Philadelphia households and businesses face resilience test over next 18 months: A financial expert's insight

1. Consumers increasingly expect the convenience of digital banking but still want a personal relationship with their financial institution. Are those expectations becoming difficult to reconcile?

I think there's an interesting contradiction developing in banking. Consumers consistently tell us they value relationships, personalized service, and having somebody they trust for financial advice. Yet increasingly, they're conducting their financial lives through apps, online platforms, and financial technology companies, often with very little human interaction. They're increasingly making decisions based primarily on rates, which can sometimes overlook factors such as service, advice, convenience, and long-term financial support.

Technology has made banking faster and more convenient, which is a good thing. But I worry that we're also creating a level of disintermediation that ultimately weakens the relationship between consumers and their financial institutions. The result is that consumers may have more financial products than ever, but fewer people who really understand their overall financial picture.

At Trumark Credit Union, we don't believe digital convenience and relationship banking should be mutually exclusive. Technology should simplify routine banking while giving our employees more opportunities to provide meaningful advice, identify needs, and help members make better financial decisions.

I think AI presents an interesting opportunity here. Used thoughtfully, it can help financial institutions better understand members' needs, identify opportunities, and make employees more effective.

2. Rising costs continue to put pressure on businesses and households. How are these challenges affecting Greater Philadelphia, and how should businesses and consumers respond?

The challenge is that rising costs are cumulative. Inflation, higher borrowing costs, housing, insurance, utilities, and healthcare are all putting pressure on household and business budgets. And this comes after decades in which the costs of many essential goods and services have outpaced wage growth. Consumers and small businesses are being pressed from nearly every direction.

Even if inflation and interest rates moderate, that doesn't mean prices return to where they were. Many of these increases are structural, we need to recognize that we're operating in a fundamentally different cost environment.

Here in Greater Philadelphia, we have a remarkably diverse economy, with everything from small family-owned businesses to major healthcare, education, manufacturing, and professional services organizations. But regardless of the industry, higher operating costs and pressure on consumers ultimately affect profitability, investment decisions, and the ability to grow.

For businesses, the response needs to be more strategic than simply raising prices or cutting expenses. It's an opportunity to revisit operating efficiencies, working capital management, pricing strategies, and how capital is being deployed. I also think AI and emerging technologies will create opportunities for meaningful productivity gains, particularly for smaller businesses that have historically lacked access to sophisticated tools. Understanding what actually creates value and cash flow will be crucial. These are areas where our Business Banking team can help members think through both immediate challenges and longer-term objectives.

For consumers, I think the emphasis needs to be on understanding where their money is going, distinguishing between essential and discretionary expenses, and preserving financial flexibility wherever possible. Small, recurring obligations can have a surprisingly large cumulative impact on household finances. It's also important to look beyond the interest rate when evaluating financial products and understand the total cost, terms, and long-term implications of borrowing. This is where a trusted financial partner can add real value, helping consumers see their complete financial picture rather than making decisions one transaction at a time.

3. With interest rates remaining elevated and continued uncertainty about where they go next, how should businesses and consumers approach borrowing over the next 12 to 18 months?

One of the risks borrowers face is building their financial strategy around where they believe interest rates will go next. I was recently speaking with a group of business leaders, and several mentioned they were closely tracking prediction markets and forecasts to guide borrowing decisions. While it's reasonable to stay informed about the interest rate environment, borrowing decisions are often better guided by sound fundamentals than by expectations about future rate movements.

Rates matter, certainly, but the more important questions are whether the underlying borrowing decision makes sense at today's cost of capital, whether it remains sustainable if conditions change, and whether you have a banking partner you trust.

Businesses need to stress-test their operating models and cash flows, be thoughtful about leverage, maintain adequate liquidity, and match financing structures to the useful life of the assets being financed. It may also mean reconsidering variable-rate exposure or taking a more measured approach to expansion.

For consumers, the same principles apply: understand affordability, preserve financial flexibility, and avoid taking on obligations that only work under ideal circumstances.

Looking ahead over the next 12 to 18 months, I think financial flexibility and disciplined borrowing will be particularly important. There will still be opportunities for businesses to invest, expand, and grow, but those decisions need to be supported by sound fundamentals, not expectations about future interest rates.

At Trumark, our approach is to lend through economic cycles, not simply react to them. We want to help members identify opportunities while also ensuring their financing remains sustainable if economic conditions change.

4. Consumers have demonstrated considerable resilience despite mounting financial pressures. How much longer can that continue, and what concerns you most for the Greater Philadelphia economy over the next 12 to 18 months?

That's one of the more important questions facing the financial industry right now.

The American consumer has demonstrated remarkable resilience, but I don't think we should assume that resilience is unlimited. Higher costs for housing, transportation, insurance, and everyday necessities are absorbing a greater share of household income, particularly for consumers without substantial savings or financial flexibility.

And I think we need to recognize that consumers aren't one homogeneous group. We hear a lot about a K-shaped economy, but I think the reality is more nuanced. There's a financially secure segment that's largely insulated from these pressures, a financially vulnerable segment that's increasingly stretched, and a substantial middle that continues to demonstrate resilience, although that resilience is being tested.

Over the next 12 to 18 months, I'll be watching what happens to that middle group in particular. When consumers begin reducing discretionary spending, drawing down savings, or relying more heavily on revolving credit, those decisions eventually affect local businesses, borrowing behavior, and potentially credit performance.

For Greater Philadelphia, I think the interconnectedness of our local economy makes this particularly important. When households pull back, the effects are felt by the restaurants, retailers, contractors, service providers, and other small businesses that make up so much of our regional economy. Consumer financial health and small business financial health are closely connected.

I'm not necessarily predicting a significant deterioration in consumer credit, but I do think we need to recognize that financial stress can accumulate gradually before it becomes visible in conventional economic measures.

This is where financial institutions should be proactive. We need to recognize early signs of stress, encourage meaningful financial conversations, and help members evaluate options before manageable financial pressures become larger problems.

5. You've expressed concern about what you call "phantom leverage." What is it, and why should financial institutions be paying attention?

I use the term phantom leverage to describe financial commitments that reduce a consumer's capacity to repay but aren't always fully captured by traditional credit analysis.

Household finances have become increasingly complex. Recurring subscriptions, automatic payments and other ongoing commitments can individually seem inconsequential, but collectively they can meaningfully affect how much flexibility someone has in their monthly budget.

A borrower can look financially healthy through traditional measures while having less room in their monthly budget than those measures might suggest.

The point isn't that these commitments are inherently problematic. It's that they reinforce the importance of understanding a member's full financial picture.

For financial institutions, that means continuing to evolve how we understand financial capacity while also helping consumers better understand their own. AI and advanced analytics may help financial institutions identify patterns and opportunities to provide support, provided they are used responsibly, transparently, and with appropriate safeguards for privacy and fair lending.

At Trumark, we believe responsible lending starts with understanding a member's financial picture as fully as possible and helping them make decisions that support their long-term financial well-being.

Daniel Krewson is Senior Vice President and Director of Commercial and Business Banking at Trumark Credit Union, where he leads the organization’s commercial lending, business banking, cash management, and strategic deposit initiatives. In this role, he is responsible for developing and executing strategies that drive sustainable growth, expand business relationships, and deliver comprehensive financial solutions to businesses, entrepreneurs, and organizations throughout the Greater Philadelphia region.