The first day of the AICPA Conference for Credit Unions, held at Caesars Palace in Las Vegas, Nevada offered a number of interesting insights. Leaders on both the credit union and vendor side of the industry spoke about a diverse range of subjects ranging from the implementation of CECL (Current Expected Credit Loss) to societal technological advancements and how they affect financial services. Below are some key themes and lessons imparted on the first day in the desert.
CECL is a topic that has been circulating the credit union industry for some time now. The expectation to build a robust model that accurately accounts for credit loss during the life of the loan has created an uncertain buzz. The idea presented in CECL Journey on the Road to Implementation session was to take a step back and use CECL to positively affect your business model and roadmap.
According to a poll taken in the room, the majority of participating credit unions expect to have a CECL model running by mid-2019 (32%) or late-2019 (27%). Only 9% are currently calculating their CECL figures, while just 7% plan to have the data by the end of the year.
Although there is no rush to create a CECL model today, the forum offered some interesting strategic considerations for that process. The expectation to assess loss for the life of the loan is forcing a shift in the way credit unions are thinking about their lending strategy. Largely, this shift is around the balance between short-term gains and long-term returns.
The general idea presented is to take the time to build a robust model; one that can highlight specific opportunities for not-for-profits. Often, for-profit institutions are heavily impacted by short-term or year-end yields. Credit unions should not fall under the same trap. Although the year-end balance sheet may see a fall in the return on assets, credit unions should use CECL to determine the risk they are willing to take in the long-term and the yield they will eventually be able to add, not just in the current year.
Another topic that has and will undoubtedly continue to consume the minds of credit union leaders is technological advancements and what they mean for financial services. AICPA’s Conference on Credit Unions touched on this topic multiple times in the first day. Jeff Yabuki’s (President & CEO, Fiserv) keynote address was largely centered around world-wide advancements and what credit unions need to expect.
People often have one-to-three internet connecting devices on them at all times. In the current climate, they serve as the front door to financial institutions. This is the standard now, but it may not be in the future and credit unions need to prepare for further changes. For example, a video was shown of a google assistant making calls to local businesses on behalf of their owners (link below). Is such artificial intelligence an opportunity for credit unions? With consumers potentially handing off a growing portion of their day-to-day errands to artificial intelligence in the near future, are credit unions gearing toward accommodating this and other inevitable technological innovation?
The only thing growing faster than technology is consumer expectations. Having products in place that service today’s technology is not good enough. With new technology being created every day, credit unions need to be ready to face the ever-changing technological needs of their members.