The banking industry is going through a technological evolution that according to some experts could leave credit unions and other community financial institutions behind unless they pay attention to fintech innovation.
Even the term fintech has changed. At one time it was short for the financial technology companies that laid the foundation and provide much of today's banking technological infrastructure. Now fintech defines groundbreaking companies that have leveraged new solutions to rapidly respond to customer demands.
However, according to research commissioned by London-based Fraedom, legacy systems prevent 64% of U.S. commercial financial institutions from developing fintech applications. The study also revealed a mounting proclivity for financial institutions to partner with fintech firms to help bring new products to market faster, attract new customer segments and help differentiate themselves from competitors.
Credit unions, facing challenges from traditional and nontraditional competitors and members seeking a better user experience, seem ready but maybe not quite able to integrate fintech so easily.
Legacy platforms encumber just about any financial institution today, Mike Dionne, managing director of North America for Finastra, mentioned. “There are many platforms that can go back to the seventies, written on COBOL maybe running on IBM AS400s, and other older architecture of that ilk.” Dionne added it is a legitimate challenge that credit unions and banks alike face.
Fintechs are very nimble, very fast to market, not afraid to fail. And if they do fail, they quickly move on to the next opportunity, Ted Bilke, president of Monett, Mo.-based Jack Henry & Associate's Symitar division, explained. A recent trend detected by Symitar finds credit unions embracing more fintech partnerships to speed new product development and differentiate digital services.
Symitar sought to overcome legacy system constraints through its open Episys core to make it easier for credit unions to deploy fintech innovation such Amazon Echo connections.
Ryon Packer, SVP, product management at Fiserv Credit Union Solutions, maintained the Brookfield, Wis.-based firm provides an entire technological ecosystem that extends beyond basic core-accounting functionality. The Fiserv DNA core provides an open architecture to support new products and expanding business models.
Although fintechs have raised nearly US $110 billion since 2009, the World Fintech Report from Capgemini and LinkedIn, in collaboration with EFMA, found most are likely to fail without an effective partnership ecosystem. Additionally, both traditional and fintech firms stand to gain from a symbiotic, relationship.
Read the full article in the March 28 issue of CU Times.
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Roy Urrico
Roy W. Urrico specializes in articles about financial technology and services for Credit Union Times, as well as ghostwriting, copywriting, and case studies. Also: writer/editor of a semi-annual newsletter for Association for Financial Technology since 1997 and history projects funded by the U.S Interior Department, National Park Service and Warren County (N.Y.).
