NCUA Board Member Rodney E. Hood’s Remarks at the Defense Credit Union Council 2023 Annual Conference

As Prepared for Delivery on August 10, 2023

Thank you so much. It’s my pleasure to be here. I’m always pleased to have the opportunity to connect with so many colleagues.

It’s a particular honor to be a part of this year’s convention as we’re observing the Defense Credit Union Council’s (DCUC) 60^th anniversary. What a milestone! I’d like to extend my congratulations to all of you on six decades of high-quality service and advocacy on behalf of our military personnel and our families. The men and women of the U.S. armed forces make big sacrifices for our country, and they need to know their financial service providers have their backs and are looking after them and their families. So, thank you for everything you do on their behalf — and here’s to another 60 years of service-oriented leadership.

Today, I’d like to offer today a look at some of the broader lessons I’ve taken from the events of the last few years and use those lessons to provide some perspective on the future of the credit union industry.

The Importance of Financial Inclusion

I’ll start by looking back at the beginning of my board tenure. Four years ago this month, in August 2019, I came before the DCUC in one of my earliest public appearances as NCUA Chairman. I had just been sworn into that role a few weeks before, so it was my first opportunity to address you all. Though we touched on a wide range of issues in that discussion, my primary focus was financial inclusion.

At the time, I’m not sure I realized how central that theme would be to the next four years of my life. I noted then that I saw financial inclusion as the defining civil rights of our time. In fact, that may have been one of the first times I used that line. And those of you who have listened to me speak over the last few years have probably heard me say it so many times that you’re exhausted from hearing it.

So, we might think of this as the conclusion of a conversation we started on financial inclusion four years ago. I have, throughout my career, been a strong advocate for ensuring that marginalized and under-served communities have access to quality, affordable financial services. And I always emphasize that if we truly care about financial inclusion, as we all do, then we must recognize the importance of smaller institutions in our financial ecosystem.

That’s certainly one of the principal commitments that have guided me in my four years of board service. And I’m immensely proud of all we’ve accomplished in that time: The various regulatory reforms we’ve advanced, the launch of the NCUA’s DEI Summit, now in its fourth year, and the ACCESS initiative for financial inclusion. Well, I’ll stop there and not get carried away. Because honestly, I’m less interested in looking back at the past today than I am in focusing on the future.

‘Change is Vital’

There’s a quote I like from Warren Bennis, a notable thinker in the areas of business administration and leadership studies, who said that “In life, change is inevitable, but in business, change is vital.” I’d like to take that idea, the vitality of change, as my theme today.

That is why when they asked me for a title for my remarks today, I suggested “the credit union system of the future.” That sounds like I’m offering some kind of prediction. Well, honestly, I’m not going to position myself as an oracle, but I do want to offer some key lessons, based on my own experience and observations after three-plus decades in the financial services industry and the regulatory arena, about things the industry should be focusing on so that it can continue to thrive in the years to come.

The first of those is that credit unions must be prepared to recognize and respond to the realities of a changing society. We’re experiencing a dramatic evolution in our nation’s demographics, and that’s going to present continued challenges to all of us in leadership positions, whether in the public or private sector and will demand new ways of thinking and doing business.

Now, I know what you’re thinking: Rodney, everybody already knows that. And yes, I know it’s a cliché that institutions of all kinds need to be prepared to confront these dramatic changes.

However, I do think that these challenges are particularly acute for smaller institutions in our society, credit unions among them. These changes can be more difficult to navigate for smaller financial institutions, for instance, which simply don’t have the resources or commanding market share that a lot of larger players bring to the game. I know from my own frank discussions with credit union industry leaders that there’s concern about attracting younger members, as well as recruiting younger workers to your institutions.

Addressing that abiding challenge will require creativity and a sense of experimentation and innovation. Certainly, a strong commitment to diversity, equity, and inclusion must be part of that process. Throughout my service on the NCUA Board, you all well know that I’ve been beating the drum to urge credit unions to make DEI a central part of your business models and practices.

Going beyond DEI, I have urged and continue to urge credit unions to focus on financial technology applications. I’ve been saying that “fintech is the future of financial services” for so long now that I’ve had to retire that line because that future is here, right now, today. And listen, all these fintech tools — as well as emerging technologies like generative AI, digital currencies, and machine learning — are not shiny corporate fads. They’re not going away, so the sooner credit unions learn how to integrate them into your business plans, the stronger position you’ll be in for the future. And again, I emphasize this is particularly true for smaller institutions, for whom fintech can truly serve as a force multiplier allowing you to reach new members.

As an aside, I should emphasize that this will also be a significant challenge for regulators. To be brutally frank, I’m concerned that technological change is an area where financial regulators have too often been caught flat-footed or unprepared. So, I recognized that when it comes to navigating these new technologies, we were all in this together, which is why when I was NCUA Chairman, I worked with my Board colleagues and launched the Office of Financial Technology and Access. I saw that as an essential step because I recognized that those of us who are making and enforcing the rules must have a better grasp of what these new technologies represent for the industry.

I would also urge credit unions to learn from each other and support each other. One of the key ways in which credit unions and other cooperative finance entities differ from many traditional financial services institutions is that they’re not necessarily in direct competition with one another. That means your institutions can afford to be more supportive of one another and more collaborative. I know that events like this one create an excellent opportunity for people to develop working relationships and share ideas, and I encourage you to continue doing so.

Conclusion

To be clear: I can’t promise you this is going to be easy. You will face many challenges. But I’m also incredibly optimistic because, in both of my terms on the NCUA Board, I have seen how remarkably supple and resilient the credit union industry when it comes to identifying and responding to new challenges.

Now, with all of this said, I should emphasize that, in some very important respects, I don’t envision the “credit union system of the future” being dramatically different from the credit union system of the present, or for that fact the credit union system of the past. What I mean by that is that I anticipate the credit union system will continue to hew closely to its historical mission of providing financial access to underserved and marginalized communities, offering the highest level of financial products and services to your members, and providing positive leadership in the communities you serve.

So, when I think about the “credit union of the future,” it’s not radically different in what it’s doing. But my great hope is that by embracing new technologies, new ways of doing business, and new ways of thinking about member service, you’ll be able to meet that traditional mission of service and financial inclusion with greater effectiveness and impact. That mission and that commitment is the thing that differentiates credit unions in an increasingly crowded and competitive marketplace. Most importantly, I urge you to preserve and strengthen those things that set the industry apart.

And with that, I’d like to thank you once again for hosting me today and for four wonderful years of friendship and support. God bless you all.