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A Window of Opportunity for Credit Unions

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A Window of Opportunity for Credit Unions

By Henry Pooley, Chief Commercial Officer, Fraedom

Over recent years, the core offering of commercial cards has undergone significant transformations.

As a result of new product offerings and changing business expectations, commercial card use has risen dramatically.

The renewed growth in these products presents community credit unions with an opportunity which has been overlooked by their larger counterparts.

In fact, many of the larger national banking corporations had considered commercial cards to be a thing of the past with many either failing to update their offering or selling their commercial card portfolios to third parties. However, commercial cards are now among the fastest-growing products for banks and commercial card spending continues to increase. By 2020, we estimate that spending levels will have increased by 71% from 2013 and the compound annual growth rate will reach 8%. This growth has resulted in issuing banks racing to improve their capabilities and gain a share in a growing but highly competitive market.

According to our recent survey of regional and super regional banks, all reported major expansion in their commercial card portfolios, often growing at double-digit rates every year. Of the banks surveyed, none reported a decline in its commercial cards portfolio by any metric. As a result of this growth, commercial cards are now moving up the agenda as an investment opportunity for many institutions of all sizes. This investment will in turn fuel an expansion in capabilities and increase broader competition within the market. Organizations that do not invest in their commercial card capabilities are likely to see themselves quickly fall behind.

While the commercial cards market has historically been dominated by large national and international issuers, credit unions are in many ways better placed to take advantage of this latest wave of growth. For instance, credit unions are in a much better position to offer a more flexible customer-centric proposition and better service to small business players than national issuers. Unlike national banks, these organizations can dedicate more resources to small customers while also providing greater flexibility in commercial card program design and administration. Credit unions are in a better position to get to know what their customers need in terms of both finance and support and offer more of a bespoke solution than their larger counterparts. This support also tends to involve more personal interaction when dealing with credit unions, which allows customers to get to the root of any issues or concerns more directly than if dealing with larger organizations which often have vast call centers. These smaller issuers are also often better placed to help customers that may lack internal expertise on setting up commercial card programs and integrating them into enterprise back-end systems.

For customers, choosing to take up a commercial card with a credit union makes financial sense as only around 10% of all credit union cards charge an annual fee, compared with 45% of banks. Commercial cards from credit unions also on average have lower interest rates and late payment fees. However, there is a lack of awareness of what credit unions can offer. Credit unions should reach out to businesses in the local area and educate them on the products available to them. This will help deepen their relationship with their business members while also growing their credit card business.

Community credit unions should look to harness the potential of this valuable market by expanding their existing card portfolios, developing new product and service lines, and deepening their relationships with their corporate and business customers. Additionally, by placing an emphasis on flexibility and delivering on customer needs, these smaller organizations will strengthen their competitive offering in a highly competitive market. As a result, they have the potential to gain market share and increase their balances in a market that has long been dominated by a handful of Tier-1 issuers.

Ultimately, credit unions should take this opportunity to move into a space that has been overlooked by their traditional counterparts. This will not only help them secure a larger share of a valuable market, but it could also be beneficial to the customers in their community, offering them more focused, bespoke commercial card services often at better rates than their larger counterparts.

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Japan’s jobless rate seen up in January due to COVID-19 emergency measures – Reuters poll

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Japan's jobless rate seen up in January due to COVID-19 emergency measures - Reuters poll 1

TOKYO (Reuters) – Japan’s jobless rate is expected to have edged up in January as service industry businesses suffered renewed restrictions on movement to fight spread of the coronavirus in some areas, including Tokyo, a Reuters poll of economists showed on Friday.

While industrial production activity picked up in Japan, emergency curbs rolled out last month such as asking restaurants to close early and suspending the national travel campaign hurt the jobs market, analysts said.

The nation’s unemployment rate likely rose 3.0% in January, up from 2.9% in December, the poll of 15 economists found.

The jobs-to-applicants ratio, a gauge of the availability of jobs, was seen at 1.06 in January, unchanged from December, but stayed near September’s seven-year low of 1.03, the poll showed.

“As the impact from the coronavirus pandemic prolongs, it is hard for firms, especially the service sector, to expect their business profits to improve,” said Yusuke Shimoda, senior economist at Japan Research Institute.

“So, their willingness to hire employees appear to be subdued and it is difficult to see the jobs market recovering soon.”

Some analysts also said the government’s steps to support employment and existing labour shortages will likely prevent the jobless rate from worsening sharply.

The government will announce the labour market data at 8:30 a.m. Japan time on Tuesday (2330 GMT Monday).

Analysts expect the economy to contract in the current quarter due to the emergency measures to counter the spread of the disease.

(Reporting by Kaori Kaneko; Editing by Simon Cameron-Moore)

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China’s economy could grow 8-9% this year from low base in 2020 – central bank adviser

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China's economy could grow 8-9% this year from low base in 2020 - central bank adviser 2

BEIJING (Reuters) – China’s gross domestic product (GDP) could expand 8-9% in 2021 as it continues to rebound from the COVID-19 pandemic, Liu Shijin, a policy adviser to the People’s Bank of China, said on Friday.

This speed of recovery would not mean China has returned to a “high-growth” period, said Liu, as it would be from a low base in 2020, when China’s economy grew 2.3%.

Analysts from HSBC this week forecast that China would grow 8.5% this year, leading the global economic recovery from the pandemic.

If 2020 and 2021’s average GDP growth is around 5%, this would be a “not bad” outcome, said Liu, speaking at an online conference.

China is set to release a government work report on March 5 which typically includes a GDP growth target for the year.

Last year’s report did not include one due to uncertainties caused by the coronavirus. Reuters previously reported that 2021’s report will also not set a target.

(Reporting by Gabriel Crossley and Muyu Xu; Editing by Sam Holmes and Ana Nicolaci da Costa)

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Japan’s January factory output rises for first time in three months, retail sales drop

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Japan's January factory output rises for first time in three months, retail sales drop 3

By Daniel Leussink

TOKYO (Reuters) – Japan’s industrial output rose for the first time in three months in January thanks to a pickup in global demand, in a welcome sign for an economy still looking to shake off the drag of the coronavirus pandemic.

But retail sales, a key gauge of consumer spending, posted their second straight month of declines in January as emergency measures taken in response to the pandemic hit consumption.

Official data released on Friday showed factory output advanced 4.2% in January, boosted by sharp rises in production of electronic parts and general-purpose machinery, as well as a smaller increase in car output.

“Manufacturers will continue to increase output over the near term as long as there won’t be any big shock,” said Taro Saito, executive research fellow at NLI Research Institute.

While economic growth will likely be negative in the first quarter, the strength in manufacturing would offset the negative impact of a state of emergency at home, which is mainly affecting the services sector, he said.

The rise in output, which followed a 1.0% fall the previous month, was largely in line with a 4.0% gain forecast in a Reuters poll of economists. Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expect output to grow 2.1% in February, followed by a 6.1% decline in March.

The government kept its assessment of industrial production unchanged, saying it was picking up.

Factory output fell in November and December as a rebound in car production ended on sagging global demand, but since then strong demand for tech-making equipment and electronic goods has helped turn the tide.

Still, some analysts worry that Japan’s economic recovery will remain hobbled by weaker conditions at home and as lockdown measures taken around the world to contain the COVID-19 crisis, particularly in Europe, weigh.

The government also released data on Friday showing retail sales fell 2.4% in January compared with the same month a year earlier, in a sign households tightened their purse strings as the coronavirus staged a resurgence.

The fall, which was in line with a 2.6% drop seen by economists in a Reuters poll, was largely due to sharp contractions in general merchandise and fabrics apparel spending. It followed a 0.2% fall in December.

Compared to a month earlier, retail sales in January fell 0.5% on a seasonally adjusted basis for the third straight month of declines. But the pace of decline was slower than in the previous two months.

“We think consumer spending will only fall around 1% quarter-on-quarter this quarter,” said Tom Learmouth, Japan economist at Capital Economics.

“We expect it to rise fairly strongly over the coming quarters as the recovery resumes and is soon given a shot in the arm by vaccines,” he added.

(Reporting by Daniel Leussink; Editing by Sam Holmes and Richard Pullin)

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