By Ray Birch
ST. PETERSBURG, Fla.—There are four areas where credit unions need to be focused in 2024, according to one person, who is citing examples drawn from grocery stores, overseas (but headed to the U.S.), and bank failures.
With the latter, that same expert said cybersecurity deserves attention for a reason that may not be so obvious but which could hit any credit union.
PSCU Chief Growth Officer Brian Scott said one of the issues credit unions should be monitoring, as will be faster payments driven by FedNow.
“When it comes to payments in ’24, there's probably four areas that I would say are really interesting,” said Scott. “We've heard about mobile payments for the last 10 years, but I think there's a confluence of things happening right now that in 2024 is going to drive more activity than what we'd expect.”
Scott pointed to mobile wallets, contactless, account to account payments, embedded payments, all of which aren’t new.
Growing Volume
“But now we think about true growth and actually putting a lot of volume on these things,” Scott said. “For example, embedded payments really have just now started exploding. Also account to account, especially as you think about FedNow…And then there is contactless, again. That started to really increase during the pandemic, but we didn't quite get the mass volume that's really growing at an increased rate right now.”
Scott emphasized the significant increase in the number of consumers now using their mobile phones and mobile wallets to make payments as they’ve become more and more comfortable with those tools.
“What this creates is an explosion of mobile payments, specifically in 2024. That is one big bucket to watch this year,” he said.
Lessons from Grocery Stores
The next big development CUs should be following, according to Scott, is autonomous checkout.
“This is different than you going to the grocery store and having to scan your own groceries,” he said. “It's when you walk into a store, you scan your phone and your payment credentials as you walk in, and then while you're in the store you pick up an item like you do in your hotel in Las Vegas. Pick up bottled water off the sensor and you get billed for itp--the second you pick it up off the sensor. It’s the same concept. You're ringing up your purchases as you go and when you scan your phone on the way out you conduct that purchase. It's way different than scanning all of your items as you get to the checkout. I think we're going to see a huge explosion of that.”
Brian Scott
Scott said while the technology is not new, especially outside the United States, many more stores are considering autonomous checkout because it reduces the need for excessive inventory and it can markedly reduce loss due to theft.
“This is prevalent all across Europe, and I think we're going to see an explosion of autonomous checkout here in the U.S. in 2024,” Scott predicted.
The Year of Open Banking
Another development Scott believes deserves CU leaders’ attention in 2024 will be what he called “the year of open banking.”
“There's much more interconnectedness of data now than there's ever been, and the ability to access all of that data through APIs,” he said. “For the last couple of years a lot of people have started bringing data in from multiple sources. But they haven't really been utilizing this concept of open banking.”
But that is changing rapidly, Scott said.
“I know 10 credit unions right now that are essentially building an open banking experience on top of their existing credit union. What I mean by that is Credit Union ABC may be running their normal credit union, but then they create a digital version of themselves running under the same charter. They create a digital version of themselves that looks, feels and acts very differently than the legacy credit union. It has a whole different user experience. Essentially, they're doing open banking on top of themselves.
‘Fascinating’ Approach
“I think it's just a fascinating way to run your credit union,” continued Scott. “Because you're going to lose some of your existing members, but those members were going to leave and go somewhere else anyway—and you're going to bring in a whole group of new members that like the new digital banking experience.”
The digital CU will likely have different rates and fee structures, Scott believes.
“And you may not be allowed to walk into a branch,” he said. “But that's the experience some people want. I think the open banking concept is really set to explode in 2024.
The ‘Scary One’
Scott said his final area of focus for CUs in ’24 is a “scary one.”
“Everybody's talking about AI, but what it does is it puts an emphasis on the need for greater cybersecurity,” he said.
Scott pointed to the deposit run in early 2024 at Silicon Valley Bank that spread rapidly as reports over the bank’s financial condition spared. As a result, many of its large, commercial depositors began to pull those deposits, a task made easier by technology.
What that made clear, Scott told CUToday.info, was just how financial institutions now live in the era of the digital deposit run. While he emphasized credit unions do not have portfolios similar to that of Silicon Valley Bank—which did huge business with both start-up tech firms and established companies—any financial institution can be victimized by a negative report that sparks a crisis of confidence.
One of those is fraud, he stressed.
“In a FedNow environment, where you can move money instantly out of your account, fraudsters could drain a massive amount of money out of a number of accounts at a credit union,” he said. “Or, there could just be news about a fraudster taking a bunch of money out of a credit union, and if I'm a member of that credit union and I hear that, now I can move my money out instantly.”
Not as Focused as Should Be
And before it knows it, a credit union finds itself in a Silicon Valley Bank-like scenario, Scott asserted.
“Too many credit unions and too many community banks are not as focused on cybersecurity as they should be, and in an environment where there are multiple different types of payments coming together, and as money can move much more freely and much more quickly than ever, the need to prevent fraud and manage that cybersecurity threat is greater than ever,” Scott said, adding more cooperatives need a senior person who’s just in charge of payments. “Maybe it’s an area that credit unions aren't focusing on and really should be for 2024.”
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