Directors can play a key role in helping credit unions evaluate financial technology companies and their potential impact.
To keep pace with rapidly evolving member demand for digital financial services, credit unions are working with more third-party providers than ever before. Falling under the large and somewhat nebulous umbrella of “fintech,” these partners are essential allies in the battle for engagement and lifelong loyalty. That said, not all fintechs are equal. Far from it. In fact, the fintech marketplace is about as divergent as they come, with high-value startup unicorns on one end of the spectrum and digitally transformed legacy firms on the other.
Navigating the unfamiliar terrain of the fintech landscape may not be simple, but it’s not an insurmountable task. Willing board volunteers can play active roles in helping their credit unions find and implement the right technology to support growth and member satisfaction goals. Here are a few things to keep in mind.
Fintechs Friends and Fintech Foes
Credit union board members can think of fintech firms as falling into one of two general categories—friend or foe. Friendly fintechs are those that have a stated goal of strengthening traditional financial institutions’ value proposition. These are the technology innovators with a business model that makes partnering with credit unions, banks and other established financial institutions essential for their ultimate success.
Fintech foes, on the other hand, are the firms that are actively seeking to disrupt the consumer-FI relationship. By smoothing out the bumps of classically clunky financial transactions, they are earning trust and loyalty at a rapid pace, displacing credit unions, banks and others in the minds of both banked and unbanked consumers. In a 2021 CO-OP Financial Services/EY survey of credit union members, nearly a quarter chose PayPal as their most trusted financial brand.
Each fintech category requires a different approach. Fintech friends should be evaluated for their potential to help the credit union meet its strategic objectives. Fintech foes should be monitored closely for their competitive threat. Board members are in a terrific position to contribute this analysis, as they are not mired in the day-to-day operations that can get in the way of actively monitoring the shifting fintech environment.
When evaluating fintech partners, credit unions should look for strong values alignment. This goes beyond the technology or product’s purpose, profitability structure and contracts. One can assess true human-centricity in the way the fintech builds and iterates its solutions.
Human-centered design, for instance, is an iterative process during which product developers focus on user needs in every phase. The idea is to address the whole user experience by having a strong grip on context. With continual feedback, developers build, test and pilot through multiple versions to bring a highly relevant solution to market.
When advising their credit unions on fintech, board members should have a solid understanding of the precise member persona the credit union is hoping to attract, help or impact with the innovation. Who are the members most likely to use the fintech solution, and what are their actual pains, gains, needs and jobs to be done? Evaluating fintech partners through this lens will help board members make more confident recommendations.
Some questions to ask of the potential fintech partner: Are you building from the user out? How are you conducting research? (One-on-one conversations, for instance, can reveal a lot more insight than surveys.) Have you integrated a user feedback loop into the iteration strategy so that trends and shifts in expectations become a natural part of the process?
Convergence of Digital and Data
When it comes to fintech innovation (or innovation of any kind, really) digital and data are inextricably linked. For any fintech solution to really hit the mark for today’s members, it needs a frictionless connection to clean, accessible, and—if possible—real-time data.
Board members may want to suggest a pause in the implementation of fintech if the credit union has not reached an adequate level of data maturity. One way board members can do this without risking a hard stop on fintech innovation is to establish a data governance committee. With a charter to put policies in place around data integrity, protection, availability and use, the committee can keep the credit union marching toward data maturity as others are evaluating the data requirements of the most coveted fintech solutions. Recruiting a new board member or two with IT or analytics experience may help get such an initiative off the ground and keep it moving forward in lockstep with market realities.
At the end of the day, credit union board members are volunteers who carry a heavy set of responsibilities. Evaluating fintech could seem like just one more thing to heap onto an already weighty load. Or, with some reframing, it could actually be fun (the secret sauce to an engaged board). There are a lot of very cool innovations out there, and by getting curious, staying enthusiastic and eagerly taking on the task, board members may discover an entirely new passion for helping their credit union and its members achieve financial health.
Micheal Herman is president of AdvantEdge Digital, a Cuna Mutual Group Company that helps credit unions unlock their digital potential through a single SaaS business offering two complementary solutions: analytics and digital lending.