to training opportunities that instill the knowledge and confidence they need to do their jobs successfully. If you are relying on employees to train new hires and provide ongoing refresher courses while some individuals may be working remotely and/or taking on new responsibilities, your training strategy may be lacking consistency and failing to fully engage everyone who needs to be involved.
When it comes to training employees on critical member initiatives, like overdraft privilege and other services that offer financial stability for members, professional, program-specific trainers can take the guesswork out of the learning process and strengthen everyone’s peace of mind. With the support of experienced facilitators, you can boost your employees’ knowledge of program management, compliance, industry best practices and member engagement to make sure that everyone on staff has more confidence regarding how the program works, how to explain it effectively to members, as well as what value it brings to program users and the credit union.
For the past several months, COVID-19 has had a major impact on the economic well-being of financial institutions and consumers alike. And its impact is expected to continue for the remainder of the year, at least. How you respond to your members’ needs today can have a substantial impact on the success of your credit union for years to come. By reassessing your current strategies for improving the member experience, controlling your expenses and protecting revenue, you can address the changing environment with confidence.