1. Big 10 & University Credit Union Conference
Top Industry Trends: What To Watch Out For
Ronald Mazursky
Strategic Initiatives Group
May 12, 2017
May

2. Agenda I. Credit Union Performance Trends II. Industry Trends
Infrastructure Evolution
User Experience
Mobile Migration
May

3. Credit Union Performance Trends
May

4. Credit Unions Gain Strength in 2016
Source: Callahan, Peer-to-Peer Analytics, February 2017
May

5. Credit Union Mergers and Acquisitions
Industry consolidation continues
Source: Callahan as of 9/30/16
May

6. CU Loan Product Offerings Highlight Growth Opportunity
Percent of Credit Unions Offering Loan Types
Source: Callahan, Custom Reporting for JHA, February 2017
May

7. Loan Portfolio Mix Reveals Opportunity
Source: Callahan, Custom Reporting for JHA, February 2017
May

8. 2017 Predictions The U.S. economy will grow by 2.5%
Fed Funds rate to hit 1.4% by year-end
10-year Treasury to top 3%
Credit union membership to increase by 3.5%
New auto, credit cards, and mortgage to be strong
Delinquency at .75%
Net charge-offs down to .5%
Savings balances grow by 5.5% (down from 6%)
Source: CUNA, Economic and Credit Union Forecast, 2017
May

9. 2017 Credit Union Loan Growth Expected to Slow
Almost 11% throughout
parts of 2016
CUNA predicts 9% loan growth in 2017
Source: Callahan, “Callahan Peer-to-Peer Analytics”, February 2017
May

10. Consumer Debt Avoidance to Impact Lending
80% of borrowers surveyed are resistant to taking out new loans
39%
Would avoid debt if possible
41%
Would avoid debt at all costs
Source: Filene, Confidence in Borrowing Survey, 2016
May

11. Agenda I. Credit Union Performance Trends II. Industry Trends
Infrastructure Evolution
User Experience
Mobile Migration
May

12. 2/3 of banks saw organic growth of customers over the past year…
I. Trends – Infrastructure Evolution
2/3 of banks saw organic growth of customers over the past year…
DATADRIVEN
Organic
Acquisition/Merger
58.3%
41.7%
67%
Source: SI-16 Survey Question: Background Q 3 and Q4. Q3: How has the number of customers at your bank changed over the past year? Q4: If there has been growth in the number of customers over the past year, where has the majority of the growth come from?

13. 54% of banks expect to see 6-25% decline in branch traffic
I. Trends – Infrastructure Evolution
But, bankers expect to see a significant decline in branch traffic over the next 5 years
DATADRIVEN
81% of banks foresee a decline in branch traffic over the next five years!
7% of banks expect to grow branch traffic during this period
54% of banks expect to see 6-25% decline in branch traffic
Source: SI-16 Survey Question: Background Q 7. What change do you anticipate in your branch traffic volume in the next five years?

14. Continued Demand for Branch Automation
I. Trends – Infrastructure Evolution
Continued Demand for Branch Automation
Source: SIG, “Strategic Initiatives Banking Study 2016”, May 2016
May

15. The Sudden Emergence of Fintech
I. Trends – Infrastructure Evolution
The Sudden Emergence of Fintech
May

16. Investments in U.S. Fintech peaked in 2015
I. Trends – Infrastructure Evolution
Investments in U.S. Fintech peaked in 2015
May

17. The Broad Reach of the Fintech Market
I. Trends – Infrastructure Evolution
The Broad Reach of the Fintech Market
Source: venturescanner.com/infographics (April 24, 2017)

18. Infrastructure is Being Upgraded
I. Trends – Infrastructure Evolution
Infrastructure is Being Upgraded
Source: Venture Scanner Financial Technology Startup Landscape Trends and Insights (January, 2017)
May

19. Agenda I. Credit Union Performance Trends II. Industry Trends
Infrastructure Evolution
User Experience
Mobile Migration
May

20. User Experience Matters to Consumers
II. Trends – User Experience as Differentiator
User Experience Matters to Consumers
Recent consumer research reveals that:
81% Are frustrated dealing with a company that isn’t easy to do business with
73% Expect customer service to be easier and more convenient
61% Want customer service to be faster
44% Complain on social media about poor customer experiences
Source: Accenture Global Consumer Pulse Survey, 2016
May

21. What Consumers Want II. Trends – User Experience as Differentiator
Source: Omni-channel and Retail Banking – Why All The Buzz?, IDC Financial Insights, September 2014
May

22. Tech Trends Enhance the Member Experience
II. Trends – User Experience as Differentiator
Tech Trends Enhance the Member Experience
Biometrics
Artificial Intelligence
Chatbots
April 26

23. II. Trends – User Experience as Differentiator
Biometrics
May

24. MasterCard and USAA II. Trends – User Experience as Differentiator
May

25. Biometrics Overtake Passwords
II. Trends – User Experience as Differentiator
Biometrics Overtake Passwords
Fingerprint Scanning Leads in Consumer Confidence
May

26. II. Trends – User Experience as Differentiator
Chatbots
May

27. Chatbot Examples II. Trends – User Experience as Differentiator
May

28. Chatbots Growing Faster Than iOS Apps
II. Trends – User Experience as Differentiator
Chatbots Growing Faster Than iOS Apps
Chatbot growth exceeding that of smart device apps, consumers are more accepting of them, and will likely become part of financial services delivery in the next several years.
170% growth in a
three month period
Source: Citi Research, TechCrunch, Company Reports
May

29. 50+% of Consumers Use or are Interested in Using Voice Chatbots
II. Trends – User Experience as Differentiator
50+% of Consumers Use or are Interested in Using Voice Chatbots
84% use
or want to
70% use
or want to
62% use
or want to
50% use
or want to
SOURCE: BI Intelligence, February 2017
May

30. 87% of FIs Have or are Planning for Chatbots
II. Trends – User Experience as Differentiator
87% of FIs Have or are Planning for Chatbots
Source: Financial Institutions Bullish on Chatbots, The Financial Brand, January 2017
May

31. Chatbots Reduce the Cost of Customer Service
II. Trends – User Experience as Differentiator
Chatbots Reduce the Cost of Customer Service
Nearly 30% Annual Customer Service Rep Salary Savings
SOURCE: BI Intelligence, Company Reports, December 2016
May

32. Chatbot Research & Demos
II. Trends – User Experience as Differentiator
Chatbot Research & Demos
May

33. Agenda I. Credit Union Performance Trends II. Industry Trends
Infrastructure Evolution
User Experience
Mobile Migration
May

34. U.S. Demand for Mobile Devices
III. Trends – Mobile Migration
U.S. Demand for Mobile Devices
Source: Pew Research Center
May

35. Mobile Adoption Not Limited to Gen Y
III. Trends – Mobile Migration
Mobile Adoption Not Limited to Gen Y
Source: First Annapolis Consulting, Inc. Study of Mobile Banking & Payments (3rd Ed.)
May

36. Increased Demand for Mobile Banking
III. Trends – Mobile Migration
Increased Demand for Mobile Banking
Source: First Annapolis Consulting, Inc. Study of Mobile Banking & Payments (3rd Ed.)
May

37. III. Trends – Mobile Migration
As customer bases grow and branch traffic declines, online and mobile become the channels of preference
DATADRIVEN
Source: SI-16 Survey Question: Online and Mobile Banking Q1 and Q2. Q1: Indicate your current perspective on using online channels to apply for each of the following new accounts/services. Q2: Indicate your current perspective on using mobile challenges to apply for each of the following new accounts/services.

38. III. Trends – Mobile Migration
As customer bases grow and branch traffic declines, online and mobile become the channels of preference
DATADRIVEN
Source: SI-16 Survey Question: Online and Mobile Banking Q1 and Q2. Q1: Indicate your current perspective on using online channels to apply for each of the following new accounts/services. Q2: Indicate your current perspective on using mobile challenges to apply for each of the following new accounts/services.

39. The Bottom-Line
Fintech partnerships present opportunities to capitalize on their strengths
Improvement in user experience supports improved ROI
Support exists for tech trends - biometrics and chatbots are gaining consumer and FI acceptance and demand
Mobile banking and payments appeals to all
May

40. Thank You Ronald Mazursky Director of Strategic Initiatives
Strategic Initiatives Group
May