In the financial services market, credit unions (CUs) and financial technology (FinTech) companies are moving from rivals to partners. As consumer demand for seamless banking increases, they are collaborating to improve efficiency and member experiences.
Despite challenges like slow decision-making and incompatible systems, a PYMNTS Intelligence report, “Dream Team: Credit Unions and FinTechs Partner to Deliver Financial Innovation,” a collaboration with Velera, reveals these partnerships are mutually beneficial.
Many FinTech companies now view credit unions as partners rather than competitors. According to the report, 66% of FinTechs see CUs as clients and 90% view them as collaborators. Additionally, 43% of FinTechs currently offer products to CUs, including self-service solutions and member experience enhancements, aligning with the rising demand for digital-first services and giving CUs a competitive edge over larger banks.
An example of this collaboration is between Scienaptic AI and Kentucky Credit Unions. This partnership seeks to integrate AI-driven underwriting technology, enhancing lending capabilities and member experiences. Scienaptic’s platform, which has processed over $80 billion in credit decisions, helps CUs expand their offerings and support underserved communities.
While CUs and FinTechs want to collaborate, several challenges exist. One of the most significant obstacles is the difference in decision-making speeds. According to the report, 68% of FinTechs consider slow decision-making at CUs a major challenge, with 47% deeming it the main barrier. Other challenges include a lack of innovation readiness at CUs (40%) and limited budgets (28%).
CUs and FinTechs can overcome these issues by focusing on incremental improvements. Experts recommend CUs and FinTechs identify specific areas for improvement, such as self-service platforms or lending practices, instead of trying to overhaul entire systems. This approach allows both partners to address challenges in a more manageable way, ensuring more productive and sustainable collaborations.
Self-service banking is an area where CUs and FinTechs are aligning to meet the needs of digital-first consumers. According to the report, 23% of Generation Z consumers choose financial institutions based on self-service banking convenience, compared to just 15% of older generations. This trend illustrates younger consumers place more value on digital services for their financial needs.
To meet these demands, many CUs are partnering with FinTechs to offer seamless self-service options. For example, Pinwheel and Candescent introduced a direct deposit switching solution for CUs. Pinwheel simplifies the process of transferring payday deposits, enhancing the member experience by reducing friction in the onboarding process. This collaboration allows CUs to capture more deposits, reduce churn, and strengthen member relationships.
Collaboration between credit unions and FinTechs provides mutual benefits, allowing CUs to enhance their service offerings with self-service banking and AI-driven tools to meet the digital needs of younger generations, leading to higher member satisfaction. As a result, FinTechs gain access to CUs’ established consumer base and industry expertise. By aligning goals and overcoming operational challenges, FinTechs and CUs can compete in the financial market and provide products and services that meet the expectations of today’s digital-first consumers.
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