MEMPHIS, Tenn.–(BUSINESS THREAD)–SRM (Strategic Resource Management), an independent advisory firm serving financial institutions and other industries in North America and Europe, today shared information about the top trends it has seen affecting banks and credit unions so far this year and predictions on how they may affect the industry in the future.
Banks and credit unions will need to pay attention to developments in digital assets, Buy Now, Pay Later (BNPL) and regulatory oversight, while dealing with the fallout from inflation and aggressive interest rate hikes. interest
“The first half of 2022 has been a very busy one for the financial services industry with some significant changes and developments in emerging areas,” said Brad Downs, CEO of SRM. “There is no reason to expect the pace of change to slow in the second half of the year. These issues will remain important to the success of all financial institutions today and into the future.”
cryptocurrency
Cryptocurrency has been the starting point for the entire financial services industry this year. A number of financial institutions, especially credit unions, have launched cryptocurrency buy/sell/hold capabilities in recent months in partnership with fintech companies that provide supporting custody services as required by current regulatory positions .
After briefly reaching a high of $68,000 in November 2021, the price of one Bitcoin fell below $20,000 in the middle of the year before staging a nominal recovery. On a broader level, cryptocurrencies as a whole lost two-thirds of their value, falling from nearly $3 trillion to less than $1 trillion.
Rapidly evolving developments in this space have reinforced the need for customer education – a role that banks and credit unions are positioned to fill, given their existing relationships of trust. Additionally, several surveys indicate that a broad base of consumers would prefer to handle crypto activities through their trusted financial institution. The debacles with uninsured entities TerraUSA, Celsius and Voyager illustrate how sensible regulation could stabilize and further grow the market.
Buy now, pay later
The Buy Now, Pay Later (BNPL) space has found a similar trajectory to crypto. Some of the sharpest declines in valuation have occurred among BNPL-focused fintech companies in the US and abroad. At the same time, use cases are expanding. With recent inflation, standard household purchases are increasingly looking like logical candidates for BNPL as consumers continue to spend despite inflation concerns.
The BNPL model has attracted the interest of a significant consumer demographic, who sometimes perceive it as an alternative to credit card debt. SRM continues to see a role for financial institutions in the BNPL space, an idea explored in this recent white paper. Although regulation will increase, financial institutions are equipped to meet this challenge. It is important to choose partners wisely, monitor risk, book appropriately and determine the right product positioning among an institution’s broader set of offerings.
Regulatory changes and evolution
Federal agencies have been handling requests for comments and information on several issues, including the Presidential Executive Order seeking clarity on digital assets and calling for reports from multiple agencies by December.
The Federal Reserve’s request for comments on central bank digital currencies (CBDCs) has generated an unprecedented volume of public submissions. Statements by new Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra have outlined his priorities, including revisions to the CARD Act, the Fair Credit Reporting Act and NSF/overdraft charges , among other things.
The prospect of further regulation seems more a matter of when than if. The industry expects significant regulatory activity in late 2022, regardless of November’s midterm elections.
About SRM
SRM (Strategic Resource Management) has helped more than 1,000 financial institutions add more than $5 billion in value to their bottom line in areas such as payments, digital transformation, core processing, artificial intelligence, digital assets and efficiency general operation SRM has reduced costs, created revenue opportunities, increased productivity and provided a competitive advantage to clients in an environment of constant and accelerating change. visit www.srmcorp.com for more information and follow us LinkedIn i Twitter for timely and relevant information.
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