How do you plan for something that has never happened before?
For the last two weeks — and for much of the foreseeable future — it is the questions that consumers, businesses, banks, public health officials and legislators are asking themselves as an utterly unprecedented situation is unfolding around them amid the coronavirus pandemic.
The economy, for all intents and purposes, is on hiatus as everyone is staying in as part of an attempt to flatten the curve and thus failing to generate much in the way of real-world economic activity.
It’s a difficult time and an alarming one in many dimensions. But it is also perhaps a time in which credit unions (CUs) can rise to the occasion, PSCU’s President and CEO Chuck Fagan told Karen Webster in a recent conversation. While CUs have never dealt with anything quite like this or at this scale, they have been on the ground for wildfires in California, hurricanes across the southeast and the government shutdown a year ago that resembled the current crisis in many key ways.
“Credit unions shine in times like this, and credit unions like they did during that government shutdown, go to offering things like microloans with minimal review, skip payments, quick credit line adjustments,” he said. “This is an area where I think credit unions can really hit the right spot for their members because they don’t really worry about a stock price or a quarterly number; they can do those things immediately in ways that are in their members' best interests.”
It’s an important offering to make, he noted, particularly at the moment when the entire world is gripped by uncertainty and consumers are making ATM runs hoarding cash in some places. Consumers, he noted, need to know that they are being cared for directly and individually during times of uncertainty, particularly economic. There are challenges for CUs in providing that certainty in ways that are both reassuring for members and safe for staff. But, Fagan noted, there are also opportunities as the world begins to recover from the crisis.
Responding Correctly To The Unknown
The challenges in mitigating a disaster, particularly one like COVID-19 — the disease caused by the coronavirus, which is novel and thus unprecedented — is there is no standard rulebook to turn to when assessing risk. Microloans and debt forgiveness can work for CUs for a while, Webster noted, but not indefinitely, and the challenge is no one can answer confidently what the duration of the current slowdown will be.
Fagan agreed, noting that although the uncertainty of risk is a day-to-day issue to be managed in financial services, what is happening at scale at present is, in fact, a unique situation — although one he said he believes that CUs by and large are prepared to take on from a capital perspective.
“It certainly could be a risk that we see later this year [and] in the next year,” he said. “But credit unions have had really record years the last couple of years when capital has built up to where if there are some unfortunate losses that they will take on by doing the right thing, they're prepared to do that.”
Questions that PSCU, a credit union service organization (CUSO), hears from its partners and CU CEOs, he noted, are mostly how do they make sure their members have a place to go, that their call centers can handle volume, and that they can stay open albeit in a drive-through capacity to serve member needs. It’s a situation, he noted, that is reminiscent of the gear-up for a natural disaster, which has required plenty of technical modification and upgrading to make sure workers can securely access systems from home, call center volume can be re-routed to branch locations or remote workers when there is overflow, or they have services through PSCU to handle overnight capacity.
On a longer-term level, he noted, the worry is how to manage the longer-term projects, the yearlong upgrades and the other big ideas that were on the agenda before the COVID-19 pandemic hijacked the calendar. So far, those efforts have remained on time, although that situation is obviously evolving.
And in the broader long term, he noted, CUs also are setting up a uniquely good position to continue their enhanced relationship with customers even after the present crisis has passed, by nature of their status as a consistent and reassuring presence in the present.
We know the next few weeks and even months will be difficult on consumers and small- to medium-sized businesses (SMBs), and thus the CUs that serve them. But the opportunity to build on the value proposition that is at the bedrock of CUs — trust, presence and a commitment to working with the consumer directly to optimize the relationship at a person level — are uniquely relevant right now.
“If they have created the level of innovation that syncs up with what the consumer is looking for, they're going to be doing the right things for their members in the communities they serve, and that is really a great opportunity to deliver the member experience that people are always talking about in a unique way that will last longer than the current crisis,” he said.