Article written by:
Trevor Walsh
Senior, Assurance & Business Advisory Services

As we approach the end of the year with no clear end in sight for the pandemic and an uncertain economic landscape, a daunting challenge for maintaining growth and excellent service has presented itself. Credit unions have responded in kind by dynamically changing the way they serve their members and strategically navigating through these hurdles.  During the year, we’ve identified several trends amongst our credit union clients, some of which we’ve highlighted below.

Mortgage Lending is the Name of the Game

While personal, auto, and credit card lending have all suffered during the course of the pandemic, mortgage lending is continuing to grow at an elevated rate, with portfolios rising 12.3% as of August 31, 2020, according to CUNA. Record-low mortgage rates, combined with relatively strong home-purchasing power, have attributed to a rising number of new first mortgages and refinances. Credit unions with strong mortgage lending teams have taken this growth in stride and have expanded their mortgage department to tackle this heightened demand. While mortgage demand is expected to taper off going into 2021, taking advantage of the current mortgage environment has been key to the financial success of several credit unions this year.

Loan Participations Provide Diversification and Mitigate Concentration Risks

With a surge in member deposit growth, credit unions are finding themselves with excess liquidity and limited options to leverage the use of excess cash. Loan participations have been an avenue for credit unions to utilize this cash on hand while also diversifying their loan portfolio. Technological advances and new vendors have made loan participations easier to access for small and mid-size financial institutions. By purchasing loan participations, a credit union can access a wide variety of loans and diversify their portfolio by geography, employer/industry, asset class, credit quality, and borrower type. Likewise, sales of loan participations can help credit unions offset concentration risks they may have in their current pool of loans.

More Credit Unions are Taking on P2P Platforms

With the rise of mobile and online banking platforms, credit unions have now turned to “peer-to-peer” (P2P) payment products as an even easier method for members to utilize their accounts. The pandemic has accelerated the use of these platforms, which include Venmo, Google Pay, and Zelle. Fintech Company Fiserv has reported that it has already added, or enhanced, P2P payment capabilities for more than 200 credit unions and banks in 2020, and the trend will likely continue going into 2021.

As 2020 comes to a close and we look into 2021, credit unions will continue to adapt to the ever-changing environment that has been exacerbated by the pandemic. As you work through dynamic changes of your own, be sure to consult your GBQ credit union team to hear our latest thoughts on the trends shaping the industry.

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