A Fresh Perspective on Fintech
Fintech companies are the reason financial institutions are enjoying a boost in status. Depending on whom you talk to, fintech is the reason they have seen a boost in membership and accelerated lending growth. However, in a NAFCU Credit Union Monitoring Survey this past February, 75% of respondents February indicated levels of being “somewhat” or “very” concerned about the rising rate of fintech companies, and how it could impact the financial marketplace at large.
Why Fintech is a Concern to Credit Unions
Of particular concern are credit and digital payments. Survey respondents indicated that these have the potential to be “significantly” disruptive, mostly because consumer preferences are shifting in favor of faster technologies that are more innovative. (Not to mention the cybersecurity concerns that comes with it.) The majority of respondents cited credit or digital payments as fintech market segments with the most potential to directly compete with credit union services.
Not surprisingly, 90% of credit unions favor tighter control on fintech companies via federal regulation, with 70% willing to tie these companies to the same regulatory standards as traditional financial institutions. It appears credit unions view fintech as a threat. However, there is always another side. The following will cast fresh perspective on the issue.
Wikipedia defines Fintech as:
"After reviewing more than 200 scientific papers citing the term fintech, the most comprehensive scientific study on the definition of fintech concludes that 'fintech is a new financial industry that applies technology to improve financial activities."
How Fintech is Helping Credit Unions
Fintech includes a menagerie of services, not all of which directly compete with credit union services. Rather, many fintech services (and the companies offering them) absolutely prop up credit unions, allowing you to offer your members the best possible experience possible, at all possible moments (literally). Despite sometimes egregious core IT contracts that prevent smaller credit unions from leveraging cutting edge technology, fintech is being used by some credit unions to strengthen their brand. It goes back to the credit union mission to serve the needs of their members. By approaching fintech with this in mind allows credit unions to cherry-pick the best in the way of apps, data systems management and forms providers.
Apps are one area in particular where credit unions are making the best use of fintech. Some vetting may be in order first, but once you filter out the non-essential and functionally redundant apps, you can find gold. This is especially true if you focus on apps that strengthen the relationship between credit union members and the credit union.
For example, apps can use GPS to indicate whether or not a member is near an available money saving deal. If a member walks near a restaurant or store that has a deal available, the app will trigger an alert through a push notification. If the member follows through with the offer, the credit union is rewarded intrinsically when the member pays for the offer with their card. This directly competes with other credit card companies, and credit unions come out the winner. There are other ways credit unions can leverage fintech as well. By using big data to their advantage, they may be able to seek out consumers with high interest loans, and then market themselves as an alternative with better rates. To win with fintech, simply go back to your mission; meet the needs of your members. That is how we have approached forms for more than 30 years. As your needs change, we adapt and follow suit. It’s the nature of fintech, the nature of forms and disclosures, and the nature of the industry. As fintech continues to grow, we will all adapt accordingly.