Credit unions, which already face challenges from traditional and nontraditional competitors and members seeking a better user experience, appear ready to integrate fintech solutions but perhaps not quite able to do so easily.

Legacy platforms encumber just about any financial institution today, Mike Dionne, managing director of North America for Finastra, noted. "There are many platforms that can go back to the 70s, written on COBOL and maybe running on IBM AS400s, or other older architecture of that ilk." He added this is a legitimate challenge that both credit unions and banks face.

Dionne noted Finastra sees two aspects to opening up legacy systems: Technological and philosophical. "The technological is solved through things like APIs and updating of architecture. It's important that credit unions look to their partners to philosophically buy in to that openness as well."

Finastra, according to Dionne, looked to provide more openness with FusionFabric.cloud, which allows the creation and deployment of innovative apps. "We aren't necessarily sunsetting anything. We're going to take some of those legacy platforms, and we've got them, and allow innovators to weave into our fabric for the benefit of the credit union."

Fintechs are very nimble, very fast to market and not afraid to fail. And if they do fail, they quickly move on to the next opportunity, Ted Bilke, president of the 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 up new product development and differentiate their digital services.

Symitar sought to overcome legacy system constraints through its open Episys core to make it easier for credit unions to deploy fintech innovations such as Amazon Echo connections. "As a core vendor, I wasn't really that interested in devoting technical resources to bolt Amazon Echo to Episys," Bilke said, adding that using third-party application programming interfaces to accomplish that task would make for a better business model.

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 expand business models.

Packer noted, "We've really increased our capability and scope of offers in helping people take advantage of the marketplace innovation taking place. The demand is still getting more complex and more sophisticated as time goes on."

Fiserv executives feel it's their job to be innovative and offer new solutions continuously that work within each financial institution's system and environment, but also be cognizant of security and regulatory factors.

Still, there is a huge disconnect between the fintech and credit union worlds, acknowledged Nikhil Lakhanpal, co-founder of the New York City-based fintech firm Narmi, which provides apps for helping members reduce bills and select home insurance. "Many fintech companies have amazing technology and direct-to-consumer business models. Credit unions have the desire to grow and implement new technologies, and already possess an established user base," he said, adding that fintechs do not face the typical barriers to innovation that credit unions face, such as legacy providers' slow development cycles.

A key obstacle is that much of the new technology available to credit unions relies on easy access to members' financial data, and Lakhanpal explained technology such as artificial intelligence and machine leaning is only functional if it receives the right data input. "To overcome this, credit unions must take a hard stance with legacy systems to have full access to their member data," he added.

Packer underscored this complicated data issue. "It's easy for a startup company to go, 'We built this really cool tool and it's got a great UI [user interface] on it and it does these really awesome things.' What's really hard is making it compliant with all the regulations or making it secure against all the data risks that exists for credit unions nowadays." Credit unions also need to determine if they have the staff, bandwidth, capability and desire to protect member data if they unleash it from the core.

Although fintechs have raised nearly $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 forming symbiotic relationships.

The Raleigh, N.C.-based CUSO Constellation Digital Partners provides a cloud-based marketplace that enables upper- to mid-tier credit unions to connect with innovative app developers. Founder/CEO Kristopher Kovacs said he realized despite the boom of potential fintech partners, credit unions were not able to access them because of their legacy structure.

"Financial institutions have made sizable investments in legacy systems," Kovacs shared. "Those systems are purpose-built and not designed to easily integrate with new and innovative services created by potential fintech partners." However, Kovacs noted fintechs that focus on standardizing and reusing a common core interface can help credit unions overcome the drag of previous system selections.

Credit unions need to accept the realization that no single provider can do everything for them, Kovacs emphasized. "You have to build a network of solution providers that requires the institution to have an 'integration-first' strategy."

Opportunities exist for credit unions to innovate on top of legacy systems, maintained Dr. Debbie Bartoo, senior innovation strategist at the St. Petersburg, Fla.-based CUSO PSCU, which invests resources on behalf of its owner credit unions to research and understand technologies such as AI and machine learning. "Fintechs can often bring to market solutions that are creative and can be integrated to legacy platforms through the use of APIs," she noted, adding fintechs can provide new product opportunities and engaging experiences.

Carlos Carvajal, chief marketing executive at the Austin, Texas-based digital apps company Kony, said he believes credit unions must invest in improving processes and technology to increase agility, while incorporating new technology such as chatbots, AI, personalization and augmented reality.

"One of the biggest challenges with accelerating digital innovation and adopting new technology is the complexity associated with siloed legacy systems that have been around for over 15 years," Carvajal explained. He suggested instead of looking at what they have in terms of legacy systems first, credit unions start with their current digital member experience and engagement systems.

Sometimes the stumbling block to innovation comes from credit unions that are perfectly happy with their status quo. Packer explained Fiserv learned from surveys and interviews that not every credit union wants to be a technology leader. "They need help excelling at what they've chosen to be their business model," he said, which may or may not have them leaning especially toward fintechs. "Our job as technology providers is to enable credit unions to execute their business plans, not to force them into ours."