What impact will the COVID-19 pandemic have on consumer and cooperative finance in the coming months and years, and what role will credit unions play in mitigating its effects? The second part of this Special Report reviews how the crisis may affect financial services providers, particularly credit unions. It looks specifically at how credit unions have responded to members’ immediate needs; how financial well-being is being re-centered in the credit union value proposition; how credit unions will need to innovate and evolve their service delivery models, focusing on digital financial services; and how the credit union business model will be challenged as organizations navigate a depressed, low-rate economic environment.
What is the research about?
The combined public health and economic crisis occasioned by the coronavirus pandemic requires a strategic re-set for financial services providers, including credit unions.
As they responded to the COVID-19 crisis, credit unions focused, first, on emergency relief and crisis management. Right now, credit unions are rightly emphasizing employee safety and security, maintaining services, and providing support to members, especially those facing financial stress. Many are also finding ways to support their communities, such as through matching employees’ donations to relief programs.
The message we have heard across the credit union system has been consistent: Now is the time to re-focus on your people—your employees and members—and to invest in business continuity and business resiliency so as to further your mission and support your community.
What are the credit union implications?
At the same time, the implications of the COVID-19 crisis will be far-reaching, and credit unions must begin to prepare to confront upheavals and turbulence across the full footprint of their business, from the front line to the back office, up and down the organizational hierarchy, and across all channels, physical and digital. In many ways, impacts fall outside the bounds of typical business continuity planning. In one survey of more than 1,000 financial institutions, over half of U.S. banks and credit unions are expecting “extreme” or “severe” impact to their communities. As one credit union CEO explained, “Forward looking, most credit unions will be okay this year, but it’s the 24–36-month horizon that is most concerning. What can we be doing today to sustain ourselves and grow for the future?”
As we take stock, then, it is important to think both short- and long-term, and, as Callahan & Associates argues, “the definition and measurement of success likely needs to change.”
There will soon come a period for recovery, then stability, and finally the potential for longer-term and potentially more thoroughgoing transformation. Today, many credit unions are already beginning to lay the groundwork for longer-term strategic assessment and operational change.
In Part 3, we will turn our attention to the broader context of shifts in work life, social and economic life, and political life.