5/5/2018 CREDIT UNIONS IN Who We Are. Our research (THINK) + our innovation (DO) + our action (CHANGE) = the secret formula.

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1 CREDIT UNIONS IN 2025 Hawaii Credit Union League Convention May 19, 2018 HELLO! Cortney Angeley Impact Director 2 ABOUT FILENE Who We Are Filene Research Institute conducts research, tests innovative pilot concepts and offers proven solutions that create meaningful impact for credit unions and drive positive change for credit union members. Our research (THINK) + our innovation (DO) + our action (CHANGE) = the secret formula. 3 1

2 ABOUT FILENE How We Work THINK. Everything we do is ROOTED IN RESEARCH. DO. Through innovation, we turn RESEARCH INTO IDEAS. CHANGE. We put IDEAS INTO ACTION through impact. 4 WHEN THINKING ON THE FUTURE We always overestimate the change that will occur in the next two years, and underestimate the change that will occur in the next ten. Don t let yourself be lulled into inaction. - Bill Gates, Microsoft Guy 5 Today s Trends Will Shape Tomorrow 6 2

3 THE RISE OF VALUE BANKING Millennials 7 8 Collaborative Consumption 9 3

4 SHARED ECONOMY Sharing economy sectors vs. traditional rental sectors Peer-to-peer Car sharing and rentals Video streaming and DVD rentals 10 Tech-savvy Natives are our Future 11 Showrooming 12 4

5 Few er In-Branch Transactions Average monthly branch transaction volume (in thousands) Credit Unions Community Banks 13 Digital Channels are Creeping Up 14 But the Br anch is not De ad 15 5

6 W H AT W E VE LEARN FROM BUFFETS A couple brief points here, if wanted 16 If You Build It, They Will Come 17 An Omni-channel Experience 18 6

7 ALL OVER THE WORLD 24 hours a day 7 days a week 365 day a year 19 OMNI-CHANNEL MEMBER ENGAGEMENT Extremely strong omnichannel engagement retain 89% of customers Weak omni-channel engagement retain 33% of customers Top 10 Customer Experience Trends for 2016 Fonolo, fonolo.com 20 What is Engagement? The emotional connection between your customers and your FI (Filene) 21 7

8 EventBrite: Changing Concert Experiences Tokyo Olympic Games 23 BIG DATA CHALLENGE A couple brief points here, if wanted Photo by Denys Nevozhai onunsplash 24 8

9 Google Home is Always On 25 CogniToys 26 BEAM BRUSH Big Data M ak e s Life Be tter 27 9

10 CROW DFUNDING Connects collaborative consumption and leverages big data Finds new ways to connect and serve 28 CROWDFUNDING The Big Five Contribution: no expectation of a direct benefit charity donation Reward: nonfinancial reward based on contribution level T-shirt or coffee mug Pre-purchase: product or service in the future Indiegogo Equity: ownership stakes if a company is funded Peer-to-Peer Lending: funders receive at least partial repayment

11 GE TTIN G S TA R TE D Uncover Members Social Priorities 31 VIRTUAL REALITY Consumer spending on VR will increase from $108 million in 2014 to $22 billion in Tractica, July Virtual Reality Appetite 33 11

12 Sam s ung: Be Fe ar less What about Internables? 36 12

13 DR. MIRROR Microchip with Readings and Recommendations 37 Gamification Improves Results 38 Things You Can Do Tomorrow 1. Continue to Watch the Top Trends Values Banking Collaborative Consumption Big Data 2. What Do Your Members Care About Most? 3. Marry the trends and member needs. Work to identify: Top opportunity Top threat How will your credit union respond? Crowdfunding Virtual Reality Gamification 39 13

14 Let s Talk 40 Credit Union Forecast Five Key Themes REGULATION 42 14

15 #1 Consolidation 43 #1 Consolidation CUs -44% Assets +160% 44 #2 Regulation in 2025 Whither NCUA? Taxation Rising Leadership Standards Shared Branching Integration Credit Union Consolidation Continues 45 15

16 #3 Lending in #3 LENDING Disintermediation A Big.Darn.Deal 47 #3 LENDING Disintermediation Consumer Lending: Loan issuances up by $1.5B in 5 years Student Lending: Loans outstanding have grown 70% since 2008 Small Business Lending: Better approval rates than banks or credit unions 48 16

17 #3 LENDING Student Loans 49 #3 - LENDING Payday Loans 50 #3 LENDING Payday Loans: What Options are Available? Not many good ones 51 17

18 #3 LENDING Algorithmic Banking 52 #3 LENDING E-Mortgages 53 #4 Financial Technology in 2025 CGI, Understanding Financial Consumers Inthe Digital Era, 2014, /pdf/br_fs_consumersurveyreport_final_july_2014.pdf

19 #4 FINANCIAL TECHNOLOGY FinTech: The Great Unbundling 55 #4 FINANCIAL TECHNOLOGY WALMART LAUNCHES NEW MONEY TRANSFER SERVICE W I TH I N TH E I R A P P - - Express Money Service = shorter line - - Intends to extend to Bill Pay and Check Cashing 56 #4 FINANCIAL TECHNOLOGY Trov: On-Demand Property Insurance 57 19

20 #4 FINANCIAL TECHNOLOGY DOUUGH (YES, THAT S THE SPELLING) Uses Al Financial Control Center of the Future More automated than Mint or Moven #4 FINANCIAL TECHNOLOGY Sm ar tphone Ow nership 64% 74% 83% 93% >$30,00 0/yr $30,000 -$49,000 $50,000 -$74,999 $75,000 or more heet/ mobile/ 60 20

21 #4 FINANCIAL TECHNOLOGY Smartphone Dependency 21% of Americans with an annual household income of less than $30,000 per year are smartphone-dependent Only 5% of Americans from households earning more than $75,000 per year rely on their smartphones 17% of Americans age are smartphone-dependent heet/ mobile/ 61 Goodbye ATMs? #4 FINANCIAL TECHNOLOGY ATM Consumer Usage: Source: ATM Marketplace, ATMFutureTrends 2015, and ATM Future Trends #4 FINANCIAL TECHNOLOGY ATM Industry Predictions Source: ATM Marketplace, ATMFutureTrends 2015, and ATM Future Trends

22 #5 Payments in Why Will Cash Use Decline? Changing consumer tastes Regulatory policy Technology improvements Cryptocurrencies 65 Globally, a Tw o-speed System 66 22

23 Value vs. Volume (in the US) 67 A Tw eet on Payment Preferences The economics of payments is clear, but there is little data about how and why the number and value of consumer payments change over time 68 THE RISE OF BLOCKCHAIN Blockchain - Defined a cryptographically assured database in a cloud (or p2p network) that maintains a continuously-growing list of records called blocks, secured from tampering and revision 69 23

24 THE RISE OF BLOCKCHAIN Say What?! 70 THE RISE OF BLOCKCHAIN Blockchain in English A shared database filled with entries that have to be confirmed and encrypted A secure Google document We append one row at a time with new transactions As each row is added, the previous row cannot be edited Blocks = data that is added to each transaction record Each block is added using a cryptographic signature called a hash 71 THE RISE OF BLOCKCHAIN Blockchain - Benefits Secure: each block is slightly different than the one before Inexpensive: $400 vs. $12.50 Efficient: less human intervention, cross-border support 72 24

25 CASH The Road Ahead for Cash Smartphones will continue to be king Measure cash volume vs. value over time Compare ATM technology costs with member utilization Keep an eye on blockchain 73 THE PATH FORWARD Re com mendations Continue to monitor shifts in auto ownership Determine how you can address member lending needs - Student loans, payday loan alternatives, etc. Discuss how your credit union is embracing (or not!) digital media in a way that makes sense for you and you members Consider framing your payments strategy based upon member preferences 74 THANK YOU! QUESTIONS? 25

26 NEED M ORE BRAINFOOD? filene.org Cortney Angeley cortneya@filene.org 26