Article – Economic Update

With the first quarter in the rearview mirror and the summer months quickly approaching, many members are uncertain about the direction of the economy, and most consumer confidence measures remain below pre-pandemic norms.

Based on recent conversations with our clients, the following concerns are among the most top-of-mind issues for credit union members these days.

 

Cost of Living

Higher prices for everyday essentials like food, rent, utilities and gas continue to stretch member finances. This can be particularly concerning for members living paycheck to paycheck or on a fixed income. While wages have increased for some, they have often failed to keep pace with everyday costs.

What this means for you: Members will be more likely to rely on short-term credit, extensions or their savings (if available) to cover everyday expenses. Ensure your QCash program is set up to meet your credit union’s goals and members’ needs. Your QCash Client Relationship Advisor can review your credit union’s Underwriting Settings Playbook with you to ensure you are maximizing opportunities for members to take advantage of your small-dollar loan solutions while balancing your level of acceptable risk.

 

Job Security

Confidence in the job market continues to decline as members become more concerned about how difficult it would be to find new employment if they lost their current job. This fear exists even with members that are actively employed with a steady income. Added to these concerns is the fear of being replaced by artificial intelligence.

What this means for you: As your members worry about their ability to manage payments in the future, it is important to make sure they know about  potential hardship or payment protection options. Educating your frontline employees on product offerings and how to have these tough conversations is a vital component of your member support strategy.

 

Potential Inflation

Even as consumer inflation has improved somewhat, member unease about future inflation, especially regarding food costs, continues. This outlook can influence member behavior even when prices haven’t actually increased.

What this means for you: Concerns regarding potential rising prices reinforce members’ need for easy to understand, fixed payment loan options that safeguard against future increases. Make your members aware of your small-dollar loan program with content on your website and digital banking app. Ask your Client Relationship Advisor about the resources available in the new QCash Marketing Portal. Members cannot utilize a program they don’t know you offer!

 

Borrowing Costs

Looking back over recent years, borrowing continues to be expensive for consumers as interest rates remain above pre-pandemic norms. Debt levels have also increased in recent years, which adds to the impact of increased rates. Many of our members are concerned about obtaining long‑term credit due to the uncertainty around potential future rate changes. Variable‑rate debt can also be an issue for members living paycheck to paycheck.

What this means for you: Right now, members are more likely to need assistance with managing unexpected expenses and less likely to finance large purchases. Depending on risk tolerance, there may be an opportunity to refinance higher interest rate loans from other financial institutions to a lower rate with your credit union. Times of financial strain can also negatively impact credit score. QCash provides you with the opportunity to support your members with those struggles to get back on track.

 

Housing

Housing prices remain at record highs, which stretches the budgets of members that rent as well as those that own. Depending on the area of the country, many first‑time home buyers have been priced out of the market. The increased cost to rent is also outpacing income increases for many.

What this means for you: Housing‑related expenses often cause the need for emergency borrowing. Many members are also staying in their home rather than moving, which may generate the need for a home improvement loan. Make your members aware of your small-dollar loan program and consider a home improvement loan campaign during the warmer months.

 

How QCash Can Help

You provide your community with a safe place to turn during this time of financial uncertainty. QCash can help you meet your members’ financial needs by continuing to enhance your small-dollar loan program.

Many of the credit unions that we partner with have expanded their small-dollar loan programs to offer Specialty Loans that proactively provide funds for calendar-based needs and events. Numerous credit unions are working with us now to set up vacation loans to prevent members from turning to higher interest rate options this summer.

Some of our clients have pre-approved their members for a vacation loan this summer and plan to reach out to let them know they are pre-approved for a specific amount. This prevents members from wondering if they will be approved and may provide the confidence needed to turn to their credit union this summer.

During these unique economic times, a sound small-dollar loan program is not optional. It is necessary.