Ten years ago we all used to do five-year plans, then most of us moved to three, and I’m not sure there is much value beyond 18 months anymore.
With that said, let’s start with what I am sure of. Ten years from now I’ll be retired, playing golf, and drinking a good glass of wine now and then. For now, though, on to the more speculative matters.
We wear two hats at CO-OP Financial Services, that of our credit union members as well as our own role as a significant player in payments processing. I’ll start with credit unions. Ten years from now there will be fewer than 5,000 credit unions and less than 2,000 with under $20 million in assets. Corporate credit unions, leagues, CUSO’s and other vendors serving credit unions will have been forced to consolidate. System-wide, assets will have tripled with only modest increases in membership and average ROA will be on the sunny side of 1.0.
This somewhat rosy forecast is premised on two things. First, our trade groups will maintain their legislative and regulatory initiative by securing additional powers and maintaining our industry’s tax exempt status. Second, we put aside our traditional provincial and parochial nature and instead, pursue consolidation that will best serve our members. If we fail at either of these initiatives, all bets are off.
Looking into the payments crystal ball, the demand deposit (notice I avoided checking) account will remain the primary basis for payments. There will still be 25-30 billion checks written, with ALL being processed and cleared electronically. What we refer to today as debit and credit card-based payments will be initiated by all forms of media – cards, mini-cards, fobs, watches, phones, etc. Anything that can hold a chip and RFID antennae will be a candidate, which will make for some really interesting marketing partnerships.
Cash transactions will be near the same level as today, but declining as a percentage of the total transactions pie. ATM’s, which will still be a critical delivery mechanism, will be coupled with assisted kiosk devices replacing many teller stations and shared branches.
Security will be improved, but I am not sure there will be a move to biometrics. Regardless, we undoubtedly will be facing some new security threat. VISA, MasterCard, Amex and Discover will remain the dominant credit brands with some rationalization of the PIN debit market. Interchange will be lower, volumes and fees will be higher and 50% of credit union revenues will come from payments products.
CO-OP Financial Services will follow one of two paths. Consolidation of core processors and market actions of the national brands could limit our ability to grow and provide value to our members. If this scenario plays out, we will be forced to sell, with a massive windfall going to our credit union patrons. The more desirable path would see CO-OP merging with other like-minded organizations to form a credit union payments and services powerhouse that could withstand any competitive threat.
We live in a “grow or die” market. The path we ultimately take will come down to credit union cooperation, avoiding provincialism/parochialism and having the courage to exercise vision.
Jim Hanisch is the Executive Vice President Network Operations & Corporate Development, CO-OP Financial Services. For more information about CO-OP please go to www.co-opfs.org