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MonJa’s Digital Banking and Lending Monthly Roundup – Why Subscribe?
Digital banking and lending are evolving rapidly. Recent fintech-banking partnerships and innovation in technology with the introduction of AI, ML and blockchain herald a new era in lending. Fintech’s are changing the competitive ecosystem, empowering lenders to process loans faster and smarter. In a world full of noise, understanding how the technologies and developments may impact your financial institution’s credit decisions and credit portfolio is of critical importance. With MonJa’s Digital Banking and Lending Monthly Roundup, it’s easy to stay up to date on what’s happening in the space. Get the latest updates, analysis and commentary on digital banking and lending segment!
In November, existing-home sales increased 1.9% to a seasonally adjusted annualized rate of 6.46 million units. This shows a 2% reduction in sales over the previous year. However, supply remains the critical hindrance. Inventory levels are down 13% year on year, accounting for only 2.1 months of supply based on current sales levels. This month, sales increased in three regions. The South experienced the greatest increase, up 2.9% on the month, followed by the West (+2.3%) and the Midwest (+0.7%). The combined effect of the Omicron variant and increased mortgage rates may drain some of the housing market’s momentum, but the effects will be minimal, and sales should continue to rise in the first half of 2022.
12/26/21 Nation’s Biggest Banks Again Close Branches due to COVID, Labor Shortages (CUtoday)
The nation’s largest banks are temporarily closing branches nationwide to deal with labor shortages and continued COVID-19 challenges, specifically the emergence of the new omicron strain. Bank of America informed its customers through its website that it is doing everything necessary to reopen as quickly as possible, but certain facilities may be closed for an extended period. According to Bank of America’s spokesperson, temporary closures have occurred in locations where it is experiencing fewer visits or insufficient staffing. Wells Fargo also reported that it has around 4,800 branches nationwide, with 94% of them open, implying that approximately 288 locations are temporarily inactive across the country.
12/22/21 Will ‘Chuck’ Give Smaller Banks an Edge in P2P Versus Venmo, Cash App and Zelle? (The Financial Brand)
Till now, Zelle has been widely viewed as the banking industry’s response to the original peer-to-peer challenge. But a new collaborative endeavor called “Chuck,” set to begin in 2022, holds the possibility of a fresh approach. However, it could be critical, as P2P technology has become a common practice not only for consumers paying each other but also for paying at the point of sale. The Chuck project has been marketed to smaller financial institutions as a lower-cost alternative to Zelle. While cost was one of the project’s initial catalysts, its goal broadened to incorporate additional aspects. Chuck’s goal is not to become “the anti-Zelle,” but to level the playing field for institutions and redefine consumer payments. While Venmo, PayPal, and Cash App provide opportunities to earn money, profitability is not a topic of discussion with Chuck’s associates at this time.
12/22/21 Why the credit union tax exemption is vital for the economy (CUInsight)
Although credit unions are not-for-profit cooperative entities whose tax-exempt status has been confirmed time and again by the IRS, Treasury Department, and Congress, bank lobbyists continue to advocate for the nullification of credit unions’ federal tax exemption. A recent study conducted by Dr Robert M. Feinberg of American University and Dr Douglas Meade of the Interindustry Economic Research Fund and commissioned by NAFCU found that eliminating credit unions’ tax-exempt status would lower economic activity by $120 billion over 10 years and cost the federal government roughly $56 billion in tax revenue. Not just that, a 50% decrease in credit union market share would cost bank customers between $6.8 billion and $9.9 billion per year in higher lending rates and lower deposit rates. And if these benefits are lost, minority and rural populations may suffer disproportionately.
12/21/21 BNPL’s ‘Venmo moment’ nears (LendIt Fintech News)
Ruby Walia, Mobiquity’s senior advisor for digital banking, feels the fintech industry is experiencing a Venmo moment in terms of buy now, pay later (BNPL), but a more complex one. Banks are concerned about disintermediation and the entry of a giant into the sector, such as Apple or Amazon. Zelle, which is integrated into many bank mobile apps, was their collective solution. The prospect of co-branded BNPL solutions with the banks issuing credit cards is being discussed. Walia anticipates that merchants and banks will collaborate on solutions, whether joint or standalone, during the next two years. Looking ahead to 2022, Walia envisions a lot of BNPL activity, starting with brands partnering with banks to launch their BNPL capacity, just like the sporting goods retailer Scheels did with FNBO. He also believes that there is still ample space for innovation in making everyday financial transactions more frictionless.
12/21/21 Banks are ‘missing the mark’ on overdraft revamps, Dave CEO says (Banking Dive)
While a rising number of financial institutions are rethinking or eliminating overdraft fees, most aren’t doing enough to address a critical need among their clients, according to Dave CEO Jason Wilk. He believes that getting rid of overdrafts fixes part of the problem, but it can also harm customers who rely on those funds to make ends meet, even if it’s pricey credit. Many policies that promote no fees for overdrafts require clients to have a direct deposit as well as be a member of the bank for a particular period of time, as per Wilk, who added that Dave has no such requirements. Dave announced in June that it intends to go public through a merger with a blank-check company sponsored by Victory Park Capital, a Chicago-based investment group.
12/21/21 Alabama’s Avadian Credit Union buys bank in year’s 13th such deal (Banking Dive)
As per a report by Birmingham Business Journal, Avadian Credit Union in Birmingham, Alabama, agreed to acquire Citizens State Bank, a two-location, $85 million-asset community bank in Vernon, 95 miles west. The acquisition price and assumption are not yet disclosed, but the deal is anticipated to close by the third quarter of 2022. The agreement marks the 13th deal of a bank being bought by a credit union in 2021, surpassing the seven such acquisitions in 2020 but falling short of the record of 16 in 2019. Citizens State Bank’s president and CEO, Anthony Burnett, termed the deal as an appealing fit for the bank, giving a comprehensive range of products and services to customers as well as enhanced geographic diversification.
12/17/21 NCUA: Credit Unions Can Engage Crypto-Currency Vendors (Credit Union Times)
Congress grappled with how to regulate cryptocurrencies again this week, as the NCUA informed credit unions that they could engage third-party providers of crypto-currency services if they follow certain procedures. The NCUA will review interactions with crypto-currency providers in the same way that it evaluates all other third-party relationships: by examining how well they exercise sound judgment, perform due diligence, assess risk, and plan. Federal credit unions may continue to function as mediators between their members and suppliers, including those offering crypto-currency services. Federally insured credit unions should thoroughly assess the risks associated with digital asset activities, including legal, reputational, and economical.
12/16/21 TransUnion Forecasts Slow Growth in Consumer Credit in 2022 (Credit Union Times)
TransUnion estimates that lenders will originate few more consumer loans in 2022 than 2021. The biggest gains are expected in personal loans. The growth is linked to a predicted increase in consumer expenditure. It will eventually be raised when credit card balances increase and customers seek debt consolidation through personal loans. Auto loans are predicted to rise slightly next year, while credit cards are expected to fall. Balances are expected to rise above pre-pandemic levels when there is a greater return to larger card-focused transactions such as international travel and/or entertainment spending. As more customers request credit and spend more, delinquencies are likely to rise to 1.74% by the end of the year while remaining below pre-pandemic levels.
The pandemic enabled fresh entrants and more agile smaller operators to focus on growth at a time when high street banks were naturally focused on protecting and serving their existing customer base. Fintechs and challengers have welcomed open finance more readily than their larger competitors because it helps them extend their lending reach, better manage risk, and lower their overheads. On the other hand, open finance enables lenders to offer more competitive, personalized rates to consumers as a result of a far better understanding of their finances and risk profile. The lending market is still 30% lower than it was before Covid, but open finance is seen as the way to unlocking it.
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