There are bites – small and LARGE – being taken out of credit unions’ non-interest income. Just consider:
- PINless PIN.
- Apple Pay – or the pay option du jour (e.g., Bitcoin, Samsung Pay, etc.).
- The increase in payments via ACH, including P2P.
- The decline in ODP.
As these bites are being taken out of revenue, decisions will need to be made as to how to compensate for the loss, not to mention the additional expenses associated with managing multiple payment options for your members.
If credit unions are not willing to accept lower earnings, then viable options are to:
- Generate other non-interest income that is not influenced by interest rates.
- Generate new interest income by accepting additional credit risk, interest rate risk, or both.
- Be fanatical about continuous process improvement to better manage expenses.
Many high-functioning credit unions are proactively digging deep into their risks to non-interest income. They are quantifying the bites – small and LARGE – and forecasting trends to understand, well in advance, the potential impact to income. Identifying these risks, long before they become an unfortunate reality, opens up many viable options for risk management and mitigation.
Decision-makers of high-functioning credit unions are then investing the time to have strategic discussions. These forward-thinking discussions help decision-makers make rational, in-depth, strategic decisions versus having a knee-jerk reaction if the risks become reality. If it becomes necessary to take on additional credit risk or interest rate risk, then it can be done in a deliberate manner allowing decision-makers adequate time to test additional risks in small, manageable increments.
History has proven that the point at which you address a problem is directly related to the number of viable and desirable options you have to solve it. Don’t wait to address this issue.