While decision makers in some industries may aim to keep their companies on the bleeding edge of innovation, those at credit unions are more likely to say they want to be on the leading edge.
“I think most credit unions want to be a fast follower,” Scott Young, vice president of innovation at PSCU, told PYMNTS. “They want to make sure the solution is tried and true and tested out.”
And while it can be tempting to get excited about new banking products, it’s important to vet them to see if they’re actually the right fit for their organizations and the members who’ve put their trust in them.
Sources of Innovation for Credit Unions
Many credit unions are looking to FinTechs for novel solutions to problems like technology gaps and slow time-to-market for new products and features. That’s the value FinTechs can bring to credit unions: complete focus on solving niche problems or enhancing niche experiences.
But because they are trying to solve for one or two niche functions, FinTechs may have a fairly siloed approach to tech that may not exactly mesh with organizational or member needs, Young said.
“We need to keep that in mind,” Young said. “But if they can come in and either make the member’s life easier or make the credit union’s life easier in a certain function, I think that’s a sweet spot to explore.”
The same can be said about finding consultants to assist with FinTech implementation, he added. It’s important to look for someone with a wide enough perspective to make an accurate recommendation.
“If they’re a good consultant, they truly have visibility across multiple, not only solutions, but industries,” Young said.
Credit union service organizations (CUSOs) such as PSCU are also helpful. They can vet the solutions offered by FinTechs so credit unions don’t have to do that alone. Credit unions can go to a CUSO, ask if they’ve seen a solution for a given problem and often find a vetted solution.
“Having a CUSO vet out a FinTech, not just from a proof of concept or proof of value, but truly getting into how mature they are, how risky they are, given their maturity, what their tech stack looks like — let us do all that heavy lifting for a credit union,” Young said.
What to Look for in Vendors, Innovations
When credit unions are looking to add a FinTech’s banking product, maturity is a quality to look for. Young said that while he’s worked with credit union CEOs who wanted to be everywhere their members are, others said they couldn’t do business with a company until it was further along in its lifecycle.
Another thing for credit unions to consider is how much of their critical member relationships they would relinquish to a FinTech. If there’s an application programming interface (API) taking members into a FinTech experience, credit unions should ask themselves if they would be losing share of mind as well.
“I think there’s a balance,” Young said. “Certainly, FinTechs have extreme value in our ecosystem. But just a caution, I would say, is, ‘How much of the relationship are you relinquishing to that FinTech? Is it a true partnership or are you just handing off your relationship to somebody else?’”
Digital Issuance and Cryptocurrency
Young said the biggest industry game-changer right now is issuing digital cards, which is going to become table stakes for any financial institution.
When approved for a new card, consumers are going to expect to have it in their digital wallet and ready to use within minutes. When their card has been lost or stolen or their account has a problem with fraud, they’re going to expect to get a new account number and new credentials so they can continue uninterrupted.
“So, if you haven’t already started looking into digital issuance — for our credit unions out there — to me that is going to be one of the biggest industry game-changers from a card management perspective,” Young said.
Beyond that, the biggest topic of discussion for the last six to eight months has been cryptocurrency. While cryptocurrency is still primarily an investment product, rather than being used for point-of-sale or payments, that may change. PSCU is working to enable members to use cryptocurrencies without leaving the credit union banking experience.
“Oh, by the way, we no longer call digital banking or online banking that — it’s just banking,” Young said. “That’s just what it is now, and I think we should just call it what it is: banking.”
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