Credit unions’ relationships with fintech companies might define their future in financial services, according to Tom Davis, CSCU’s senior vice president of finance and technology.
It is the age of unbundling—where services are being peeled off—and fintech companies are thriving.
“These folks are here in our space and we’ve got to deal with them one way or the other,” Davis said at the 2016 CSCU Solutions Conference in Orlando, Fla.
Fintech companies take a single line of the business and develop a better, easier user experience. “They do one thing, they do it with laser focus, and they do it very, very well,” Davis said.
How do credit unions respond? Davis said they could:
When you look at credit union strengths and weaknesses, and those of fintech, “there’s something to be said” for collaboration, Davis said.
Fintech companies have several strengths over financial institutions: They’re nimble, need less revenue to reach their financial goals, and are not weighed down by regulatory burdens.
But fintech companies also have weaknesses compared with credit unions: They’re limited in what they can offer because of regulations, don’t have the same scale as traditional financial services firms, and lack integration of companion products and services.
Furthermore, credit unions have other attractive advantages, including stable funding, financial expertise, and an established and cultivated customer base.
When you blend credit unions and fintech on paper, “the cons sort of go away” for both, Davis said.
What will fintech companies likely do as they mature in the space? According to Davis, they could:
The future of credit unions could depend highly on whether fintech is a friend or a foe, Davis said.