Neobanks, Fintechs, Bigtechs – Oh My! How Does Your CU Compare to Challengers?

No matter how hard you try, challenger banks are hard to ignore. Each day seems to bring news of another challenger bank, or another partnership or acquisition of one, and the activity of challenger banks is poised to only increase as they are taking the banking market by storm. While credit unions differ in approach by honing in on personal connections with members, there is a lot to be learned from challenger banks. All in all, members and customers are after the same thing, which is high tech and in channels that work best for them.

As members’ preferences continue to evolve, credit unions are faced with fierce competition from challenger banks. In the past year, challenger banks have gained rapid attraction due to their ability to meet customers in the channel of their choice – digital.  As of September 2020, seven American challenger banks counted approximately 39 million users combined, a 40% increase compared to the previous year, according to Statistica. While it’s easy to say this could be a reaction to COVID-19, as limited personal interactions made it easier to incorporate a fully digital banking option, another reason could be the advanced tech solutions that many customers and members are after.

Where Does the Fear Lie in Digital Innovation?

A technology overhaul can be an arduous, daunting task for any type of institution, but even more so for community financial institutions like credit unions that may be limited in staff and resources. Additionally, making any type of change in the core has the reputation of taking months to years to sort out, as well as requiring additional staff or piling on stress for staff who already wear a few hats.

In the past, implementing a new product would require a full integration with the core, which drastically increased expenses. However, credit unions can implement a unified stack as a greenfield, or fresh, installation to sit on top of their core using open banking and API connections. With a unified stack, credit unions are empowered to launch new products faster and provide a seamless banking experience to members.

To remain viable, many credit unions are striving to digitize their services to attract and retain members. However, their digitization efforts are futile due to the implementation of their legacy core. Rather than work with their legacy core in working alongside other vendors with enhanced solutions, which could take months to years, credit unions need to take on the mindset of the challenger and create a unified stack of solutions.

Incorporating an Omni Stack

First off, what is an omni stack? An omni stack is the latest version of core banking that encompasses the core and all its solutions that would typically be provided by multiple vendors in one holistic and cloud-based offering. Between checking, savings, loan solutions, digital channels and payments, the traditional credit union has a lot of moving parts and siloed solutions that take a lot of work, time and money to keep working. Through omni stack, all of these aforementioned lines of business and offerings can operate as one streamlined and well-oiled machine with minimal costs, oversight and down time when it comes to technology upgrades.

Additionally, because the unified offering is the only provider for the credit union, a hyper-personalized relationship with members can be created. By analyzing current offerings and spending habits of members, the omni stack is able to see revenue growth opportunities. And if the offering appeals to the member, it can be seamlessly integrated into their own personal stack of solutions with minimal effort because their information is already known within the system.

Omni stack solutions also offer a fully cloud-based atmosphere. From bad weather to the rise of wildfires we’ve seen this year to unimaginable inconveniences, unexpected events sometimes cause systems and electricity to go down, leading to major inconveniences. However, the cloud is the best option for minimizing those risks. Credit unions utilizing omni stack can put that worry on the back burner.

Omni stack takes the technology and infrastructure worries out of the equation for credit union executives, leaving them with more space to focus on members and provide that personal touch they are best known for.

Bhavin Turakhia is the Co-founder and CEO of Zeta, a San Francisco-based banking technology provider.