With a unique culture of intermeshing relationships, cooperative arrangements, CUSOs, leagues and a very high trust between individual institutions, the industry seems to struggle with the gap between the culture of credit unions and the business models of vendors or outside technology partners.

Technology roadmaps aren't perceived as providing sufficient guidance for fintech, and many credit union leaders feel stuck – looking to their peers for help making good decisions about fintech, but needing examples to use to justify the risk.

Unfortunately, there is little time on the clock for credit unions to make strategic plans to deal with the increased competition from fintech firms and, more broadly, the shifting demands of consumers that are reflected in the successful fintech competitors' product offerings.

Through our research we found three essential strategic considerations that all credit unions need to address.

First, where is the locus of innovation? Does your existing network of vendors, core systems and staff provide you with the insight you need to plan? Are you examining the business models and not just the technology of fintech competitors to help guide your strategy?

Second, vendor management and risk management models need adjustment. Your members are demanding digital innovation – your challenge is to invest in digital innovation to maintain the incredible levels of loyalty and satisfaction that your members report. But, partnering or launching trials with fintech firms will necessitate the creation of simpler, leaner and potentially more risk-tolerant models for vendor selection and screening.

How can you apply an agile development mindset to your vendor selection processes, not just your development team's management processes? Fintech firms move fast, and the caution and conservative nature of many credit unions needs a nudge.

Third, step back from your systems and think about how you can learn from fintech firms. Can you do a pilot? Can you partner with them? They are usually experts at user interface design, and as a credit union you understand your members better than they do. Banks understand that their cultures must change, and that part of teaching their IT teams and product managers how to compete is through interaction with fintech firms.

For What Audience of Members?

A consistent theme we heard from research participants is the fear that millennials don't trust financial institutions. We propose two opposing viewpoints.

First, millennials are learning about money and how to manage money at a much later stage of life compared to previous generations. This is a generation of delayed lifecycle milestones. They take classes in “adulting” and sorely missed out on the home economic classes many of us took. The implication is that most fintech companies have a very narrow product offering to solve a narrow and simple set of problems. Millennials are trying to manage relatively modest sums of money; they are the poorest generation in U.S. history. Rather than focusing on the technology that powers a competitor's solution (machine learning, artificial intelligence, etc.) understand the scope of their solution. We believe that as millennials mature in earning power and financial literacy, they will migrate to solutions for more complex lifestyles – meaning Mint doesn't manage your life as well as Quicken.

Second, members across the age spectrum are migrating to a digital-first lifestyle. Gen X spends more time on social media than millennials. Baby boomers are the fastest growing segment for Facebook in the U.S. How are you providing digital literacy and helping make a transition to digital banking? Are you intentionally targeting all your members, or focusing solely on millennials? Credit unions are safe and trusted places. Extend that trust by creating opportunities to learn in your credit unions. There is a genius in Apple's Genius Bar – which is probably 90% customer education and mentoring and 10% technical fixes.

You will change your technology to adjust to fintech – which reflects the needs and desires of your members. That is a given. But where to start? We offer a very non-technical model of thinking about this inspired by nature's landscape around us.

Prune

First, start by cutting. Where is most of your revenue? Where is your growth? Are you able to cut outdated or less-demanded programs or services? Does your strategy reflect your members' changing demands? Given how many credit unions operate on default, start with a deep strategic review. Cut costs, update outmoded systems and verify that your marketing spend is returning on your investment. Many credit unions can't invest in fintech without first freeing up cash flow, which requires cutting costs and narrowing focus.

Graft

Can you form a partnership with a fintech firm to improve part of your member experience? Graft on one of their solutions. Many of them have sophisticated APIs and the ability to be integrated with your existing systems fairly easily. Be transparent with your members and call the arrangement a trial or a pilot. If things don't go as planned, chances are members will forgive you. Consider only offering the solution or service to a limited number of members. You don't need to re-engineer your core to start learning from fintech firms.

Grow

Focus on where you see growth in the future and invest in learning, strategy and technology that positions you for the next 10 years. There are hundreds of billions of bank and credit union revenue up for grabs, and regardless of member loyalty, over time the business will flow to the institutions that have the right sized solutions for their field of membership.

Tree analogies aside, with a disciplined and member-centric approach, your credit union can begin to develop a roadmap for fintech decision-making that will best position you to responsively address your members' demands while wisely investing your credit union's limited technology resources.

Richard Swart is a Fellow for the Filene Research Institute. He can be reached at 608-661-3758.