Velera CEO: Credit Unions Beef Up Financial Guidance as Members Face Economic Uncertainty

Among the most strategic initiatives for credit unions, to gain new members and keep current ones loyal, is to innovate.

During uncertain times, innovation can take several forms, with new products and services delivered digitally. Serving the member means meeting individuals where they want to be met — and right now they want a bit of guidance from their CUs.

Chuck Fagan, president and CEO of credit union service organization Velera, told Karen Webster that consumers’ mindsets have been “chaotic these past six months — sentiment is up and down. There are pockets where the consumer is feeling pretty strong about things, but there are also pockets where there are general concerns” on topics ranging from tariffs to inflation.

“What we’ve seen in terms of delinquencies ticking up, it’s still not at crisis level, and consumers are managing well,” he said.

However, if the message during the presidential campaign was that prices were going to come down — eggs are but the poster child here — well, that’s going to take time.

Consumers are recalibrating what they can spend, and where, and trying to figure out how to get things ready should the proverbial rainy day come.

“For credit unions, this is a prime-time opportunity to provide financial education — including budgeting tools,” Fagan said.

There is appeal in offering high yield checking and savings accounts (where in some instances, yields are north of 5%), and banking clients don’t have to tie up their money in CDs to get similar returns.

Uncertainty for Credit Unions Too

The uncertainty of the current environment extends to CUs themselves, where the Community Development Financial Institutions (CDFI) Fund was the target of a new executive order from President Donald Trump last month. Trump ordered the CDFI Fund be “eliminated to the maximum extent consistent with applicable law.” The Credit Card Competition Act may resurface in the current Congress, throwing the economics of interchange fees into a bit of doubt. The fate of the Consumer Financial Protection Bureau is a wild card.

“We’ve been caught up in a consolidation of regulators, and the CFPB, if it’s re-emerged, will certainly have a different focus,” Fagan said.

That focus might more fully be on fraud, which continued to grow at heady rates, with no slowdown in sight.

“If they really wanted to make a difference for the consumer by hunkering down on doing something to protect the consumer on the fraud side, I think it would be huge … you’ve seen lawsuits dropped and investigations dropped, and what they pick back up will be interesting,” he said.

The nominee to helm the bureau, Jonathan McKernan, seems to be both a listener and collaborator when it comes to regulatory priorities, “and that’s good for the consumer and for the financial institutions and everyone involved,” Fagan said.

The Innovation Roadmap

In discussing how CUs should approach innovation, Fagan said successful innovation requires more than just moving to embrace the shiny new penny, so to speak. Innovation might be simply doing things differently than they had been done before — but it also requires new digital capabilities.

Size and scale may not permit much in the way of innovation failures at CUs, but “to truly innovate, you have to have a failure mentality,” he said. “You’re not going to hit it out of the ballpark with every single initiative.”

Partnerships are key, especially with digital wallet buildouts, he said. Partnerships, particularly through Velera, can speed innovation cycles, meeting demands for streamlined (virtual) card provisioning and other offerings.

“Speed on the back end of innovation is one of those areas where smaller FIs must take advantage,” Fagan said. Otherwise, banking clients, particularly younger ones, will be quick to move to a CU’s competitor.

Things may be uncertain now, said Fagan, adding, “ultimately, we’ll all come out of this on the other side, and things will ‘strengthen up,’ but it’s going to take a little bit of time.”