With a new year comes new opportunities for your credit union to grow and improve for your members. Already, there are things for credit unions to look forward to in 2024, so here are several opportunities and trends for your credit union to keep an eye on throughout the year!
Higher Interest Rates and MMAs
While the Federal Reserve is expected to cut interest rates in 2024, it could be summertime before they do. Additionally, the Fed is still keeping a close eye on the market and forming its policies to guard against further inflation while avoiding a recession. It will take more clear evidence that inflation is going down to the level of the Fed’s 2% long-term target for them to start cutting interest rates this year. A presidential election year adds another variable to the interest rate forecasting considerations.
Until the interest rate outlook is clarified, now may be the time to take advantage of the higher interest rates with money market account deposits, which are performing well at current interest rate levels.
The Importance of Asset Liability Management
Currently, credit unions' liquidity is tight from the many loans on the books and consumers drawing down savings as they deal with inflation. Many people are pulling from their savings accounts to cover expenses and not replacing it yet, which can be challenging to balance with the strong loan growth credit unions were previously experiencing. These shifts make methodical Asset Liability Management (ALM) a must.
Additionally, CD issuance can help your credit union manage liquidity risk. Through the SimpliCD Issuance service, credit unions can quickly and easily issue CDs to nonmembers (usually other credit unions) to loosen up the liquidity crunch. LaCorp is proud to partner with SimpliCD to help your credit union issue or invest easily and do so with the added benefits of consolidated reporting and competitive rates.
FedNow and Real-Time Payments
ACHs are an easy way for members to move their money around quickly, and being able to do so digitally means that money can be transferred faster than ever before. Members will be able to send their rent money right up to the last possible minute – just when they need it. Of course, this speed can easily become a problem when money is sent to a fraudulent account, and it’s nearly impossible to get the money back once the funds are gone.
To help better protect against such fraud, the Federal Reserve launched FedNow in July 2023 to improve speed and security. Last year, 331 financial institutions sent and/or received funds on the platform, including more than 60 credit unions. Aside from the Federal Reserve, RTP from The Clearing House provides a similar platform. However, FedNow’s systems are less expensive to deploy and do not require a separate master account.
As faster payments become more available in the marketplace, members will increasingly ask for these services. Moving into 2024, having excellent and secure ACH services will help keep members’ money safe and prevent fraud liabilities down the road. Look for more to come from LaCorp on FedNow later in the year.
2024 will bring a lot of change for credit unions, hopefully loosening up the current liquidity crunch. In the meantime, your extra funds can do more for your credit union and members at LaCorp, where we still have the best money market account rates among any of the corporate credit unions’ advertised rates. See for yourself!