Credit Union Success Depends on Streamlining Fintech Partnerships
It’s a familiar story. Credit union signs up to roll out an exciting new product or service with a fintech provider; months later, the project remains mired in the implementation process. What went wrong? The CU found itself playing defense after the compatibility of its data system was lost to the uncertainties of platform integration.
It's time for credit unions to realize that it is in their best interests to form partnerships with fintech providers. Such collaboration allows them the flexibility to offer a competitive feature set despite limited R&D budgets, and also to secure their seat at the table in determining the future of financial services.
Credit unions must first overcome some substantial hurdles in order to realize this vision, however. First on the list is creating an efficient procurement process for fintech providers. This means ensuring a streamlined approach for onboarding new partners, predictable working models, and continuous delivery of new features with fault tolerance. This process involves identifying any integration “gotchas” upfront before they become costly headaches further down the road.
The second to-do involves overcoming the 'if it's not broke, don't fix it mentality. In today's new financial normal, technologies are built to be replaced before they fail. Fintechs are not dependent on legacy systems, which is a key contributor to their speed and agility. Credit unions need to adopt a similar mindset to remain competitive in an increasingly diverse financial marketplace.
Can CUs afford to discard their legacy systems overnight? Probably not- but the challenge of integrating antiquated cores with the newer solutions necessary to compete for members’ hearts and minds will only grow more complicated. For those not ready to scrap their creaky yet “ain’t broke” core, another option is to create a middleware platform to streamline the process of onboarding future partners.
Lack of credit union resources is the number one barrier cited by fintechs impeding project completion. A credit union’s best response to this constraint is to staff a team with players familiar with the fintech industry-likely a mix of skilled existing resources and some newcomers- empowering them to break a few norms and build in-house knowledge. Avoid letting (or making) partners do all the difficult integration work- not only will the acquired expertise be valuable for future endeavors, but the approach will also help the CU embrace a “disruptor” culture.
At a program level, credit unions can improve procurement processes by establishing clear and consistent working guidelines to adhere to while onboarding new fintechs and solutions. These should include long-term project goals measurable at each stage of the product lifecycle.
The reality is that credit unions must out-partner their bank and nonbank competition if they hope to stay in the game. Partnering with fintechs- potentially including a presence on the boards of newer entrants- can be an effective means to influence product direction and even generate new revenue streams. After all, more dollars can fuel further innovation, in turn, driving toward the ultimate goal of elevated member service and satisfaction.