Top 3 Barriers CUs Face in Developing Fintech Partnerships – and How to Avoid Them

In recent years, it’s become clear that the credit union and fintech relationship is critical to serving and growing member bases. Credit unions frequently hear that fintech partnerships can provide innovative solutions to these and other needs. In spite of this, the process of identifying, evaluating and setting up these partnerships is not without its challenges.

In fact, there are very common barriers credit unions face in developing successful fintech partnerships. Here are the top three – and how you can avoid them.

Barrier: Unknown of Innovation

It can be hard for financial institutions and credit unions to be the first to try a new or innovative solution. Often, credit unions tell us they’re looking for proven solutions, so they know members will receive the best service possible. We also hear from credit unions how much they value personal interactions and support in providing their members high levels of service. This comes from strong ties to our shared mission as a credit union movement – wanting to provide the best, most personal service possible to members. But too often, this can actually hold credit unions back.

How to avoid: Think of technology as enhancing, rather than replacing.

When leveraged appropriately, fintech partnerships can open pathways for improved member experiences and expand opportunities for long-term growth. According to research conducted by Zest AI, the average age of the U.S. credit union member is 53. In contrast, the age of the average American is 38, according to the U.S. Census Bureau. As young people mature and begin building financial independence, they will be faced with more banking options than ever.  Many will never have physically cashed a check. Credit unions enjoy a luxury rarely afforded to other financial services providers: Positive goodwill. A prudent technology strategy can help to catalyze this momentum to better serve a rapidly growing segment of the population.

Fintech partnerships can actually enhance the personalized service credit unions provide members. It can help us grow membership and reach more consumers who might not have access to the financial support they need. A truly successful partnership can help to amplify the critical role that credit unions play in helping members build financial well-being.

Barrier: Success Can Be Difficult to Measure

For any strategy to be successful, it needs to be measurable. This may seem like a challenging proposition at first. After all, how can one define what progress looks like for something as nebulous as a “developing a fintech partnership?”

How to avoid: Encourage your teams to think through incremental, discrete aspects, rather than one large outcome. In addition, seek to customize your strategy to the specific resources at your disposal.

For example, you may have a smaller team that feels constrained for resources. It may not be realistic to set a strategic objective of integrating fintechs into every facet of existing processes. A measurable outcome may be to first outline which operational or member service aspects are working well, and which require improvement. This may necessitate extra preparation on your end, such as mapping Net Promoter Scores (NPS). From there, you may be able to prioritize near and long-term opportunities for improvement. It may very well be that some of these may not benefit from technology at all. Ultimately, you may determine in the next eight to 10 months that you would like to pilot a messaging platform that enables you to better reach your members. Success may be: Increasing NPS by 5% from your existing baseline.

For areas that may stand to benefit from fintech partnerships, try to be thoughtful about what specific items need to be addressed. First, develop an ideal state, and only then turn to the market to understand the solutions that exist. Attempting to go through fintech after fintech to find a solution is a bit like walking into a grocery store on an empty stomach, without a shopping list in hand.

Barrier: Partnering With Companies That Lack Traditional Credit Union Experience

Many fintech companies feature founding teams that may not have had the same amount of experience as you in the credit union ecosystem. It can be hard to immediately build relationships, or to know that you’re tapping into the right expertise to best serve credit union members.

How to avoid: Early stage fintechs are often small and strapped for resources as they prioritize on building a robust and seamless tech experience for prospective users. As a result, they are typically yearning for the exact expertise you and your teams have. Rather than viewing this as a negative, embrace this as an opportunity to learn from diverse perspectives while also emphasizing your team’s unique depth of expertise.

Keep this perspective in mind the next time you consider having a conversation with a fintech.  Rather than focusing on tradeoffs, try to find a common ground that would result in a mutually beneficial win-win scenario for all parties involved. For the fintech, this can mean having an additional invaluable data point from an industry expert, which can be leveraged to refine and improve the product offering. For your team, this could mean capitalizing on the opportunity to start developing your own repository of perspectives on what type of technology is relevant to you, and what type is not.

Ilona Limonta-Volkova is a Senior Associate at TruStage Ventures in Madison, Wis.