Three credit union market perspectives – Q3 2022

Consumer Credit Market Overview

Credit unions and banks across the country are doing their best to interpret conflicting data points of consumer credit health. Across financial services, Q2 saw lenders significantly grow balances in products like Personal Loans (31.3% YOY growth) and Credit Cards (16% YOY Growth). Credit unions saw sharp growth in HELOC (19% YOY) while the market as a whole had 2.2% of HELOC balances runoff in Q2. All lender types experienced mortgage originations slow, due in part to the rising interest rate environment. As credit unions look for growth outside of mortgage, they are keeping an eye on rising delinquency levels over the past 12 months. Below are 3 trends impacting credit unions so far in 2022:

• Lenders still lag behind with identity and fraud capabilities and less than 30% are very confident in their existing defenses

As credit union digital usage has been on the rise, so has identity fraud threats. Many credit unions find themselves utilizing legacy fraud tools to combat modern fraud and identity issues. Simultaneously, the member experience suffers with inefficient processes and a one-size-fits-all identity strategy that proves too cumbersome on good actors hoping to execute simple transactions online. Top lenders are working to streamline both the application and identity processes, leveraging best practices available within the systems they use today.

• The South saw the highest YOY rise in 60+ DPD in non-revolving lending products

While aggregate delinquency remains below pre-pandemic levels, lenders of all sizes are experiencing YOY delinquency growth on non-revolving types (auto, mortgage, personal loans). Lenders in the South are experiencing the highest YOY changes in delinquency, with Louisiana leading the way at +74 bps 60+ DPD growth. Northern states from coast to coast are seeing less performance slippage YOY, which suggest that the impact from the current economic pressures will vary by both geography and consumer base.

• Consumers in lower income tiers are already experiencing financial stress, as demonstrated by deteriorating performance

Loans to borrowers in the lowest income tiers saw delinquencies rise over the past three years, with near prime consumers fairing the worst. While as a whole delinquency remains below pre-pandemic levels, consumers below the 60K income band are seeing the highest levels of deterioration. No matter what region and consumers base they serve, many lenders are ramping up account management frequency to better monitor their members financial health, and using lead indicators like aggregate excess payment to determine capacity to pay.

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