The term fintech (or FinTech, if you prefer the trendier iteration) is being redefined — literally. For as long as credit unions have relied upon computers, fintech — short for financial technology – has referred simply to the technology employed by the financial services industry. For example, your core data processor is a fintech company. Or at least it was.
Seemingly overnight, fintech has been redefined as technology companies that seek to displace or disrupt (another popular term), traditional financial services players by building a better mousetrap. In other words, whereas fintech used to refer to your technology partners, it now refers to your newest competitors.
As reported here in January, this threat appears to be real. As that article noted , a survey by a company called TransferWise predicted a significant shift among consumers from relying on credit unions and banks to using pure-play technology companies over the next five to 10 years. That prediction may seem self-serving since TransferWise is one of these new fintech companies. Be that as it may, this is not a trend that credit unions can afford to ignore.
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Google, Samsung and Apple are the names you already know in the fintech arena. But for every name you know, there are dozens of other startups that believe they've come up with just the right secret sauce to steal a piece of your business away. Common sense and elementary math tell us that they can't all be successful; there are simply too many of them. However, it's all but certain that at least some of them will succeed to one degree or another.
What's a poor credit union to do? Stand by idly and watch these firms slowly — or maybe not so slowly — erode its business?
First and foremost, credit unions must begin to think of technology in a new context. For decades, technology has simply been a tool — a commodity, if you will. If your core platform no longer met your needs, you replaced it with another one. When Internet banking came along, you chose a system you liked and checked that item off your list.
Today's consumers scrutinize your technology choices much more closely. The technology you offer is as important or even more important to them than your loan rates or free checking requirements. In short, technology is now a product, and your technology product must be competitive — not just with the bank down the street, but with all of these fintech barbarians at the gate.
This requires a more thorough analysis of your current and future technology partners. Your credit union needs to align itself with companies that not only offer the right technology for today, but are skilled and nimble enough to keep you ahead of the curve. There are companies large and small, established and new, that fit this bill.
The one thing your credit union has that no fintech company will ever have — and in fact seems to have no interest in having — is a relationship with the member. Combine a superior relationship with superior technology, and you can't be beat.
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