Fintech: Great, but Not Everything

We are all reaching for something. Something that'll make life better, make work better and something that might even help keep us from eating Doritos so much. A hole to fill. An itch to scratch.

I consider myself fairly well plugged in when it comes to technology trends. I'm somewhere in between a person who plays Dungeons and Dragons and someone who can write code – neither of which I do. What I do understand is the application of technology that my D&D friends come up with during their day jobs. Come out of the basement Mark!

Technology, in a broad sense, has been in our country's DNA for ages. But what we think of technology today is typically our phones, laptops, IT networks and, of course, fintech. I'll admit it, I have an obsession with fintech and I think the credit union world does too. But I believe this obsession comes from two different places. For me it's a look at practical applications of moving my money around and not putting me off with too many steps. For the credit union industry, it appears to be an obsession of finding the Holy Grail solution to all of the problems to help credit unions grow, attract millennial members, increase earnings, grow lending and even fix that awful coffee maker in the break room.

From a practical angle, I'm shopping for a new credit union. And the main deciding factors for me include two things: 1) is their mobile banking experience solid and 2) how far away is a branch? That's it. Google can answer the second question, but I have to rely on other people to help with the first question since I can't take the CU technology on a test run before becoming a member. I've reached out to credit union friends to give me their honest thoughts on their credit union technology experience. And their responses have been very helpful as far as scratching credit unions off of the list and keeping others in mind. One response, from a credit union community director, stated, "Honestly, we're not the most technologically advanced CU and it can be difficult to conduct business online. I know [CU competitor name] is changing its online banking platform shortly, which will be good since it isn't that great right now." An honest response to a direct question. Practical me.

Credit unions, on the other hand, are obviously looking at a much larger picture of technology applications for members. And it appears to turn into an almost paranoid approach to fintech. "What are Amazon and Facebook doing?" It's a legitimate question, but not one that most credit unions can practically respond to appropriately. Although, you should make note of a very important report that recently came out from the World Economic Forum. Experts there believe that the two technology giants, Amazon and Facebook, "post more of a competitive challenge to banks than fintech." Rob Galaski, who co-authored the report, said, "Fintechs have changed the basis of competition in financial services, but not the competitive landscape." He continued, during an interview with CNBC, "Fintechs now define the tempo and direction of innovation in financial services, but high customer switching costs and the rapid response of incumbents has challenged their ability to scale. Agile incumbents have used the fintech ecosystem as a supermarket for capabilities, making the ability to nurture and rapidly form partnerships a critical ingredient to banks' competitive success."

What we are seeing, and even with recent mergers within the credit union fintech landscape, is that the use of fintech for credit unions is coming down to partnerships that the fintech organization has with the bigger players. Credit unions cannot answer the question, "What are Amazon and Facebook doing?" But your fintech partners can, and they can handle the pressure. Your credit union partners with fintech firms to deal with the complex and mysterious world of bridging technology into your cooperative. While important, I don't think fintech will be that "problem solved" moment for your credit union. It will simply be a nice addition to who you are as a credit union. It won't define you, but it will enhance you.

I bring all of this up because some fintech firms are now trying to become banks, and that puts us all in a strange position. It's like double disruption for the industry. And with Amazon announcing how it is expanding its payments ecosystem, it's triple disruption. During Amazon's Q2 earnings report, it noted the rollout that now allows consumers to add cash to their Amazon account with the ability to earn rewards. As Business Insider stated, this is "essentially giving these users a banking account." I think the silver bullet that credit unions are looking for in the fintech world is going to come down to what alliances fintech firms have with the smaller and bigger fintech and technology fish. Organizations like Amazon have the reach needed to capture a massive base. Last year, Amazon doled out more than $1 billion in loans. It has the money, the infrastructure and the fan base.

The obvious statement is find a fintech firm that you can trust. A firm with not only your shared values, but a firm with connections. As we watch more fintech organizations frequently acquire new companies (one was literally announced while I was writing this), we're going to see the need for a better technological understanding of what services CUs need to stay technologically realistic.

I want to stress that I'm a huge fan, supporter and nerd for fintech and the technology being developed to help my own personal financial life and needs. So, go fintech! Do your thing! And just order a new coffee maker from Amazon already. Because, don't be surprised if Amazon owns your fintech firm in the future.

Michael Ogden is executive editor for CU Times. He can be reached at [email protected].

NOT FOR REPRINT

Editor-in-Chief at CU Times. To connect, email at [email protected]. As Editor-in-Chief of CU Times since 2016, Michael Ogden has led the editorial team in all aspects of content strategy and execution, including the creation of the publication’s exclusive and proprietary research database of the credit union industry’s economic landscape. Under Michael’s leadership, CU Times has successfully shifted to an all-digital editorial product with new focuses on the payments, fraud, lending and regulatory beats. Most recently, he introduced a data-focused editorial product for subscribers that breaks down credit union issues into hard data, allowing for a deeper and more factual narrative for readers. In 2024, he launched the "Shared Accounts With CU Times" podcast, which offers a fresh, inside-the-newsroom perspective through interviews with leaders from the credit union industry and the regulatory world. He dives into pressing credit union issues, while revealing the personalities working behind-the-scenes to push the credit union world forward. His background includes years as a radio and TV anchor/reporter and a public relations and digital/social media manager, where he covered the food and music industries, as well as cooperatives and credit unions. Over the years, he has launched numerous exclusive video and podcast series, including a successful series of interactive backstage interviews with musicians at music festivals, showcasing his social media and live streaming production skills.