Digital transformation is an imperative component of the ability of credit unions (CUs) to compete in the financial services market. But as institutions that are often smaller than traditional banks, limited resources mean adopting emerging technologies and cutting-edge services can be too resource-intensive for CUs to do so efficiently.
The conundrum has guided the CU community toward a unique path to modernization, forged largely through the understanding that adoption of innovations like faster payments functionality is not only key to a competitive offering for CU members, but to optimizing operations of the CUs themselves.
Melissa Ashley, CEO of Corporate One Federal Credit Union, and Keith Riddle, CEO of Sherpa Technologies, discussed with PYMNTS the role that collaboration plays in enabling CUs to claim their seat at the faster payments table.
"When you look at what is required to adopt technology, it takes a very focused effort, and a large investment in order to make it happen," said Ashley.
As such, Corporate One and Sherpa recently announced the next phase in their roadmap to looping Corporate One's CU members into The Clearing House's RTP real-time payments network. As Ashley and Riddle explained, by industry stakeholders working together to promote faster payments innovation, and by the CU ecosystem working together to enable faster payments adoption, the industry can be well positioned to compete in a modern financial services landscape.
Innovation Through Collaboration
Corporate One's position in the CU market is one built on the collaborative business model. With about 800 CU members, Corporate One is able to bear much of the weight of back-office logistics on behalf of those CUs. In the case of RTP, Corporate One is both a funding agent and, more recently, a certified participant of the network, meaning it can manage liquidity and receive RTP payments for CUs, while also supporting the onboarding of these institutions onto the payment rail rather than requiring them to go it alone.
This is also made possible through Corporate One's creation of and investment in Sherpa Technologies, one of its subsidiaries, which was formed to facilitate this technological adoption process as a third-party service provider. According to Riddle, this alleviates a significant burden for CUs interested in embracing new tools like RTP.
"It wouldn't be prudent for an individual credit union to pursue the same development effort — testing, certification, management of the technology — if we have these things already available, tested and certified that they can plug into and use for their desired use-cases," he said. "Collaboration is key to making this affordable and to ensure industry partners are aware of this opportunity."
In a further reflection of the role of collaboration in the faster payments ecosystem specifically, Ashley and Riddle noted their experience in supporting the national finserv market's faster payments innovation efforts. Corporate One was a founding member of the U.S. Faster Payments Council, while Riddle serves as chair of The Clearing House's RTP Advisory Committee.
Ensuring CUs have a voice in the development and rollout of faster payments infrastructure like RTP is important to enabling these institutions to elevate their finserv offerings and competitive edge, they noted. While collaboration can ease the back-end challenges of looping into new payment rails like RTP, CUs themselves must also take the initiative to promote innovation and ubiquity.
"Credit unions of every side are trying to understand the business use-cases that would bring their institution in alignment with a real-time payments framework," said Riddle. "With [RTP] being a new network, new use-cases are evolving."
While faster payments initially targeted consumers, small- to medium-sized businesses (SMBs) are increasingly a popular target for financial services providers. Connecting SMB members to faster payments sending and receivable capabilities, for instance, is a particularly valuable use-case for CUs to elevate the SMB customer experience.
But there is another important area of exploration in the ways CUs can obtain value through adoption of faster payment infrastructure. Ashley and Riddle noted that RTP adoption is important for the institutions themselves in areas like real-time loan disbursement or even payroll transactions.
In both arenas, being able to quickly loop into the RTP network can provide CUs with more time and resources to focus on their relationships with consumers and SMBs, rather than using that time to build out network connectivity.
With many CUs offering a valuable lifeline for consumers and SMBs unable to access more traditional, larger banks, ensuring CUs can efficiently modernize and embrace emerging payments tools like RTP is immensely valuable, said Ashley.
"Credit unions really do help people during these difficult times," she noted. "We want to support them to make sure they continue to do that long after this crisis. Larger institutions have a huge ability and a lot of R&D money to be investing in tech. We're smaller, but nimble, and we can enable credit unions to be as capable as any larger institution."