Canada is still in the midst of a post-pandemic bounce back, and economists across the country are predicting that 2023 will be a challenging year for many Canadians as inflation remains high. With talk of a potential ‘mild recession’ still on the table, experts are warning that we have not reached the peak of our fiscal issues.
It’s admittedly a bleak outlook as we head into 2023, especially as the Bank of Canada remains steadfast in its goal to return inflation to 2 percent. This is likely going to mean further interest rate hikes this year, putting further financial strain on average Canadians.
Credit unions are all too familiar with the financial pressures being faced by their members, as the increased cost of living is making it difficult for members to make ends meet. Costs of doing business are rising as well, and everyone seems to be feeling the crunch on their wallet.
Member service has become more important than ever as retail and business members are faced with economic uncertainty. Despite these challenges, credit unions showed up in a major way in 2022, and will continue to support members and their communities in 2023.
Credit union leaders can look to the broader business operating environment to help them set their priorities for 2023 and beyond. There are important developments emerging in 2023 to stay aware of that will affect not only members, but credit unions as institutions. Despite the economic difficulties we face, progress must continue to keep credit unions competitive and able to better serve their members.
Buy Now, Pay Later – a Slippery Slope?
2022 saw a surge in buy now, pay later (BNPL) offerings to help consumers lessen the financial squeeze for not only large purchases but everyday goods and services. Even the Big Canadian Banks like BMO are beginning to roll out BNPL offerings for credit card holders where purchases over a certain dollar amount can be broken out into smaller payments.
BNPL is helpful for small-dollar financing options that are (usually) interest-free, but there is growing concern that with the economic challenges Canadians are facing, consumers may become too reliant on BNPL. The over-use of BNPL could lead to widespread issues with debt-service ratios and financing that is not reported on credit bureau checks, and could possibly put people who rely on BNPL close to insolvency.
BNPL is an important technology trend for credit unions to keep in mind for 2023, as the use of BNPL is likely to grow even more in the coming year, and could pose challenges for some members.
Open Banking is set to Begin Phase one Rollout in 2023
Open banking has long been anticipated in Canada, and the phase one rollout is finally set to kick off in 2023. While participation in open banking is optional for credit unions, both the Canadian Credit Union Association (CCUA) and the Large Credit Union Coalition (LCUC) are urging credit unions of all sizes to keep a finger on the pulse of open banking in Canada and consider how they might participate in this new technology.
The CCUA is helping credit unions facilitate this process by creating a draft document that allows credit unions to consider the regional regulatory requirements that may impact them if they choose to participate in open banking. Understanding these requirements is an important first step to participation in the larger national open banking system. Celero can help you navigate the open banking landscape. Reach out to an Account Executive to learn more.
Chatbots are Dominating the Digital Landscape
In November of 2022, the ChatGPT chatbot by OpenAI made waves by showcasing how good advanced artificial intelligence (AI) can really be. Chatbots as a technology have been around for a while, but ChatGPT has reignited the attention of business leaders who are thinking about how they can implement chatbot technology as part of their digital offerings.
Even non-AI-powered chatbots can be very effective at customer service delivery when designed well, and can help lessen the burden for online and call center customer service teams by answering member questions or triaging customers to the correct party for assistance. Companies like Unblu are already delivering conversational chatbot technology for mobile apps and online banking that is created especially for financial institutions, putting this powerful technology within reach for credit unions.
Cyber Security is Still top of Mind
The Canadian Anti-Fraud Centre (CAFC) noted in its most recent annual report on fraud in Canada that digital fraud is the most concerning trend for consumers and businesses alike. CAFC found that investment fraud was the biggest area for concern, as investment fraud involving cryptocurrency has skyrocketed in recent years, up 238% in 2021 alone. This is important for credit unions to take note of and reinforce to members in 2023 who are active investors.
Cyber-attacks in general are also on the rise, as hackers have preyed upon the vulnerabilities posed by more employees working from home and from more people transacting online. These attacks have demonstrated the importance of keeping hardware up to date with robust encryptions, security software and standards. 2023 will be a year where there is increased emphasis on disaster recovery and business continuity planning.
In-branch Experiences will Continue to Evolve
The in-branch experience remains important to many members, but credit unions are shifting the branch’s role and how this touchpoint is used. With the increased number of members relying on digital banking, many credit unions are now using appointment-only models.
Every credit union serves a unique member base, so credit unions must take their members’ preferences and needs into account when creating a branch strategy. This is where relying on a trusted technology or consulting partner can come in handy. Ultimately, digital and branch banking must complement one another to be effective.
Credit unions have demonstrated their dedication to members over the past 12 months. This year, the institutions that adapt to the changing credit union landscape by implementing new technology, evolving their operations, and creating strong business continuity plans, will be the ones best positioned for success. Members will always remember and find comfort in knowing that their credit union is there for them through times of prosperity and hardship alike.
