Industry Trends for Regional Banks/Credit Unions in the United States for 2021

According to the Credit Union Trends Report and Economic Report for December 2020, industry experts believe that credit union loans and deposits will reach 6.0% and 8%, respectively, in 2021. Additional insights into the state of the regional banking industry and the credit unions industry for 2021 and beyond in the United States have been provided below.

US Regional Banking Industry in 2021

State of the US Regional Banks Industry

  • According to research published on IbisWorld, the market size of regional banks in the United States is expected to grow by 2.5% to reach $213.2 billion in 2021. The industry has grown faster than the economy overall.
  • Some of the main factors that are negatively impacting regional banks in the United States are high competition and the prime rate.
  • According to Fitch Ratings, the US banking sector’s outlook remains positive, but 60% of US banks have a negative outlook.
Top Banking Priorities Through 2021


Regional Banks Response to the Pandemic

    • During the first months of the COVID-19 pandemic, the banking industry in the US responded as follows:

How Customer Expectations/Needs Are Evolving

    • According to banking experts in the United States, the customer is still at the front and center of the industry, and banks should be able to anticipate and respond to the changing needs and desires of the banking customer.
    • Experts believe that banks will have greater success if they focus on the individual customer journey in all its different forms and use data and technology to connect with customers on an emotional level.
    • According to Deloitte Digital, money is an emotional subject for customers, and banks need to marry their existing customer data with customer emotions to meet the ever-evolving customer expectations.
    • As of August 2020, banking customers in the US realized just how much banking they could do online and mobile, and they were more digital-savvy than they were when the pandemic started.
    • The most significant effect the pandemic has had on customer experience is the shift to digital channels/digital banking.
    • In 2021, banks need to brace themselves to face the following changes in customers needs and expectations:

Major Shifts in the Industry


US Credit Unions Industry in 2021

What’s going on in the industry this year

Credit Unions Response to the Pandemic

  • As the effects of the pandemic started being felt within the credit union industry, different credit unions responded differently to the pandemic. The most common response from credit unions in the United States was deferring massive credit to their employees. Below are some of the ways credit unions in the US responded to the pandemic:
    • Coastal Federal Credit Union “implemented Skip-A-Pay for consumer loans and credit cards, modified mortgages, ramped up emergency relief loans, slashed late fees and NSF fees, tweaked mobile deposit limits and …identified nonprofits in the community that were making immediate impact, and provided them with nearly $700,000 in grants.”
    • BECU Credit Union “launched new products, like a 0% APR personal loan for up to $1,000, and increasing member liquidity by waiving early CD withdrawal fees. To support the long-term health of our communities, we created and promoted new financial education content, and pledged support to COVID-19 response funds in nine communities in Washington and in South Carolina. We also implemented a 2:1 employee donation gift match for the month of May.”
    • Genisys CU “deferred payments at no cost on millions of dollars in loans so our members could instead put food on their families’ table….helped hundreds of small businesses survive by processing their Payroll Protections loans when their banks wouldn’t even call them back…donated their entire pandemic inventory of masks and gloves to our local healthcare providers.”

How Customer Expectations/Needs Are Evolving

  • Just like regional banks, credit union members’ expectations for 2021 are changing, with digital use surging and members’ expectations regarding trust, loyalty, personalization, and privacy changing rapidly.
  • Credit union members and banking customers are increasingly demanding a more personalized banking experience where credit unions reach them with individualized messaging to ask questions, educate them, and engage them.
  • The CreditUnion Insight has the following takeaways from 2020 to help credit unions in 2021:
  • Create a comprehensive, omnichannel strategy: In the United States, Credit union members want sales and service experiences that are simple, quick, customized, and pleasant to use, and they want consistency across all engagement channels. According to a survey, over 45% of survey respondents said the pandemic had permanently changed the way they bank, while 31% were looking to increase their usage of online and mobile banking in the future.
  • Use data to deliver personalized communication to credit union members.

Major Shifts in the Industry

1. Changing Dynamics at the NCUA

  • According to The American Banker, credit unions in the United States should expect several uncertainties, including a transition period at the National Credit Unions Administration (NCUA).
  • The association board recently received a new member, and President-Elect Joe Biden is expected to promote Todd Harper to the chairmanship, implying a shift in dynamics for the regulator of credit unions in the United States.
  • When Harper, a Democrat, assumes offices, he will be “politically outgunned” since the current chairman, Rodney Hood, and his vice-chairman, Kyle Hauptman, are Republicans.
  • Harper will find it hard to advance his policies, especially on the agency’s role in consumer protection, since it’s not widely expected that the two Republicans down the hall will second his policies.
  • In addition, experts believe that the transition of leadership in the White House and Congress may bring about new relief to be used in offsetting a likely increase in delinquencies.

2. Field of Membership Changes Will Continue in Earnest

3. Acquisitions

  • According to industry experts, it is difficult to tell if the number of CU-Bank deals will return to its 2019 levels in 2021.
  • However, it looks promising since the number of acquisitions dipped as the pandemic became widespread, but they rebounded as 2020 came to a close.
  • Experts believe that CU-bank deals in 2021 will be spread across the country and will not be limited to a few states, as was the case in 2019.

4. Cybersecurity Will be Huge Issue

  • In 2021, many credit union employees will be working remotely from their homes. According to experts, this significantly increases the chances of phishing attacks targeted on employees by hackers.
  • In the heels of cybersecurity breaches at the close of 2020, credit unions will likely shift their efforts from responding to the pandemic to improving the security of their banking systems.
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