Checking All the Fintech Partner Checklist Boxes

In the current environment of instant gratification within the digital experience, credit unions are under more pressure than ever to keep up with rising member expectations. When it comes to experience, technology providers outside of banking are raising the bar on the user experience, which has critically impacted the way members interact with their credit unions. Members have begun to expect credit unions to give them experiences on par with industries offering self-driving cars, self-setting thermostats, self-driven vacuums and digital personal assistants. These new developments in consumer-facing industries have led to a new culture in which consumers expect technology to complete mundane tasks for them. Many credit unions are aware of this evolution toward a “do it for me” mindset and have rightfully chosen to partner with fintech organizations as a result. When considering whether to partner with a fintech organization or not, credit unions need to ensure the partnership showcases a few of the following key characteristics.

Be Forward Thinking

First and foremost, credit unions must remember that in today’s rapidly changing industry, innovative ideas become commonplace tomorrow. When looking for partnerships, credit unions should remember to think about investing in relationships that will take them well into the future. The right partnerships enable them to add value, provide a better experience and continually put the service of members first. There is a famous quote by hockey legend Wayne Gretzky: “To be successful, I skate to where the puck is going to be, not to where it has been.” Instead of offering members a user experience that catches up to the major players, credit unions need to consider whether these partnerships can be the vehicle to surpass the current market offerings and stay ahead of the curve.

Share Common Goals

Ideally, a partnership between a credit union and a fintech organization should serve a common goal. Some service providers have direct-to-consumer initiatives that compete with credit unions’ objectives. A good example of this is the complex relationship that some financial institutions have with Paypal. While many consumers appreciate the simplicity of having their financial institution integrate with a popular brand such as Paypal, this P2P service retains a cash deposit and effectively cannibalizes funds that would normally remain in checking or savings accounts. Instead, credit unions should look to partner with organizations that serve financial institutions as their primary audience. Partnering with a popular brand can ultimately hurt a credit union, instead of helping it grow its member services and improve members’ user experiences. Credit unions need to be careful to not partner with a sheep in wolf’s clothing, which could cause them to give up their established brand.

Demonstrate Longevity in the Financial Industry

Just as credit unions should carefully consider whether or not a potential partner shares their goals, credit unions should aspire to partner with fintech organizations with experience in the financial industry. Credit unions are ultimately responsible for the products and services they offer members, so partnering with fintech organizations with deep roots in financial services helps simplify the potential difficulties of integrating with various core systems and conducting third-party risk management assessments. By partnering with an organization closely familiar with the credit union industry, credit unions have added assurance that their potential partners will understand their challenges.

Focus on Compliance and Security

In a constantly changing regulatory environment, credit unions are ultimately responsible for any non-compliant activity – even if it results from a third party – making compliance and security an important part of their due diligence checks. Partnering with fintech organizations familiar with the challenges and requirements of credit union vendor management is a must, especially since failing to comply with regulatory requirements can impact credit unions’ reputation in the industry and result in harsh enforcement actions and fines. Similarly, if a credit union’s partner undergoes a data breach, this could seriously impact members’ trust in their financial institution. Credit unions should carefully consider if their potential partners have a solid understanding of regulatory compliance and security before entering into a relationship.

For the most successful partnership with a fintech organization, credit unions need to confirm that potential partners have these attributes. Credit unions have an opportunity to transform their member services through the right relationships with the fintech industry, and should look to build partnerships that achieve these goals. These partners must have strategic plans for innovative product offerings now and in the future. They must also share the goals of their credit union clients, instead of making up the competition. Finally, they must be aware of the industry challenges and concerns, especially when dealing with sensitive member information or when under strict regulatory requirements. If a fintech organization shows signs of all these traits, credit unions can know they have selected the right partner.

Fran Duggan is CEO of Payrailz. He can be reached at 860-430-9261 or fduggan@payrailz.com.