3 Steps to Prepare Your Culture for AI Posted by AVCU on 3:04 PM

 According to Jared  Spataro from Microsoft, As business leaders, today we find ourselves in a place that’s all too familiar: the unfamiliar. Just as we steered our teams through the shift to remote and flexible work, we’re now on the verge of another seismic shift: AI. And like the shift to flexible work, priming an organization to embrace AI will hinge first and foremost on culture.

The pace and volume of work has increased exponentially, and we’re all struggling under the weight of it. Leaders and employees are eager for AI to lift the burden. That’s the key takeaway from our 2023 Work Trend Index, which surveyed 31,000 people across 31 countries and analyzed trillions of aggregated productivity signals in Microsoft 365, along with labor market trends on LinkedIn.

Nearly two-thirds of employees surveyed told us they don’t have enough time or energy to do their job. The cause of this drain is something we identified in the report as digital debt: the influx of data, emails, and chats has outpaced our ability to keep up. Employees today spend nearly 60% of their time communicating, leaving only 40% of their time for creating and innovating. In a world where creativity is the new productivity, digital debt isn’t just an inconvenience — it’s a liability.

AI promises to address that liability by allowing employees to focus on the most meaningful work. Increasing productivity, streamlining repetitive tasks, and increasing employee well-being are the top three things leaders want from AI, according to our research. Notably, amid fears that AI will replace jobs, reducing headcount was last on the list.

Becoming an AI-powered organization will require us to work in entirely new ways. As leaders, there are three steps we can take today to get our cultures ready for an AI-powered future:

Choose curiosity over fear

AI marks a new interaction model between humans and computers. Until now, the way we’ve interacted with computers has been similar to how we interact with a calculator: We ask a question or give directions, and the computer provides an answer. But with AI, the computer will be more like a copilot. We’ll need to develop a new kind of chemistry together, learning when and how to ask questions and about the importance of fact-checking responses.

Fear is a natural reaction to change, so it’s understandable for employees to feel some uncertainty about what AI will mean for their work. Our research found that while 49% of employees are concerned AI will replace their jobs, the promise of AI outweighs the threat: 70% of employees are more than willing to delegate to AI to lighten their workloads.

We’re rarely served by operating from a place of fear. By fostering a culture of curiosity, we can empower our people to understand how AI works, including its capabilities and its shortcomings. This understanding starts with firsthand experience. Encourage employees to put curiosity into action by experimenting (safely and securely) with new AI tools, such as AI-powered search, intelligent writing assistance, or smart calendaring, to name just a few. Since every role and function will have different ways to use and benefit from AI, challenge them to rethink how AI could improve or transform processes as they get familiar with the tools. From there, employees can begin to unlock new ways of working.

Embrace failure

AI will change nearly every job, and nearly every work pattern can benefit from some degree of AI augmentation or automation. As leaders, now is the time to encourage our teams to bring creativity to reimagining work, adopting a test-and-learn strategy to find ways AI can best help meet the needs of the business.

AI won’t get it right every time, but even when it’s wrong, it’s usefully wrong. It moves you at least one step forward from a blank slate, so you can jump right into the critical thinking work of reviewing, editing, or augmenting. It will take time to learn these new patterns of work and identify which processes need to change and how. But if we create a culture where experimentation and learning are viewed as a prerequisite to progress, we’ll get there much faster.

As leaders, we have a responsibility to create the right environment for failure so that our people are empowered to experiment to uncover how AI can fit into their workflows. In my experience, that includes celebrating wins as well as sharing lessons learned in order to help keep each other from wasting time learning the same lesson twice. Both formally and informally, carve out space for people to share knowledge — for example, by crowdsourcing a prompt guidebook within your department or making AI tips a standing agenda item in your monthly all-staff meetings. Operating with agility will be a foundational tenet of AI-powered organizations.

Become a learn-it-all

I often hear concerns that AI will be a crutch, offering shortcuts and workarounds that ultimately diminish innovation and engagement. In my mind, the potential for AI is so much bigger than that, and it will become a competitive advantage for those who use it thoughtfully. Those will become your most engaged and innovative employees.

The value you get from AI is only as good as what you put in. Simple questions will result in simple answers. But sophisticated, thought-provoking questions will result in more complex analysis and bigger ideas. The value will shift from employees who have all the right answers to employees who know how to ask the right questions. Organizations of the future will place a premium on analytical thinkers and problem-solvers who can effectively reason over AI-generated content.

At Microsoft, we believe a learn-it-all mentality will get us much farther than a know-it-all one. And while the learning curve of using AI can be daunting, it’s a muscle that has to be built over time — and that we should start strengthening today. When I talk to leaders about how to achieve this across their companies and teams, I tell them three things:

• Establish guardrails to help people experiment safely and responsibly. Which tools do you encourage employees to use, and what data is — and isn’t — appropriate to input. What guidelines do they need to follow around fact-checking, reviewing, and editing?
• Learning to work with AI will need to be a continuous process, not a one-time training. Infuse learning opportunities into your rhythm of business and keep employees up to date with the latest resources. For example, one team might block off Friday afternoons for learning, while another has monthly “office hours” for AI Q&A and troubleshooting. And think beyond traditional courses or resources. How can peer-to-peer knowledge sharing, such as lunch and learns or a digital hotline, play a role so people can learn from each other?
• Embrace the need for change management. Being intentional and programmatic will be crucial for successfully adopting AI. Identify goals and metrics for success, and select AI champions or pilot program leads to help bring the vision to life. Different functions and disciplines will have different needs and challenges when it comes to AI, but one shared need will be for structure and support as we all transition to a new way of working.

The platform shift to AI is well underway. And while it holds the promise of transforming work and giving organizations a competitive advantage, realizing those benefits isn’t possible without a culture that embraces curiosity, failure, and learning. As leaders, we’re uniquely positioned to foster this culture within our organizations today in order to set our teams up for success in the future. When paired with the capabilities of AI, this kind of culture will unlock a better future of work for everyone.

What’s in a name? A credit union’s LGBTQ program finds a wider audience Posted by AVCU on 11:21 AM

 Credit unions that tailor services for members of the LGBTQ community may find an unmet need among other demographics as well.

Michigan State University Federal Credit Union in East Lansing, Michigan, is nearing the finish line on development of a feature within its digital banking platforms and card offerings that will allow members to set a preferred name and set of pronouns. The program, which is expected to go live before the end of the third quarter, is like many others that allow credit card users, for example, to put their preferred name on the card.

While such services are developed with a transgender audience in mind, they also appeal to other marginalized groups such as international students or indigenous persons, said Amanda Denney, director of diversity, equity and inclusion for the $6.8 billion-asset MSU FCU, which serves students and staff of the university, as well as employees of the state.

“We have a lot of international students that come over and actually pick Americanized names, and they do this for a number of reasons, but that project is helping that group of people too,” Denney said. “When we hear preferred names and pronouns, people automatically jump to LGBTQ+, but there is such a huge impact [with this project] across the board with really anyone.”

The credit union first explored the concept internally in 2020 with the inclusion of pronouns in staff email signatures and editing of employment documents wherever legally allowed to record a new chosen name. It also incorporated educational material into its trainings on diversity, equity and inclusion to explain the significance of MSUFCU’s change.

Banks and credit unions that provide such products must also make sure their staff are properly instructed on using preferred names and pronouns in every customer interaction.

“Our goal is to allow everyone to be their full, authentic self and that’s really hard to do if you’re consistently being affronted with microaggressions by being misgendered [and] mislabeled,” Denney said. “Very specifically for the LGBTQ+ community, especially individuals that are nonbinary, or transgender, this can be a really important tool for them.”

Organizations such as Daylight, a New York-based digital banking provider for the LGBTQ community, and Mastercard have also launched preferred-name projects with the aim to better serve transgender and nonbinary consumers who endure negative encounters due to a difference between their legal and preferred names.

Some credit unions that already have similar initiatives in place are working to now offer more tailored services in lending for consumers seeking to undergo gender affirming procedures, as well as other LGTBQ funding needs.

Linda Bodie, chief executive and innovator at the $44 million-asset Element Federal Credit Union in Charleston, West Virginia, said she has worked alongside local pride organizations to better understand the needs of its LGBTQ members and determine which areas are most underserved.

“We have specialized lending for adoption, weddings, surgery [and really] anything particular to the LGBTQ+ community … We work closely with our local pride organization, Rainbow Pride of West Virginia, to identify our community needs,” Bodie said.

Element is planning to further its commitment to aiding local members through collaborative housing and employment partnerships with local realtors, pride organizations and other groups to address instances of discrimination during the search for a home.

In addition to her 24-year tenure as Element’s CEO, Bodie helped to organize and launch the LGBTQ credit union support association CU Pride in June 2020, which now has more than 1,200 members nationwide and is dedicated to progressing inclusivity within the industry and offering educational toolkits and opportunities for collaboration.

“With our tenets, which is to create educational opportunities for the credit union system … It gives them the opportunity to understand the community and really push towards our mission, which is to get the entire industry to embrace the LGBTQ+,” said Zach Christensen, co-founder of CU Pride and director of diversity, equity and inclusion and communications at Mitchell Stankovic. 

“Organizationally, credit unions are not queer or LGBTQ, but credit unions can be organizational allies,” through better education, he said. 

A Pew Research Center survey of 10,188 U.S. adults in May found that 5.1% of those under 30 reported they identify as transgender or nonbinary, with the share of adults knowing someone who is either transgender or nonbinary growing to 44% in 2022 from 37% in 2017.

Experts from trade organizations such as the National Association of Federally-Insured Credit Unions and the Credit Union National Association say that institutions need to closely analyze research and feedback from the data gathered or otherwise risk new programs becoming ineffectual.

“One of the things that we’re doing is becoming more intentional about this work and about listening to our communities,” said Samira Salem, vice president of diversity, equity and inclusion for CUNA, which is a supporting organization of CU Pride.

Better serving LGBTQ communities means developing products and services specific to their needs, Salem said. “It is in the DNA of credit unions to serve the underserved [and] the marginalized, and it is our value system.”

But beyond ensuring the success of the new services, credit unions aiming to stand as allies of those belonging to the LGBTQ community must also ensure that their efforts go beyond marketing campaigns and lead to change within the organizations as well.

“It’s not just about marketing and sort of this outward-facing messaging about what you are as an organization [and] what you stand for; you have to put your money where your mouth is, so to speak … and demonstrate that you have diversity, for example, on your board of directors and within your management,” said Ann Petros (formerly Kossachev), who works as the vice president of regulatory affairs for NAFCU.

How long can credit unions keep sacrificing fees? Posted by AVCU on 2:19 PM

 Some credit unions are trying to strike a balance between growing noninterest income and reducing some fees in order to help members who have been adversely impacted by COVID-19 and the economic downturn.

But can it be done?

"That's the million-dollar question," said Aaron Goff, president and CEO of Clackamas Community Federal Credit Union in Milwaukie, Ore., which recently cut several of its fees.

Many credit unions revamped their fee structures or eliminated fees entirely in the wake of the Great Recession, as credit union membership surged amid consumer backlash against the big banks. Now, with the nation in another economic downturn, some credit unions are taking similar steps once again.

 Last year, as the pandemic began to spread widely, the $517 million-asset Clackamas Community adjusted its fee structure to help struggling members, reducing fees from $27 to $12 each for overdrafts, NSF, returned items and stop-payment orders. Additionally, the $1.50 overdraft transfer fee that kicked in when the credit union had to move money from one account to another to cover a potential overdraft was eliminated entirely.

Those changes were intended to be temporary, and Goff said that with a solid revenue base, management believed the credit union could take the hit – at least in the short run.

The hit turned out to be nearly $800,000, as fee income for Clackamas Community fell from almost $2 million in 2019 to about $1.2 million last year. Still, the credit union earned more than $6.5 million in noninterest income last year, according to call report data from the National Credit Union Administration. That amount was nearly identical to the $6.4 million it earned in 2019.

Still, the credit union recently announced those reductions are here to say. Goff was hesitant to use the word "permanent," but said the new fee structure will remain in place indefinitely.

He said the bottom line is that Clackamas decided it will commit to helping people who need the help most. "The people who pay those fees are often times the people who can afford them the least," he said. "So are we willing to put our money where our mouth is?"

Fourth-quarter data from the NCUA, the most recent information available, showed an 11.3% year-over-year increase in noninterest income across the industry, compared with 7.3% growth in the year ending Dec. 31, 2019. Much of that, however, was driven by fees from mortgage refinancing and the Paycheck Protection Program. Fee income paid by members – such as overdrafts, NSFs, transfer fees and more – makes up only a portion of the NCUA’s noninterest income calculation, which also includes fees paid as part of loan applications, interchange income and more. Fee income makes up only a portion of overall noninterest income for the industry, which rose by more than 11% last year on the strength of PPP and mortgage refis.

The end is near

With PPP expiring soon and the mortgage refi boom expected to slow down sometime this year, credit unions are attempting to determine how they can cut fees but still maintain the same levels of profitability.

"Some of it is just projecting into the future and trying to read the tea leaves and get some comfort level with what we think is going to happen,” said Goff.

While PPP and mortgage refinancing helped many credit unions, many institutions didn’t participate in PPP and don’t offer home loans. As such, many credit unions aren’t incorporating that income into their strategies due to their one-time-only nature, said Vincent Hui, managing director at the consultancy Cornerstone Advisors.

He said credit unions instead are looking at alternative fee sources such as interchange, which is not paid by members, to replace account fees. Many use waivers instead of blanket fee reductions because it is easier to stop waivers at some point rather than increasing fees, he said.

"Also, not all fees generate the same amount of volume. Some fee reductions may not have a significant impact as they may not be incurred a lot by members," Hui said.

Geoff Bacino, an industry consultant and former member of the NCUA board, suggested it shouldn’t take a pandemic for credit unions to consider how fee income and member service intersect. He said many credit unions have taken a good first step by assuming that members are hurting. "In other words, don't make members apply for help or assistance, but rather be proactive," he said. PPP, he added, shouldn't be looked at as anything other than a "temporary Band-Aid."

Goff said Clackamas Community participated in both rounds of Paycheck Protection Program lending, which has taken some of the sting out of the loss of other fee income.

Pathways Financial Credit Union in Columbus, Ohio, saw noninterest income surge by 27% last year thanks to mortgages and PPP, though fee income was down by 11.5% to $2.3 million. That’s by design, explained President and CEO Michael Shafer, noting that reducing or eliminating certain member fees has been an ongoing effort for the $507 million-asset shop.

"This has been part of a multi-year process which we expect will result in savings to our members in excess of $500,000 per year," said Shafer, adding that NSF and overdraft fees are expected to be reduced sometime during the next 12 months.

Pathways’ push to lower fees is a corporate strategy that predates COVID, said Shafer. The credit union wants to earn less from service fees and more from other noninterest income sources such as debit and credit interchange, loan servicing and selling mortgages to the secondary market.

"We are actively looking to eliminate or reduce fees that we deem to be nuisance type fees, fees that are unpopular with members or fees that generate such a small amount of revenue that they are not material," he said.

PPP and mortgage refis have been "huge" for Pathways in 2020 and 2021. Shafer said the credit union did close to $60 million in PPP loans, which has generated a modest amount of loan interest revenue and significant lender fee income from the Small Business Administration.

Lessons from the Great Recession

So are some credit unions acting on lessons learned after the Great Recession?

Bacino said credit unions that cut fees during the crisis from 2007-10 provided a road map for those now looking to provide much-needed assistance to their members.

"The other part of this equation is the regulator," he said. "NCUA and state regulatory agencies must have long memories when the next exam cycle rolls around. Much of 2020 should be viewed as crisis times, and examiners must provide some leeway for credit unions that were worried about members first and underwriting second."

Hui said two main lessons were learned during the last recession that are applicable today. First, credit unions are focusing on ensuring any fees members pay provide value to the member, which is why there are fewer nuisance fees today. Also, many credit unions use waivers rather than across-the-board fee cuts to provide greater flexibility down the road.

Goff said financial institutions also learned that they needed to be more aggressive in helping consumers.

"We did some things, but we didn't do nearly this much accommodation back in those days," he said of the industry in general. "And perhaps we should have."

NEACH Seeks Nominations for Board Posted by Association of Vermont Credit Unions on 10:06 AM

The New England ACH Association (NEACH) is seeking qualified candidates to serve on its Board of Directors.  All candidates must hold an officer position at a NEACH-member financial institution. Board members are elected for two-year terms. The Board seeks gender, racial, and geographic
diversity and officers of member financial institutions committed to helping NEACH achieve its
mission of providing strategic and operational support to its members. Additionally, the Board
endeavors to expand the expertise and perspectives represented on the Board. Candidates
should have an understanding of NEACH’s mission and the work NEACH does to improve the
payments landscape.

Interested candidates are encouraged to review the Board Responsibilities and to complete the
nomination form and questionnaire. We also ask that interested candidates complete a short
skills assessment and demographic survey.  Nominations for positions on the NEACH Board of Directors will be accepted through July 31, 2020. Completed documentation can be sent to Nicole Beck-Dowd at nbeckdown@neach.org .

Members of NEACH's 17 member board include Steve Roy, President of Tricorp FCU, and the lone Vermont board member is Caroline Carpenter, President of National Bank of Middlebury.

ABA Launches New Anti-Credit Union Effort Posted by AVCU on 1:26 PM

As thousands of credit union advocates invaded the nation’s capital this week, the American Bankers Association on Monday announced it will step up its campaign against the largest credit unions.

The association said it has purchased ads on Politico’s “Morning Money” newsletter and on digital and social media platforms.

The move came as more than 5,000 credit union advocates arrived at CUNA’s Governmental Affairs Conference. Many of those advocates plan to meet with hometown members of Congress during their visit.

In describing the effort, ABA said, “The ads highlight several ways that large credit unions have far exceeded their statutory mission to serve individuals of modest means – from buying up taxpaying banks to purchasing naming rates to sports stadiums. They also call for a reexamination of the tax exemptions for these institutions.”

The association also said its explorecreditunions.com website will feature blog posts alleging that credit unions have outgrown their “special treatment.”

For a lengthy period, that website did not identify the ABA as its host. It was only after CU Times reported that the association was the website’s sponsor that the ABA acknowledged that.

The Independent Community Bankers of America has its own anti-credit union campaign called “Wake Up.”

Vehicle Sales Overcome Hurdles for January Rise Posted by AVCU on 8:42 AM

Total vehicle sales increased to a rate of 16.8 million annualized units in January – up 0.8 percent from last year.  Of note, strong light truck sales beat expectations and offset a decrease in car sales.

"Total unit sales have remained remarkably stable since 2015, but a shift from autos to light trucks over that time has resulted in a large increase in average prices," said NAFCU Chief Economist and Vice President of Research Curt Long in a new Macro Data Flash report.

"The National Automobile Dealers Association projects that this trend will continue in 2020, with light trucks accounting for 75 percent of all light vehicle sales by the end of the year. NAFCU expects vehicle sales to remain stable through 2020 at just below 17 million units," Long added.

Car sales decreased 6.2 percent to 4.2 million annualized units during the month. Meanwhile, sales of light trucks increased from 12.2 million annualized units to 12.6 million annualized units.

CUs & Trades Say NCUA's Appraisal Rule Would 'Level the Playing Field' Posted by AVCU on 9:34 AM

The NCUA’s proposal to increase the threshold for residential mortgages that require an appraisal from $250,000 to $400,000 would help level the playing field for credit unions since banking regulators already have adopted a similar plan, credit unions and their trade groups told the agency.

They added that the plan also would help simplify the home-buying process and provide additional regulatory relief for credit unions.

“The time and expense associated with residential appraisals is often significant for homebuyers; increasing the threshold to at least $400,000 will have a substantial benefit on credit union members seeking to obtain a mortgage,” said Brad Douglas, president/CEO of the Heartland Credit Union Association.

“At Gesa Credit Union, appraisals have cost anywhere between $600 and $1,000,” Scott Adkins, EVP of the Richland, Wash.-based credit union with almost $3.7 billion in assets, said.

He added, “In addition, appraisals have taken as much as four weeks to process, causing unnecessary delays in closing that have impacted the costs of providing credit.”

However, as might be expected, the appraisal industry is opposing the proposal, contending that decreasing the number of home purchases that would require an appraisal increases safety and soundness risks for the credit union industry.

Comments on the NCUA plan were due on Tuesday. The proposed rule would continue to require credit unions to obtain written estimates of market value for purchases that would be exempt from the appraisal requirement.

According to K. L. Stubbs, vice president of consumer lending at Meridian Trust CU in Cheyenne, Wyoming, the credit union has processed 494 real estate loan applications year to date. Of that number, 44 required an appraisal since they exceeded the $250,000 threshold. However, if the threshold were increased to $400,000, only six would have required an appraisal, said Stubbs whose institution has assets of more than $415 million.

In their rule comments, some credit unions and trade groups cited regional issues.

“Obtaining appraisals in rural states such as North and South Dakota has added cost and time for consumers to obtain homeownership,” officials from the Credit Union Association of the Dakotas told the agency. “This lack of appraisers causes a delay in providing financial services to consumers and has caused severe stress on many of our credit unions and their members.”

It has been a particular problem in western North Dakota, where there has been extraordinary growth in the energy production industry, they said.

But representatives of the appraisal industry said the NCUA should abandon the effort.

“Consumer protection is being left out of the equation,” Joseph Mier, president of the Louisiana Real Estate Appraisers Coalition, said. “Having a human appraiser remain as the independent party to the transactions of less than $250,000 or less keeps the checks and balances in place during the process of a homebuyer possibly making the largest investment of their lifetime.”

Consumers Do An About-Face on Chip Cards Posted by AVCU on 7:03 AM

It wasn’t that long ago as issuers moved to chip cards from mag stripes that consumers were complaining about the change. But now More than half (54%) of U.S. consumers say inserting a chip card is their preferred payment method, according to a report from Ingenico Group and FreedomPay.

This is significantly more than the 11% who prefer swiping a magnetic strip card, noted LowCards.com in its analysis.

Contactless payments are increasing in popularity, though they have not taken off just yet. Only 7% of respondents said they preferred to tap their contactless cards, and 4% chose digital wallets for their payment of choice.

The research found that 84% of businesses currently accept contactless payments, but 63% of consumers do not know they can tap-to-pay, LowCards.com said.

Credit Unions Should 'Increase Phishing Identification' in 2020 Posted by AVCU on 6:51 PM

With the cyberthreats of Iranian operatives still hanging over organizations, a number of incidents affecting financial service companies, some predating the latest Iran-U.S. crisis, but all raising eyebrows, made news recently.

ZDNet reported a security researcher with the Twitter handle @vrNicknack alerted Troy Hunt, the Have I Been Pwned? search engine operator with a notice received from P&N Bank, a division of Police & Nurses Limited and operating in Western Australia. The notice warned of an information breach “of certain personal information” occurring through its customer relationship management platform as a result of online criminal activity. The cyberattack occurred on or around December 12 when the bank performed a server upgrade. Speculation is a company P&N Bank hired to provide hosting provided the entry point.

Stephan Chenette, co-founder/chief technology officer at AttackIQ, said, “The financial industry is one of the largest targets for cybercriminals and unfortunately, breached data from those types of organizations can be damaging for years to come.” Chenette noted the number of accounts is unknown, P&N Bank is one of the largest banks in Western Australia. As a result, a complete set of personally identifiable information is available on the dark web, further exposing the account holders to future fraud or phishing attacks. “Organizations must take proactive approaches to protect their data. This should include mapping organizational capabilities and security controls to specific attack scenarios to measure their preparedness to detect, prevent and respond to these threats.” Additionally, organizations should do their due diligence in ensuring third-party partners are practicing adequate security measures and extend testing to partners as well.”

In another incident, Bleeping Computer reported a group tracked as Ancient Tortoise is targeting accounts receivable professionals, tricking them into sending over aging reports (collections of outstanding invoices) and consequently amassing data on customers they can scam in future attacks.

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New Research Projects 52% of ATMs Will Offer Automated Deposits by 2024 Posted by AVCU on 6:41 PM

More than half of the world’s ATMs will offer automated deposits by 2024, according to new projections from banking research and consulting firm RBR. The London, England-based firm also predicted that the United States will see tens of thousands more automated deposit terminals (ADTs) arrive in the next five years.

“In a busy world where time is of the essence, both business and retail customers no longer expect to have to queue for the teller to make everyday deposits,” RBR said. “Banks report that deposit ATMs are an efficient tool for keeping their customers satisfied, while also enabling them to migrate transactions from the teller and achieve cost savings.”

Automated deposit transactions have risen quickly in the last few years, according to the research.
“Excluding China, where a meteoric surge in mobile payments has stifled cash usage, automated deposits grew by 10% in the other core markets covered in the report, contrasting with a fall in cash withdrawals in many of the same markets. Customers increasingly appreciate the benefits offered by automated deposit such as reduced queuing, instant account crediting and out-of-hours availability,” it noted.

RBR said it expected the number of terminals in the markets in the study to hit 1.6 million by 2024, which is a 14% increase. Much of that growth will come from deposit ATMs, which will make up 52% of the ATM population by 2024, it said. In the United States, RBR estimated that 40,000 ADTs will spring up in the next five years.

ADTs do more than just accept deposits. RBR predicted that two-thirds of them will also be able to recycle cash by 2024.

“Although the technology has been available for decades, the number of deposit ATMs installed worldwide continues to demonstrate healthy growth,” RBR researcher Sam Blackwell said. “Banks are now expected to pivot further towards recycling as the ratio of withdrawals to deposits narrows and CIT costs grow, presenting increased opportunities for cost savings.”

New 2020 IRS Mileage Rates Now in Effect Posted by AVCU on 9:35 AM

The Internal Revenue Service issued the 2020 optional standard mileage rates on Tuesday of this week.  These are the rates taxpayers and tax professionals can use to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Starting on Jan. 1, 2020, the standard mileage rates for the use of a car (along with vans, pickups or panel trucks) will be:

• $.57.5 cents per mile driven for business use, down half a cent from the 2019 rate;
• $.17 cents per mile driven for medical or moving purposes, down three cents from the 2019 rate; and
• $.14 cents per mile driven on behalf of charitable organizations.

The business mileage rate declined half a cent for business travel driven and three cents for medical and certain moving expenses from the 2019 rates. The charitable rate is set by statute and stays unchanged.

Taxpayers CAN'T:

• claim a miscellaneous itemized deduction for un-reimbursed employee travel expenses
• claim a deduction for moving expenses, except members of the Armed Forces on active duty and moving under orders to a permanent change of station.
• use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System or after claiming a Section 179 deduction for that vehicle. 
• use the business standard mileage rate for more than five vehicles simultaneously

For employer-provided vehicles Notice 2020-05 describes the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2020 for which employers can use the fleet-average valuation rule or the vehicle cents-per-mile valuation rule.

‘Weak Spot’ Leads to Rash of New Attacks Against Gas Stations, Pumps Posted by AVCU on 10:04 AM

VISA says North American merchants that operate gas stations and gas pumps are facing a rash of attacks from cybercrime groups wanting to deploy point-of-sale malware on their networks. In two recent security alerts, VISA said its security team investigated at least five incidents of the sort, ZD Net reported.

The payments processor said cybercrime groups carried out attacks with the main purpose of gaining access to fuel dispenser merchants' networks, where they installed POS malware.
This POS malware works by continuously scraping a computer's RAM for what looks like unencrypted payment card data, which it collects, and then uploads to a remote server.

Weak Spot Identified
The VISA Payment Fraud Disruption (PFD) team says cybercrime groups appear to have found a weak spot in how gas stations and gas pump operators work. While the in-store POS terminals of some merchants might support chip transactions, most of the card readers installed on gas pumps do not.

These gas pump card readers still operate on older technology that can only read payment data from the card's magnetic stripe.

Data from these outdated card readers is sent unencrypted to the gas station's main network, where crooks have realized they can intercept it, ZD Net explained.

The attacks on fuel dispenser merchants began over the summer, VISA said. Two of the five attacks were linked to a known cybercrime operation known as FIN8.

How to Safeguard
VISA said the easiest ways for fuel dispenser merchants to safeguard customers is to either encrypt card data while it's being transferred across a network or stored in memory or shift to a chip card acceptance policy.

"Fuel dispenser merchants should take note of this activity and deploy devices that support chip wherever possible, as this will significantly lower the likelihood of these attacks," VISA said.
Fuel dispenser merchants have until October 2020 to deploy chip compatible card readers on their gas pumps.

“Starting October 2020, VISA said liability for any card fraud would shift from card issuers to the merchants, which will likely motivate many operators to update their gas pump card readers,” ZD Net said.

Checks Continue Decline; ACH & Card Payments Surge According to Fed Data Posted by AVCU on 9:58 AM

For the first time, the number of ACH debit transfers has exceeded the number of check payments, according to a new Federal Reserve study.

Data released earlier in December showed that there were 16.6 billion ACH debit transfers in 2018 but only 14.5 billion check payments. Back in 2000, the story was much different: the year’s 2.1 billion ACH debit transfers paled in comparison to its 42.6 billion check payments.

However, the number of check payments has declined rapidly, falling 7.2% per year from 2015 to 2018. That rate was in line with drops between 2003 and 2012, but it was more than twice the 2.8% annual drop recorded over the prior three years.

"The growth of payments using debit and credit cards and the automated clearinghouse (ACH) system continued to accelerate from 2015 to 2018, while check payments continued their long-run decline,” the Federal Reserve noted in a press release.

The 2019 study included consumer, business, nonprofit and government payments in 2018 from U.S. domestic deposit accounts, prepaid debit cards, and credit cards, as well as cash withdrawals and deposits at depository institutions. 

Noncash growth rate accelerating
The study also found that noncash payments including debit card, credit card, ACH and check payments rose 6.7% per year between 2015 and 2018. The growth in debit and credit card payments accelerated too, rising 8.9% per year between 2015 and 2018, compared to a 6.8% annual growth rate between 2012 and 2015. Debit cards were used almost twice as much as credit cards in 2018, according to the data. ACH credit and debit transfers also grew faster, rising by 6% a year between 2015 and 2018, compared to 4.9% per year between 2012 and 2015.

“These core noncash payment types have retained their ability to be used in traditional ways even while they increasingly function as the means of settlement for innovative types of alternative payment methods and services, such as smartphone and internet-based services,” the Federal Reserve noted. 

Remote payments rivaling in-person
The Federal Reserve’s data also chronicled the rise of remote payments, which likely reflected continued changes in consumer shopping and financial management habits.

“For general-purpose (network-branded) cards overall, the value of remote payments in 2018 nearly equaled in-person payments, driven in part by growing e-commerce card payments and the use of cards for recurring bill payments. More than half of in-person general-purpose card payments were chip authenticated in 2018, compared to 2.0% in 2015,” the Federal Reserve noted. 

Fewer ATM withdrawals but more cash coming out
ATM visits continued to decrease, according to the data. The Federal Reserve reported 5.1 billion withdrawals in 2018, which was a 0.1 billion decrease from 2015. 

“The rate of decline for ATM cash withdrawals slowed compared with the previous three years, falling 0.9% per year from 2015 to 2018. The decline in the number, combined with an increase in value, resulted in average ATM cash withdrawals of $156 in 2018, compared to $146 in 2015,” it said.

Holiday Anti-Fraud Tips for Credit Unions Posted by AVCU on 10:41 AM

As reported recently by Credit Union Times, Chicago-based OneSpan, provider of anti-fraud and digital identity solutions to financial institutions, offered some holiday protection tips and six predictions they suggest will shape the 2020 financial services industry.

“Fraudsters don’t take time off for the holidays and in fact, may capitalize on seasonal spikes in transaction volume to more easily evade detection. As consumers increasingly use their mobile phones as their primary device for holiday shopping, banking and other transactions, cybercriminals are also turning their attention to the mobile channel,” Will LaSala, director of security solutions at OneSpan, said.

LaSala pointed out, “Mobile malware nearly doubled in 2018 and mobile account takeovers increased 79%. It’s estimated fraud losses to banks and credit unions have topped $31 billion due to customer account takeover, new account application fraud and other types of fraud occurring in digital channels.” He recommended employing mobile app security as the key to fighting fraud not only this holiday season, but all year long.

The cybersecurity director provided some measures credit unions can implement immediately to safeguard member data, meet compliance with industry regulations and avoid becoming another data breach headline:

• As transaction volumes increase fraudsters will use this spike to try and scam transactions and call centers. Let members know your brand will never ask them for their credentials via email, text or chat.
• Remind staff that security standards do not need to slip. Even though transaction volumes will be higher, pay attention to those out of the ordinary requests and do not cut any corners. Stick to the processes and procedures defined throughout the entire year.
• Mobile banking apps should protect themselves in untrusted device environments. defend any type of mobile app against sophisticated malware, they should use application shielding technology as protection.

Click here to read the full article.

As Subprime Dents Auto Loan Quality, CUs Should Look at Risk Exposure Posted by AVCU on 10:05 AM

Subprime lenders are generating rising automobile delinquencies, but credit unions might suffer collateral damage warned internationally acclaimed economist and public speaker Elliot Eisenberg in a recent webinar sponsored by Association business partner CU Direct. The economist added that altough the chances of a recession are low, lenders nonetheless should prepare for one, including looking at their exposure to areas with rising risk, especially auto lending.

The value of automobile loans delinquent at least 90 days peaked at just over 5% in 2010 in the wake of the Great Recession, and fell to a low near 3% by 2015. Since then, the rate of serious delinquency has slowly crept back up nearly 5% again, according to the New York Fed.

“The amount of delinquent loans in autos is approaching the all-time high,” Eisenberg said. “The whole situation is going to continue to deteriorate depending on how fast auto loans continue to go bad,” adding “if the economy gets meaningfully worse, those default rates are going to go up considerably.”

During the Great Recession, the total value of serious delinquencies was dominated by home lending as the housing bubble burst and foreclosures soared. Those amounts have subsided to pre-recession levels, leaving the biggest amounts of serious delinquencies with student loans followed by credit cards and auto loans.

Most student debt is held by the federal government, but its level is holding back young people from borrowing for homes and cars. The rate of credit cards in serious delinquency is also rising, but the increase is slower and the rate is still below the pre-recession rates of the early and mid-2000s. Total delinquency rates remain low for car loans at credit unions.

NCUA data shows auto loan balances that were at least 60 days delinquent Sept. 30 were $2.2 billion, or 0.58% of total auto loans, up 2 basis points from a year earlier. The delinquency rate was flat at 0.39% for new cars, and down 4 bps to 0.71% for used cars. Over the past three years, car loan delinquency rates have ranged from 0.53% to 0.72% based on rolling 12-month averages.

Among all lenders, Experian estimates that 0.75% of auto loan balances were 60 days or more delinquent as of Sept. 30, up from 0.73% a year earlier. The increase was up almost entirely among finance companies, which tend to cater to subprime borrowers.

• Credit unions’ 60-day delinquency rate stood at 0.23% Sept. 30, down from 0.24% a year earlier.
• Banks’ 60-day delinquency rate was 0.66% Sept. 30, up from 0.65% a year earlier.
• Finance companies, however, had an 1.85% delinquency rate Sept. 30, up from 1.76% a year earlier.

Finance companies accounted for 8.5% of all car loans originated in the third quarter, down from 10.5% a year earlier, according to Experian. Nonprime, subprime and deep subprime accounted fo 38.3% of all loans and leases originated in the third quarter, according to Experian.
Eisenberg said reasons for rising auto loan defaults include:

• Rising payments. Not only are prices rising, but borrowers are also taking on bigger loans to get bigger vehicles. “We drive SUVs; we drive crossovers. You don’t see many four-door sedans anymore.”
• Lengthening terms. Experian shows that 32.2% of new car and 19% of used car loans carried terms over 72 months.
• Sinking equity. Drivers trading an old car with negative equity to buy a new car has risen from 25% in 2013 to 33% this year, according to Edmunds.

“That’s a lot of cars being bought on time with upside-down buyers,” he said, adding that even lenders without subprime loans could be hurt because the used market can be flooded with repossessed vehicles sold at discounts that lower residual values.

Free Dec. 17 webinar examines Business Email Compromise scam Posted by AVCU on 10:19 AM

CUNA and the Financial Services Information Sharing and Analysis Center (FS-ISAC) will conduct a free webinar for CUNA members Dec. 17 designed to provide information on how credit unions can protect themselves from Business Email Compromise (BEC) scams. The webinar is scheduled for 3 to 4 p.m. (ET).

BEC scams target both individuals and businesses that perform wire transfers or other types of electronic fund transfers. Scammers use information available electronically to develop a profile on a company and staff, and eventually target specific individuals with what appears to be a legitimate business transaction.

However, the wire transfer is sent to an account controlled by the scammers, who then take the funds and disappear.

The FBI has been tracking these scams since they emerged in 2001, and have found organizations targeted in every U.S. state and more than 100 countries. Since January 2015, there has been a 1,300 percent increase in identified exposed losses, now totaling over $3 billion.”

Registration is currently open for the live version of the webinar. Those who register to watch live automatically receive access to the recorded version, others can register separately for just the recorded version, which will be available after the conclusion of the live event.

Krebs on Security: Sale of 4 Million Stolen Cards Tied to Breaches at 4 Restaurant Chains Posted by AVCU on 2:14 PM

Cybersecurity expert and journalist Brian Krebs reported last week on his blog that on November 23rd, one of the cybercrime underground’s largest bazaars for buying and selling stolen payment card data announced the immediate availability of some four million freshly-hacked debit and credit cards. Krebs said he learned that this latest batch of cards was siphoned from four different compromised restaurant chains that are most prevalent across the midwest and eastern US.

Two financial industry sources who track payment card fraud and asked to remain anonymous for this story said the four million cards were taken in breaches recently disclosed by restaurant chains Krystal (pictured orange), Moe’s (pictured gray), McAlister’s Deli (pictured green) and Schlotzsky’s (pictured blue). Krystal announced a card breach last month while the others are all part of the same Focus Brands parent company which disclosed breaches in August 2019.

KrebsOnSecurity heard the same conclusion from Gemini Advisory, a New York-based fraud intelligence company.

“Gemini found that the four breached restaurants, ranked from most to least affected, were Krystal, Moe’s, McAlister’s and Schlotzsky’s,” Gemini wrote in an analysis it shared with Krebs on Security. “Of the 1,750+ locations belonging to these restaurants, nearly 50% were breached and had customer payment card data exposed.”

Click the link to read the full article on the Krebs on Security blog.

Suncoast CU to Buy $746M Miami-based Bank Posted by AVCU on 1:12 PM

Tampa Florida-based $10.4B Suncoast Credit Union, the 10th largest in the country, has announced plans to purchase Apollo Bank, a $746M financial institution headquartered in Miami. If plans go through, this would be the largest credit union purchase of a bank to date and will continue to shine the spotlight on such transactions. Multiple industry analysts have forecast that more deals of this magnitude and larger are expected to continue well into 2020.

Apollo Bank, which opened its doors in 2010, has approximately 100 employees and five branches in Miami’s Brickell Financial District, Doral, Coral Gables, Kendall and Hialeah markets. The bank has been profitable, making $8.9 million in 2018 and $5.4 million through September of this year.

“We are pleased and enthusiastic to bring the value of Suncoast Credit Union to this important community,” said Suncoast CEO Kevin Johnson. “Our excellent rates, low fees and community service will have a positive impact in South Florida. We look forward to the Apollo team joining our organization and continuing to serve their commercial customer base. Bringing the benefits of membership offered by Florida’s largest credit union to the diverse cultural population in Miami is a privilege that we take great pride in sharing.”

Apollo Bank CEO and Chairman Eddy Arriola, who will serve as Suncoast’s new South Florida market president added, “Apollo Bank has thrived by meeting the needs of South Florida businesses, delivering exceptional service, investing in our communities, and nurturing talent. Nearly a decade after launching, we realized that partnering with a larger institution would put our team in position to offer even more products and services to clients while allowing our bank to scale. After considering a range of options, it became clear that Suncoast Credit Union was the right partner. Suncoast is a Florida market leader that shares Apollo Bank’s deep-rooted commitment to client service and community involvement.”

The transaction is expected to close in 2020, subject to shareholder and regulatory approvals.

CUNA Hosting Webinar to Discuss RDC compliance Posted by AVCU on 9:48 AM

CUNA will host a webinar on Wednesday, Nov. 20 to discuss patent enforcement of certain remote deposit capture (RDC) technology, particularly in the wake of the $200 million verdict awarded to USAA from Wells Fargo earlier this month. The webinar is free for CUNA members, and begins at 1 p.m. (ET).

CUNA Senior Director for Advocacy for Payments and Cybersecurity Lance Noggle and CUNA’s patent litigation attorneys Mike Rounds and Adam Yowell, of Brownstein Hyatt Farber Schreck will discuss the background of the issue, the court decision against Wells Fargo and what ramifications that decision could have for credit unions.

USAA filed suit in June 2018 against Wells Fargo alleging that the bank infringed on certain USAA patents for remote check capture (RDC), specifically patents related to mobile check capture.

Credit unions around the country have received letters from USAA asking them to negotiate licensing deals for using RDC technology that USAA claims it developed.

A recorded version of the event will be available the following day to those who registered, and interested parties can also register for the recorded version separately.

UK Financial Institutions are Increasing Use of Machine Learning Posted by AVCU on 9:39 AM

Machine learning (ML) is being used with increasing frequency by financial institutions in the U.K., according to a joint report from the Bank of England (BoE) and Financial Conduct Authority (FCA).

The report summarizes the results of a survey conducted by the Bank of England and Financial Conduct Authority involving 106 respondents from a group of almost 300 banks, credit brokers, e-money institutions, financial market infrastructure firms, investment managers, insurers, non-bank lenders and principal trading firms. It reflects the BoE and FCA’s intention to better understand the interaction between an increasingly data-driven economy and dramatic changes to the structure and nature of the financial system supporting it.

In particular, the report emphasizes the need to strike a balance between supporting development of innovative and transformative technology while also addressing the risks posed by such developments to consumers and the U.K. financial system as a whole, according to Ropes & Gray.

Key findings of the report include:

• Firms in the financial services sector are using machine learning (ML) with increasing frequency. Two-thirds of respondents reported using ML in some form, with most firms expecting usage to increase significantly in the coming years. 
• The insurance and banking sectors use ML most extensively. Overall, ML is deployed most often in relation to anti-money laundering and fraud detection, as well as in customer-facing applications such as customer services and marketing, according to the report. 
• Firms consider improvements in AML, fraud detection and overall efficiency as the biggest benefits of using ML. They identified risks, including a lack of explainability, inadequate controls or governance, data quality issues and poor model performance. To mitigate those risks, firms implement alert systems and so-called “human-in-the-loop” mechanisms to flag when the ML model is not working as intended. 
• The report found firms do not consider regulation to be an unjustified barrier to ML deployment, but some believe there should be additional guidance to clarify existing regulations. Respondents noted that, because ML is a relatively new technology, it may not always be obvious how the existing regulatory framework applies to it. 
• Firms do not believe that ML necessarily creates new risks, but it could amplify existing ones. Respondents recognized that governance and controls processes will need to keep pace with technological development to appropriately manage those risks, the report states. 
• Although most firms reported using their existing risk management frameworks to address risks posed by ML, they noted that these frameworks might have to evolve as ML becomes increasingly mature and sophisticated.