Chairman Discusses Demographics, Interest-Rate Risk and Cybersecurity
ALEXANDRIA, Va. (Oct. 7, 2015) – Credit unions face many challenges ahead, and board members need to query their managers to make sure they are ready to face those challenges, National Credit Union Administration Board Chairman Debbie Matz said Tuesday.
Speaking to the National Directors Roundtable Conference in Las Vegas, Matz said America’s demographics are changing and younger people are becoming a larger force in the economy, so credit unions need to attract these new consumers in order to stay in business.
“If the trend of aging credit union membership continues,” Matz said, “many credit unions may have no future. A credit union cannot survive without lending, but the average age of credit union members is over 47. This is critical, because the peak borrowing years are between ages 25 and 44, which means the average member is already past those peak years.
“Young demographics are huge potential markets,” Matz said. “Thirty-three percent of the U.S. population is under age 20, yet young demographics are underserved by credit unions. Members between ages 18 and 24 account for just nine percent of credit union membership.”
Offering the latest technology and promoting credit unions through new media are essential to reaching younger audiences, Matz said, and she posed four questions credit union board members should ask management about attracting younger members:
- How can the credit union reach more members in their prime borrowing years?
- How will young people learn that the credit union can help secure their futures?
- How can the credit union use the technology needed to attract younger members?
- What new media can the credit union use to reach young people?
“Older members tend to value the personal touch and stability in their institutions, two qualities that are strengths of credit unions,” Matz said. “Younger people place more value on convenience, which they often find in other institutions. They expect a full range of services on their laptops, tablets and smartphones. They expect immediate service. If you don’t offer what they expect, they’ll take their business elsewhere.”
Matz also posed important questions about the challenge of interest-rate risk and the continuing need for cybersecurity.
On interest-rate risk, Matz said NCUA continues to urge credit unions to prepare for inevitable rate hikes, and she encouraged visiting the agency’s interest-rate risk resources page. Credit union board members, she said, should be asking key questions like:
- How is management measuring the credit union’s interest-rate risk exposure?
- What have they learned from shock testing?
- Should they consider changing the credit union’s balance sheet, product pricing or investment strategy to avoid excessive risk?
- How should interest-rate risk policy be updated?
- What internal controls ensure the credit union will follow the board’s interest-rate risk policy?
Discussing cybersecurity, Matz said board members need to be familiar with the threats posed by hackers, thieves and terrorists who are targeting credit unions as possible entry points to the larger online networks. NCUA maintains a cybersecurity resources page to help board members educate themselves, and Matz suggested questions for management on the subject:
- What are the potential vulnerabilities of hackers using the credit union as an entry point?
- Has staff evaluated every vendor and payment system for cybersecurity?
- How should you consider changing cybersecurity protocols?
- How will you prepare for an examination with the Federal Financial Institutions Examination Council cybersecurity assessment tool in 2016?
Matz closed by encouraging credit union board members to be active in the dialogue with the agency and among themselves.
“We all share common goals of ensuring the safety and soundness of credit unions and protecting 101 million federally insured members,” Matz said. “So let’s work together to achieve our goals. I would really like to hear from you.”
The full text of Chairman Matz’s speech and accompanying slide presentation are available on the agency’s website here.
NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the United States, NCUA operates and manages the National Credit Union Share
Insurance Fund, insuring the deposits of account holders in all federal credit unions and the overwhelming majority of
state-chartered credit unions. At MyCreditUnion.gov, NCUA also educates the public on consumer protection and financial literacy issues.