Credit Unions and FinTechs Find Common Ground Through Personalization

Not all that long ago, FinTechs competed with banks — especially credit unions and smaller players — for the same set of customers and accounts. And they chased growth at all costs. But a lot has changed in a relatively short period of time. As Chris Corse, principal of Emerging Partnerships at Velera, told PYMNTS recently, FinTechs are examining their individual business models amid industry-wide pressures. Corse made his comments as part of the “What’s Next in Payments” series discussing what it means to be a FinTech in 2025.

He took note of the macroeconomic uncertainty that’s led to a “decline from the frothy valuations that we saw in 2021.” Equity funding and dealmaking have been muted. For investors, he told PYMNTS, there’s been a refocusing on “profitability and the overall financial health of the companies — versus prioritizing things like rapid user growth and user acquisition.”

Big FinTechs Gaining Ground

The specter of the Synapse bankruptcy still looms large, but Corse said that this has not slowed new account openings at “big FinTech” outfits such as PayPal and Square, and at neobanks such as Chime and SoFi.

“The deposits that they are taking in are large-value deposits,” he said, adding that “the equity and the awareness that they are building are trends that we’re watching.”

For the FinTechs themselves, especially consumer-facing firms, the key is to attract the business and the loyalty of younger generations, through user-friendly apps and the ability to open up accounts seamlessly. Other features that are prized by consumers include ones that are configurable in those apps, said Corse, including credit building offerings, account roundups and balance alerts. Personalization, he said, driven by artificial intelligence (AI), will continue to drive innovation in the space, helping tailor budgeting and investing apps.

The Factors for Success

Beyond the products and apps themselves, Corse was quick to point out that trust remains a critical ingredient to success, and traditional financial institutions (FIs) — once the competitive targets of FinTechs — have that trust, cemented deeply with their communities. For credit unions, the lure is there to offer new innovations to their members, while growing their footprint with younger generations.

“Among the ways they’re doing that is with FinTech partnerships,” said Corse, who added that “when you look at the neobank and the large FinTechs, they have very strong products and services, and one of the reasons why is they have very nimble tech stacks. They’re not burdened by legacy core providers or digital banking providers.” As the joint efforts deliver innovation and trust, “it’s going to be an unstoppable force in terms of reaching the younger generations,” he said.

The Regulatory Climate

The regulatory landscape is of course shifting — and rule-making governing bank/FinTech partnerships has been paused. Corse told PYMNTS that it’s still unknown how much (and what) regulation is “right,” and many FinTechs are diversifying into multiple sponsor bank partnerships. And no matter what new regulations may lie ahead, “transparency is king for compliance,” he said.

“If you’re a FinTech, you naturally have to be open about the regulations that you’re compliant with and perhaps lead off your ‘demo’ talking about that” when meeting with prospective clients. There are lessons to be learned, he said, from the fall of Synapse. As he noted, “when you place moving fast and breaking things ahead of compliance, it doesn’t end well. … For the FinTechs that do lending and fraud and use AI for that, I think having a human in the loop is certainly important,” to oversee those models. He added that FIs have been moving beyond broad solutions that go beyond just rule-based monitoring, extending into pattern recognition or anomaly detection.

Looking ahead, he told PYMNTS, “The best way for FinTechs to succeed” is to approach it with partners who have established accountholder bases, and to integrate into credit union ecosystems, rather than competing against them. “Partnerships are certainly where I see the industry going, and when we think about profitability of FinTechs, partnerships are the way to go.”