Winning Disbursements Market Share Through Fintech Partnerships

Innovative, flexible, fast to market – credit unions are uniquely well-positioned to provide the services businesses need to stay resilient amid high interest rates and looming economic uncertainty. Especially ripe for opportunity is the disbursements space, where many companies are scrambling to streamline their legacy processes and meet consumers’ demand for digital payment choices. By partnering with fintechs, credit unions can deliver cost-effective, modern payment solutions with a level of personalized service and agility that many big banks can’t match.

Eleven billion: that’s the number of non-payroll disbursements U.S. consumers received in 2021, according to PYMNTS. Only 17% of those disbursements were instant, representing a lucrative opportunity for credit unions to gain market share with payment experiences built for today’s fast-paced, digital-first lives. Through fintech partnerships, credit unions can deliver configurable digital disbursement solutions that replace traditional payment methods, such as checks, with more secure and efficient options. The possibilities are endless to combine credit unions’ strengths with fintech innovation, resulting in experiences that exceed recipients’ expectations while supporting businesses as they rise to emerging market challenges and opportunities.

Consumer Preferences Have Shifted to Integrated Digital Experiences

Whether receiving a loan overpayment refund from their financial institution or a business-to-individual payment such as an incentive or appeasement, today’s consumers want the speed, convenience and security of digital disbursements. Nearly nine in 10 Americans use digital payments, according to McKinsey, and when receiving a payment from a company, 70% prefer digital or electronic disbursements, according to Onbe’s 2023 Future of Payments Report. Most also want to pay and get paid on the go. According to McKinsey, over two-thirds of Americans expect to have a mobile wallet by 2024.

Together, credit unions and fintechs can elevate the payment experience and equip businesses to meet consumer demand by providing these preferred digital modalities along with fast gratification, enhanced security and many other benefits. The latest payment gateway solutions offer a single point of integration with a variety of popular options, including virtual payments with the choice of adding funds to a mobile wallet or payment app for added convenience and spend flexibility. White-label disbursement products make it simple to deliver custom-branded experiences that feel seamless and integrated. Reducing steps in the payment journey, along with creating a more engaging and personalized experience, can help reinforce customer loyalty and even drive secondary purchases – a win for businesses and their recipients.

Businesses Increasingly Rely on Third-Party Payment Providers

As more businesses transition from making payments in-house to relying on a third-party provider, the opportunity is ripe for credit unions to capture a larger share of the disbursements market. Half of small businesses used independent software vendors (ISVs) as payment providers in 2022, and 15% were in the process of transitioning to an ISV, McKinsey found. This widespread shift from legacy solutions such as checks creates an opportunity for businesses to unlock significant cost savings. Checks come with a higher cost of labor compared to digital and electronic payment types and can run businesses around $4 each, according to AFP’s 2022 Payments Cost Benchmarking Survey. As business requirements such as fraud prevention and regulatory compliance become more complex, companies can also reduce their risk and administrative burden by shifting in-house disbursement operations to an expert provider.

Credit unions can meet the growing demand for third-party payment solutions by using a payouts gateway to provide digital payment solutions alongside traditional financial services. While these disbursement solutions could be built in-house, many credit unions will benefit from leveraging one of the robust solutions already on the market. Customizing and reselling a fintech partner’s payments gateway and capabilities not only makes standing up a solution faster and simpler, but also lets resellers benefit from the fintech’s ongoing new developments and thought leadership. Credit unions can add new products and services quickly and scale their disbursement business without the expense and growing pains associated with developing and maintaining proprietary solutions. In turn, they bring name recognition, strong relationships and a diverse array of financial services to the table, all of which make them compelling providers for businesses seeking to outsource their disbursement operations.

Fintech partnerships will be especially vital as digital payments infrastructure continues to evolve in the coming years, fueling business and consumer demand for real-time payments and other advances. By leveraging the latest and greatest solutions from leaders in the digital payments space, credit unions can keep up with the pace of innovation and open the door to future opportunities for collaboration while focusing on what they do best: Serving as trusted consultants to their business members.

Tracy Monson is Chief Product Officer for the Chicago-based fintech Onbe.