Fintech companies help credit unions fill gaps, simplify service and educate members.
No one can predict the future. But the closest thing credit unions have to a crystal ball just might be fintechs. Since fintechs are all about cutting-edge technology, the companies in this space are often able to touch on the latest developments in the finance world well before CUs can.
That’s why fintechs are propelling the future of financial services. In our special report, three industry leaders share their thoughts on how fintechs are impacting CUs—including helping fill technology gaps, simplify service strategies and educate members in new ways.
Mind the Gap
One thing fintechs can sometimes do for CUs is to provide a service better than CUs can alone.
“No longer does a credit union have to do something themselves,” says Brian Scott, chief growth officer for CUESolutions provider PSCU, St. Petersburg, Florida. “A credit union can be more responsive and more adaptive to changing market conditions by forming partnerships.
“For example, you see credit unions dabbling in bitcoin,” he explains. “NCUA is not allowing credit unions to sell, manage or hold bitcoin. But they can partner with a fintech that does, thereby providing that service to their members.
By partnering with a fintech, CUs can quickly get into the game without having to build up the technology themselves, Scott adds. “Now, all of a sudden, the credit union is a destination for a member to conduct financial services for which they may not have gone to the credit union in the past.”
A CU’s ultimate goal is to build great relationships with its members. The right fintech partnership “creates more depth and more reason for members to come back to the credit union,” Scott says.
It’s up to credit unions to find the areas that are most valuable for members, however. This also applies to content, whether it’s a widget that extends an app’s functionality, an application programming interface that enables apps to talk with each other, or a plug-in that provides a digital solution or an asset for the CU’s website.
“It’s easy to add content now because of those types of tools, where even five or 10 years ago, you had to link out,” Scott explains. In the past, such a connection would look like an external partnership or add-on to members, but “now, more and more, it looks like it’s part of the credit union.”
The timeframe for forging fintech partnerships is getting tighter and tighter.
“The time to incorporate fintech into your digital strategy is not years from now—it’s months or maybe even weeks,” Scott says. “You can adapt much more quickly to changing market conditions, so you’re not creating an 18-month digital strategy—it may be a 12- or six-month digital strategy because it can change so quickly, and your ability to integrate partners can happen much more quickly.”
However, while fintechs can be assets to CUs, it is crucial to do the research needed to ensure the right partnerships are forged.
“I see a lot of credit unions stretching for a cool fintech,” Scott says. “They’ll say, ‘They do a lot of really neat things, so we’re going to partner with them.’ But they forget to ask if their members really do have a need for what that fintech is offering.”
Once an authentic need is identified, credit unions should find the best fintech partner to fill it. “It is important for a credit union, as they are looking at partnering with different fintechs, to do their due diligence and to talk to all of their other existing providers about those fintechs because it’s a space that’s changing rapidly,” Scott says. “A startup fintech may have a great product idea, but behind the scenes, the technology may not quite be there.”
After a concept and the related technology have checked out, a credit union can move forward with a fintech partner to enter a new arena it might not have had access to otherwise. Such powerful partnerships can help credit unions successfully forge the future.
There are many reasons to value the relationship between a credit union and a fintech organization. But according to Shanon McLachlan, vice president of CUES Supplier member Jack Henry, Monett, Missouri, and president of the company’s Credit Union Solutions division, the top reason is strengthening connections between credit unions and their communities through technology and services. This is the idea of delivering the products and services members need, when they need them.
Ultimately, McLachlan says, success comes down to the ability to simplify service for credit unions and their members.
A fintech partnership can help boost member relationships by offering more real-time and self-service access. “If done well, it allows the ‘self-service activity’ to have the same effects of ‘in-person service,’ allowing the credit union to meet members at their time of need, in their channel of preference,” McLachlan says.
A solid fintech relationship also has the potential to make a significant impact on how CUs serve their communities, he adds.
“Technology can provide deeper member insights into their financial relationships, instruments they utilize through the credit union—or through other providers—and the transactions that flow through those instruments. This gives credit unions a unified and consolidated view of how members are spending, saving, borrowing and investing, all with the ability to manage those transactions from one location,” McLachlan says. “Credit unions can offer education for all ages and levels about what financial responsibility looks like and how to manage their financial lives. There are multiple products and services out there that do this; it can be online, in person or both.”
To make the most of a fintech partnership, McLachlan recommends being open in three dimensions: “First, technology: Ensure robust and inclusive APIs that are readily available. Second, culture: Ensure ease of doing business with both functionality and service, and all that comes with it. Third, community: Have an engaged community that supports, enables, mentors and collaborates.”
How is fintech simplifying member-credit union interactions? By making interactions easy and intuitive, McLachlan says. “We can streamline processes by eliminating duplication and removing unnecessary information or efforts,” he notes. “We can also drive consistency and repeatability for the niche being addressed, which simplifies traceability and auditability. All of this is being done while prioritizing the experience for members and users.”
A well-thought-out fintech partnership can have a unique impact on a credit union’s digital growth and strategy too.
“Availability, capability and extensibility allow the credit union to grow with its digital goals and rapidly advancing needs,” McLachlan says. “Fintechs need to be able to quickly adapt to the intersection of market demands and credit union strategies.”
It all comes back to simplifying financial services and providing a seamless member experience. Fintechs and credit unions can work together to provide the tools members need while allowing anytime, anywhere access.
A blend of passion with purpose, strong core values, transparency and integrity, mixed with the willingness to collaborate and work hard are the ingredients for success with fintech partnerships, says Joe Saari, founder/chairman of CUES Supplier member Financial Fitness Group, San Diego.
“When you combine all of the above with creativity, a drive for innovation and the entrepreneurial spirit, the sky is the limit for what you can achieve,” he says. “When well-aligned, successful fintechs will help their credit union partners provide innovative solutions to better serve members’ needs.
Saari cites Financial Fitness Group as an example. “We help our credit union clients provide their members instant, unbiased education and tools for all their members’ common questions about money. This process helps credit unions attract, build and cultivate deeper relationships with their members.
CUs are stars at helping members improve their financial lives, Saari adds. “They work closely with members and have a strong understanding of the needs and challenges. Meanwhile, when a credit union chooses the right fintech partner, they have an opportunity to leverage innovative technology, tools and agile development efforts to find the best way to truly engage and serve members.”
Additionally, fintechs are helping accelerate innovation in credit unions’ digital strategies, Saari underscores.
“By leveraging the spirit of entrepreneurship and the agility that smaller, early-stage firms can provide, credit unions are working to come up with powerful programs to compete with much larger (and well-funded) banks or other organizations,” Saari says. “In a way, credit unions leveraging fintechs aim … [for] the agility of David versus the much larger and bureaucratic Goliath of big banks, brokerages or insurance firms.”
As the needs of credit union members change with the times, fintechs can help. Take fraud protection, for instance, a growing concern in an increasingly digital world.
“There are dozens of firms actively working to help empower credit unions and others to help better protect their members against potentially fraudulent activity,” Saari says. “The more nimble and creative structure of smaller entrepreneurial firms in the fintech space gives these organizations some distinct advantages versus in-house efforts to help with fraud protection.”
Another important role fintech can play in the future is helping lead the industry to provide opportunities for greater financial inclusion. Saari says, “By leveraging technology to help engage members who are often overlooked or taken advantage of by larger firms, credit unions can combine their passion for making a positive impact with proven results to help drive and effect change.” cues icon
Celia Shatzman has penned stories on topics ranging from beauty to fashion, finance, travel, celebrities, health and entertainment.