By Frank J. Diekmann
With credit union leaders now returning to pre-COVID levels of confidence in their own CUs and the economy, as reported here, some notes on deflating myths, Muenster and mateys, and something you should never stare at directly.
Busting Some BNPL Myths
The rush to offer buy now, pay later (BNPL) solutions has moved from fintechs to major players that include banks and, if the i-rumors are true, Apple.
BNPL has become just the latest piece of the lending pie a competitor is nibbling away at, with the big concern being traditional lenders are losing not just loan volume, but a generation that likes this new take on the old layaway plans. But in this case, there’s no layaway.
But not so fast, according to one new study.
Contrary to the assumption that these new credit offerings are taking market share away from credit card issuers and other lenders, TransUnion has found that doesn’t appear to be the case.
According to TransUnion’s study, Understanding the Evolving Point-of-Sale Industry, BNPL and POS offerings did not appear to have a major impact on a consumer’s usage of other forms of credit.
A Growing Pie
In fact, the BNPL/POS applicants generally used other forms of credit more than the rest of the population, the analysis stated.
“Consumers who may utilize point-of-sale financing are not doing so at the expense of traditional credit,” said Liz Pagel, senior vice president of consumer lending at TransUnion. “We saw consumers who have applied for POS financing building balances on bank and retail cards, and applying for new credit at higher levels than the general credit population. These new forms of financing are growing the credit pie – opening up more opportunities for both consumers and lenders. Consumers are looking for new ways to finance purchases and the convenience and budgeting POS offerings provide are driving them to finance more, larger purchases.”
Less surprising was one other finding: younger Gen X (ages 41-50) consumers were more likely to favor BNPL/POS, with 78% of all POS financing applicants falling between the ages of 18-50.
Tell Your Bank to Walk the Plank
Is it cheesy? Aye, like Muenster, matey. But this spot from Island FCU is worth watching just for the tagline. And given the spokes-pirates, just in time for Halloween, too.
Sure, That’s One Conclusion
There are blinding glimpses of the obvious, and then there are the BGOs that come out of Washington for which there is not adequate set of protective eyewear.
Take a recent review of $1.5-billion in losses suffered by the National Credit Union Share Insurance Fund over a decade. Those losses were put under the microscope by the General Accounting Office (GAO), which concludes NCUA could “enhance its oversight.”
It was a short trip (so, I assume, a low fare) to arriving at where most of those losses came from.
According to the GAO analysis, credit union failures generally declined from 2010 through 2020, as did losses to the NCUSIF.
“But losses spiked in 2018 largely due to failures of three credit unions with loans concentrated in taxi medallions with declining values,” GAO said.
GAO said it found NCUA has opportunities to improve its use of supervisory information to address deteriorating credit unions and its processes for reporting on failures.
In particular, GAO said NCUA could better leverage the components of its CAMEL rating system. Perhaps that will now improve since an “S,” for market sensitivity, has been added to what is now CAMELS. That new component will go into effect in early 2022.
In all, GAO said it reviewed 145 credit union failures from 2010-20, resulting in more than $1.55 billion in losses to the NCUSIF (approximately half of that was represented by the failure of taxi medallion credit unions).
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of several new book, including the brand new “The Last Lyric,” a humorous satire about a murder investigation at the Rock & Roll Hall of Fame in which every line of dialogue is either a classic pop/rock song title or lyric. Available on Amazon, Apple iBook, Barnes & Noble and Smashwords. Mr. Diekmann is also author of a non-fiction compilation of the very best & worst he has seen and heard in covering more than 500 CU meetings and conferences, “501 Name Tags: How Everything You Need to Know About Business Can Be Learned at a Conference & Forgotten in the Trade Show.” It is available on Amazon, Barnes & Noble, Apple, Lulu, and Smashwords.