PLEASANTON, Calif.-The heavy emphasis on compliance and risk management today will shape the face of the credit union industry in 2109.
David McConney, EVP and general manager for Harland Financial Solutions here, predicted CUs will be much bigger in asset size 100 years from now, fewer in number, and each serving many more members. "I believe that will be a direct result of the costs borne by credit unions to meet compliance requirements and address risk management," said McConney, alluding to small CUs being unable to manage these expenses and merging as a result.
Having fewer but larger credit unions will help level the financial services playing field, according to McConney, who believes the larger size will drive economies of scale, allowing credit unions to invest in the technology to provide consumers with the products and services they will demand. However, the way CUs manage their IT systems will change. "The ongoing investment in technology will require that credit unions become much more comfortable with outsourcing their IT business," McConney said. "The large credit unions that typically manage their systems in-house are going to find they can't afford to do that...It won't be all in-house or all service bureau. You are going to find a broad mixture of those variations."
Collaboration will play a large role in the back office, with credit unions on the same systems leveraging regional data centers. McConney also sees advantages in CUs combining other back-office operations, as well. "This will allow them to compete more aggressively in the front office on service."
Being able to be more competitive will be crucial, as threats to business in 2109 will come from more than the banks, McConney predicted. "It's not going to be so much the community banks because I believe they will experience the same challenges smaller credit union face and will merge into an environment in which you will have fewer and larger banks. But competition will grow from the near-financial types of institutions, like Walmart."
