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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, while also you can improve your finance by learning online trading, as there are resources like trade fx that help you with this. 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!

12/27/22 CUs Continue to Lure Certificates by Offering Higher Rates; FECU Caps Deposits at $5 Million (CU Today)

A range of captivating rates is being offered by CUs all around the nation as they look for inflow of funds. First Entertainment Credit Union is one of the CUs providing a 15-month Special Term Savings Certificate with a 5% APY, requiring a $5,000 minimum deposit to open the account. A 23-month share certificate paying 4.85% APY has been made available by Securityplus Federal Credit Union, with a $10,000 minimum deposit for a new account. Pacific Service CU has been providing an 18-month certificate with a 3.65% APY. A 32-month certificate with a 3.65% APY and a $1,000 minimum opening deposit is offered from Cascade FCU. Alliance CU is giving a one-year CD with a 3.25% APY and a one-year minimum.

12/27/22 NAFCU Reg Alert outlines NCUA proposal on loan participation, eligible obligation regs (NAFCU)  

Last week, NAFCU sent its members a Regulatory Alert describing the NCUA’s proposed rule changes to the rules governing eligible obligations and loan participation. NAFCU emphasizes codifying NCUA Legal Opinion 15-0813 in the Regulatory Alert to make it clear that a FICU engaging in indirect lending may, under certain conditions, be an “eligible entity.” The proposed rule would eliminate the NCUA’s eligible obligation regulation section 701.23’s CAMELS ratings and well-capitalized standards. The NCUA wants to formalize safety requirements for buying and selling acceptable debt and notes from credit unions that are closing. The 5 percent cap in section 701.23 would only apply to notes bought from dissolving credit unions under the proposed regulation. It would further redefine an eligible obligation to clarify the difference between eligible obligations and loan participation.

12/22/22 Is Your Credit Union Protected From Rising Rates? (CU Management)  

The recent rate increases by the Fed to combat inflation, the pandemic’s economic repercussions, and ongoing supply chain challenges are just a few of the hurdles credit unions must overcome when it comes to lending to member businesses. Credit unions must thoroughly understand where possible issues for their small business members may occur before they adversely affect portfolio performance to prevent financial instability and delinquencies. Credit unions can identify whether businesses are experiencing a decline in revenue, which could indicate future difficulties with loan repayment, by tracking changes in deposits at scale. Another leading indicator that can suggest financial distress experienced by a business member before a loan is 90 days past due is high line utilization. Rescoring company loans can also give a head start on risk detection and stop a loan from defaulting. Another thing to keep an eye out for is frequent overdrafts, which will enable credit union to step in before a member can’t make a loan payment. Credit unions should put up rules to automate reviews and notify teams when there are warning flags with a loan by leveraging the data that is already present in their system.

12/21/22 December M&A flurry propels credit union-bank deal tally to near record (Banking Dive)

Alabama One Credit Union, based in Tuscaloosa, announced that it would acquire First Bank of Wadley, making it the fourth bank that a credit union has expressed interest in the past two weeks. The agreement would be this year’s 15th of its type. The step would increase Alabama One’s geographic reach to 18 locations, bring the credit union into the eastern region of the state, and bring its asset total above $1 billion. In December, credit unions are announcing bank mergers at a breakneck rate. Over the first six months of 2022, the sector has witnessed nine such acquisitions. However, it is likely that trade associations like the Independent Community Bankers of America (ICBA), which contends that credit unions’ tax-exempt status enables them to offer a higher purchase price and lets them grow more freely than banks, will be unimpressed by the continued acquisition of banks by credit unions.

12/21/22 MBA Cuts Origination Forecast Again (Credit Union Times) 

As sales of new and existing houses continue to decline and interest rates stay high, the Mortgage Bankers Association has reduced its prediction for originations for the first half of 2023 by 8%. MBA also anticipates that overall originations in 2023 will drop 15% to $1.90 trillion, with purchases falling 8% to $1.45 trillion and refinances falling 33% to $449 billion. The MBA’s Weekly Mortgage Applications Survey also revealed a 1% seasonally adjusted increase from the prior week for the week ending December 16. Despite a little increase in refinance applications, they were still far below year-ago levels by around 85%. Moreover, it is not surprising that purchase applications did not increase significantly due to decreased mortgage rates since this is a historically quiet season for home buying.

12/20/22 Business credit cards are an untapped opportunity for credit unions (Co-op Solutions)

Small and medium-sized businesses (SMBs) can benefit from business credit cards by receiving much-needed finance for operations and growth, while credit unions can expand their revenue streams and expedite portfolio growth. Credit unions can take advantage of this expanding market potential by offering a business card program to their members while profiting from higher interchange income, larger average revolving balances, and an average ticket size that is 2.4 times that of a consumer transaction. Even business owners can gain greatly from using business cards, including the convenience of tracking business and personal expenses separately. Despite the fact that traditional financial institutions have long underserved the SMB market, the competition is beginning to heat up as a number of new offers and collaborations have lately been revealed, focusing on this extremely valuable area.

12/19/22 Credit Union Business Lending Trends: Times Are Shifting (Credit Union Times)

During 2021 and the first half of 2022, credit unions went through periods of economic growth that won’t be repeated for a while. The percentage of loans funded in the first half of 2022 was far higher than in the previous two years, and the growth rate was clearly unsustainable. In times of abundant liquidity, it is simple to be a participation partner, but in the current climate, credit unions should really strive to build on the cooperative spirit that the sector was established on. Since many loans have rates that reset every five years, there is always a large pool of potential customers who will require financing in the future. Delinquency has historically increased; hence a large portion of the total could be attributable to a specific asset class or credit union. While loan originations are still strong, it is now more important than ever to ensure a strong back office to handle the portfolio and any anticipated difficulties. 2023 is a fantastic time to make sure that portfolios are diversified across various industries, loan kinds, and geographic locations to effectively manage risk well into the future.

12/09/22 Sam Bankman-Fried Agrees to Testify Before House Committee (The New York Times)

Sam Bankman-Fried, the embattled co-founder and former CEO of FTX, said that he would testify before Congress over the abrupt collapse of the cryptocurrency exchange. His willingness to testify represents a U-turn from when he tweeted that he would only appear once he had finished learning and reviewing what caused the company’s swift demise. His evidence may involve a public confrontation with John J. Ray III, the current CEO of FTX and in charge of the bankruptcy process, who is also testifying. Bankman-Fried resigned last month following Binance’s withdrawal from a plan to purchase FTX, claiming issues found during due diligence.

12/01/22 BlackRock CEO Says ‘Next Generation for Markets’ Is Tokenization (Decrypt)

According to BlackRock CEO Larry Fink, tokenization of securities will usher in the next generation of markets and securities. Tokenization, according to Fink, will result in immediate settlement and lowered fees, and the growth of this kind of technology wouldn’t affect BlackRock’s business strategy despite these benefits. BlackRock is undoubtedly not the only company banking on tokenization as the direction of financial services. JPMorgan resorted to Polygon in November to trade tokenized cash deposits in a Singapore trial through Onyx Digital Assets. Recent investments of $70 million have also been made in Flowcarbon, a start-up that tokenizes carbon credits, from illustrious investors like a16z, General Catalyst, and Samsung Venture Investment.

12/01/22 The more you submit, the more we get paid’: How fintech fueled covid aid fraud (The Washington Post)

The House Select Committee on the Coronavirus Crisis, a congressional watchdog charged with monitoring roughly $5 trillion in federal pandemic aid, issued a report that accused a group of fintech companies, including Blueacorn, Womply, and Kabbage, of endangering federal efforts to revive the economy and siphoning off funds for potential private gain. The investigation discovered that they accumulated significant revenues from the processing and review fees from loans of all sizes and types, both legitimate and problematic, and frequently avoided the Small Business Administration’s monitoring, putting billions of dollars at risk. The SBA, an organization responsible for managing approximately $1 trillion in loans and grants at the height of the pandemic, has suffered severe losses. The agency routinely neglected to manage its funds while saving businesses, which allowed criminals to utilize fraudulent or stolen information to collect limited pandemic relief. 

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