Ahead In 2018: Interest Rates And Tech Tools Both On the Rise

It may or may not be a bubble, but consumer debt might roil the waters for credit unions and their members. Can machines learn to help with that?

 
 

Prediction season is here. Here’s a sobering one for 2018, one that rings in the new year with notes of opportunity and responsibility for the credit union movement.

The Fed will continue to raise rates, adding billions in interest to the credit card balances of American consumers that has now topped a trillion bucks. Combine that with a hiccup in a go-go economy and look out below.

Overall, WalletHub sees the good times continuing. For credit unions, highlights of that site’s 2018 Financial Predictions include strong auto and existing home sales and consumer credit scores peaking in 2018.

“Peaking” might be a red line here. What follows peaks? Valleys. While unemployment is expected to remain low and GDP growth steady, it still might be time to think about how to help members when harder times hit.

So, what might 2018 yield? “Another year of banks behaving badly and credit unions putting members first,” says Callahan partner Alix Patterson. We’ll see how the member-owned financial cooperative industry responds when the tide stops lifting all boats.

And even if times stay good, challenges remain. That’s where credit unions can shine.

Another year of banks behaving badly and credit unions putting members first.

Alix Patterson, Callahan & Associates

No. 1: New Ways To Solve Old Problems

Stagnant, often low, wages and the surge in part-time and contract work (i.e., the gig economy) make making ends meet tough for millions. It might behoove member-owned financial cooperatives to push for the development of products to help level incomes and smooth out the rough spots.

Wal-Mart, the nation’s largest private employer, already has taken a step in that direction, offering 1.4 million workers an app that lets them access a portion of the wages they’ve already earned without waiting for the bi-weekly paycheck.

The app is called Even and it’s been around for a couple years, but mass adoption in one fell swoop might add traction to the adoption of this and similar approaches to stabilizing unsteady incomes.

I’m not predicting it will, unless a hope is the same as a prediction.

The amount of taxes that banks owe will go down, so they’ll have more money to use to compete for consumers. Or they can give it to their shareholders. I guess the good news is, I would assume most will keep their newfound gains for their shareholders.

Jon Jeffreys, Callahan & Associates

We’ll soon know how tax reform will help or hurt the economy and the everyday American. Our managing partner at Callahan, Jon Jeffreys, had this take on how this sea change in corporate taxation might affect the competitive landscape for credit unions:

“The amount of taxes that banks owe will go down, so they’ll have more money to use to compete for consumers. Or they can give it to their shareholders. I guess the good news is, I would assume most will keep their newfound gains for their shareholders.”

That could mean some breathing room for credit unions to continue build out digital solutions that empower credit unions to serve members every which way Silicon Valley can think of while meeting the mandate of the credit union charter.

 

 

No. 2: Artificial Intelligence Expands

Lots of real brains are hard at work on artificial intelligence and promises of serious advances abound. Here’s a prediction for 2018: Continuing broadening of the definition of AI itself. Like cloud computing before, a narrowly defined idea has expanded with its ubiquity. AI now includes machine learning – a machine’s ability to keep improving its performance without constant human intervention – and really nearly anything that can be done on a computer if the definition is pushed to its limits.

Symitar president Ted Bilke says this of the year ahead: “More credit unions will advance artificial intelligence from the consideration and planning stage to deployment. Engaging with members in more impactful way may lead this effort as a revenue driver. Fraud prevention will lead the way from a cost-savings perspective.”

Driving this will be advances in machines’ ability to understand natural language, and act on it. At least one big bank, Barclays, already is allowing customers to make payments via Siri on their iPhones. Look for similar solutions using Amazon’s Alexa and Google Home.

It's already happening. Symitar announced Dec. 20 that it is now offering voice-enabled transactions for credit unions that use its Episys platform. That includes Enrichment FCU ($456.5, Oak Ridge, TN), where 115 employees have been given Amazon Echo Dot devices and training to teach members how to use them. More than 200 have in three weeks so far.

More credit unions will advance artificial intelligence from the consideration and planning stage to deployment.

Ted Bilke, Symitar

No. 3: Voice Recognition Presents New Opportunities

“As consumers become more comfortable with voice-enabled technology, they will begin using it for financial interactions,” says Scott Hess, Fiserv’s vice president of user experience, consulting, and innovation. The first wave will be checking balances and account activity, but that will be followed by paying bills and transferring funds.

A prediction: A tipping point will arrive relatively quickly. Remember the slow growth from brochure-ware to transactional websites, then how much faster mobile took off? Expect the same kind of trajectory here. After all, Amazon said the Echo Dot was a top seller on Black Friday. That’s millions of new users looking to use it. Credit unions would do well to provide a path for that.

Security also will get a boost from AI. Neural networks have been around since the turn of the century; helping credit card processors spot transactions that don’t fit patterns is really nothing new. But they’re getting better at it. And biometrics are rapidly joining PIN and passwords as authentication channels, and may soon supplant them.

Biometrics themselves are changing fast, too. Voice authentication technology is advancing, thanks to AI and machine learning, and palm vein identification already is in place at some financial institutions, including Andigo Credit Union ($873.1M, Schaumburg, IL).

Count on hearing more about that in the coming year.

No. 4: Blockchain Nears “Proofs Of Concept”

Last but not least is blockchain and distributed ledger technology. It’s the technology behind bitcoins but not bitcoins themselves, and billions are being invested worldwide in putting the technology to work.

Players in our space include CULedger (a startup backed by CUNA) and Hyperledger (a global consortium that NAFCU joined as its first financial trade association). Bilke at Symitar expects to see use cases for distributed ledger technology to begin to emerge as collaborations yield “blockchain proofs of concept.”

We already live in interesting times, and 2018 promises to be no different. Hopefully we’ll see credit unions using these innovations to heighten their ability to respond to the needs of members buffeted by the crosswinds of change in an uncertain economy.

 

Dec. 20, 2017


Comments

 
 
 

No comments have been posted yet. Be the first one.