Regulators Urge Credit Unions Match Enthusiasm for FinTech with Equal Level of Risk Management2022-08-25
Attendees of July's 2022 World Credit Union Conference in Glasgow, Scotland got to hear from two of the world’s foremost authorities on national credit union regulations during a panel discussion on the opportunities and challenges presented by emerging technologies.
Rodney Hood, Board Director for the United States’ National Credit Union Administration (NCUA), and Brian Corr, Director of Credit Union Policy with Ireland’s Department of Finance (DFIN), agreed credit unions are well positioned to implement digital and technological solutions for their members.
“I think the great advantage credit unions have all over the world is they don’t have the legacy systems the retail banks have. So, they can take onboard tried and trusted technologies,” said Corr. “One thing I say to credit unions is: ‘Be ambitious. You don’t have to take as big a risk as the retail banks.'”
The pair also agreed credit unions still need to ensure to do their due diligence before working with any technology firm, but managing the risk involved is workable for them and their regulators.
“There have always been emerging technologies. We look at what our resources are and can we do the mitigation. It’s understanding how the tools are going to work. We walk through the litany of activities. At the end of day, I, as a regulator, am trying to provide the regulatory framework for folks who take on these tools,” said Hood. "It’s manage risk, not avoid risk. I am enthusiastic about technology as a regulator because if our institutions don’t adopt these platforms there may not be an industry for me to regulate."
Both regulators also noted credit unions can draw on lessons learned during the early days of COVID-19.
"When I think back to start of the pandemic, we sat down with credit union representatives and we were worried about operational resilience and serving the 3.5 million members across the island. Credit unions in Ireland adapted really well. They brought forth digitization plans in a careful manner," said Corr. "One thing you have to factor into this, as one report recently said, there are 'signs of a gathering storm.' Some of these fintechs may not be there. Klarna, Affirm, their (market caps) are off by 70-80%. But that is also an opportunity. Some of the firms at the edges will have less money to expand their services and credit unions are well capitalized and can take advantage of that gathering storm."
According to Hood, the opportunity for growth is there.
"We have 5,000 credit unions, and they are diverse, from $500,000 in assets to more than $100 billion. One thing they all have in common is technology to serve their members. Seven-million (U.S.) members joined during the pandemic because of the digital tools," said Hood.