How to Select a FinTech Credit Union Partner

FinTech Credit Union Investment
FinTech Credit Union Partnerships Can Be a Winning Combination

Does a FinTech credit union partnership make sense for your organization? If you need to maintain a competitive edge without a big bank budget, it might. For forward thinking financial institutions, digital transformation is a critical part of the growth roadmap. Unfortunately, while major banks have plenty of technology companies vying for their business, credit unions often get left behind. A FinTech startup can present a worthy investment opportunity for CUs because it solves substantial problems for both parties:

  1. Credit unions need to move rapidly to implement technology that fulfills the needs and the expectations of their members in an increasingly digital-first banking world. They must be able to achieve these gains without a prohibitive price tag or a heavy lift for internal IT resources. 
  2. FinTech companies need capital for software development, operational growth, and market penetration. Even more, they can benefit from having access to a targeted user base that is motivated to help them refine and improve their solutions. 

Partnering with FinTechs Across the Credit Union

Technology innovation in financial services spans many areas of operations, even beyond online banking, giving credit unions opportunities for partnership in key areas: 

  • Regulation & Compliance
  • Member Relationship Management
  • Data Warehousing
  • Back-office Operations
  • Digital Channels 
  • Payments
  • Physical Channels
  • Account Origination

Credit union leaders are recognizing the need for collaboration. For example, Charles Krawitz, VP of Commercial Lending and Loan Trading for Alliant Credit Union, shared this thought in a recent article: “As a credit union leader who is always looking for innovative ways to create value for our members, I’ve discovered that fintech partnerships offer a unique opportunity to put member deposits to work and remain competitive in an evolving market.”

Questions to Ask in the FinTech Credit Union Partner Selection Process

Due diligence is an in-depth process requiring many discussions. Here are just a few key questions that can help illuminate the best partnership opportunities.

What is the financial health of the FinTech, who is at the helm, and what is their track record? 

Everyone wants to bet on a winner, and most startups don’t make it. No matter how good the idea is, the ability to execute is what gives a technology company staying power. If experienced fund managers are already invested in the FinTech startup and the leadership has a history of successfully bringing products to market, the FinTech is more likely to be around to deliver on its promise.

What is the FinTech’s commitment to Credit Unions? 

CUSOs (Credit Union Service Organizations) are favored as partners for a reason. They have a proven commitment to putting the needs of credit unions first and a better understanding of the needs of this unique market vs. that of the banking industry as a whole.

What is the collaboration process? How is feedback solicited and used? 

Credit Unions that partner with FinTechs should be able to expect that they will have input on how the technology is developed. This doesn’t mean getting everything on their wishlist for features, but it does mean having a FinTech partner that listens to your feedback and prioritizes developing high-value features that will make the biggest impact on performance for credit unions.

Can you reach agreement on the metrics for success? 

Maybe this includes the number of members impacted, the speed of rollout, the overall costs, or other factors. Agreement and alignment around goals is critical for a strong FinTech credit union partnership. Defining benchmarks and milestones up front ensures both parties can communicate openly about their needs and expectations. 

What is the timeline to get the solution ready? 

Partnering with a nimble FinTech provides a significant advantage in keeping up with or even surpassing the experience provided by large financial institutions that must wait for technology vendors to go through the slow process of implementing complex enterprise solutions. A FinTech with a lightweight tech stack and a highly targeted solution provides faster ROI. 

Is it possible to do a pilot or targeted rollout before scaling up? 

This is a step that can help de-risk implementation. Being able to test a solution before making an organization-wide commitment also allows you to test the FinTech team and see how responsive they are in handling any issues that arise. 

What is the integration effort required?

Most IT departments in the credit union industry don’t have a large staff and can’t afford to pull people away from other responsibilities to manage a major rollout of new technology. A smart FinTech partner will design solutions that keep the lift light on the client side. 

Is the solution on-premise or in the cloud?

This is a tech due diligence question that has no right or wrong answer. However, cloud-hosted solutions are becoming increasingly popular for a reason. A well-architected cloud offering inherits the security designed by multi-billion dollar tech companies like Amazon (AWS) and is usually less costly, more scalable, and easier to manage than on-premise software. 

Is member information secure?

This is a critical question no matter where the solution or data is hosted. Having a full understanding of the measures in place (from encryption to workflows to authentication) that protects operations and data privacy is a top priority.

Does it meet regulatory compliance requirements? 

Even if data is secure, you still need to be able to prove it. In the highly regulated financial services industry, this means choosing FinTech solutions that provide auditability and that support compliance with regulations across the complex compliance landscape at the local, state, and federal level wherever your credit unions operate.

Keeping Your Brand Competitive with FinTech Investment 

Celia Shatzman, writing for offered this perspective, FinTechs really shine when it comes to enhancing the digital banking member experience, such as online account opening, card management alerts and controls, personal financial management tools, member authentication, and conversational AI chatbots, to name a few.” 

We agree, as do our clients/partners. Credit unions that make the investment in financial technology now have a distinct advantage in making their brand stand out and leaving others to catch up. 

“Voice biometrics will soon be the industry standard. By joining with Illuma early, we’re ahead of the curve for member experience.”

— Craig Stancher, Member Experience Manager

Want to learn more about the opportunity to partner with Illuma? Contact us today.