For years, one of the hottest topics in the credit union industry has been the rise of fintech. As Ken Burns, EVP Sales, Marketing Automation at Origence, noted back in 2020, the impact of fintech is driving all financial institutions to completely transform their user and borrow experiences in order to meet the changing expectations and needs of who have become accustomed to living in a digital-first world of faster financing decisions and streamlined user experiences.
Of course, the fintech industry itself is now becoming more mature, and is also going through changes. In some cases, the disruptors are now the ones being disrupted. How that is all unfolding is of vital importance to the lending industry, so it’s no surprise then that one of the most anticipated breakout sessions at the recent Lending Tech Live ’22 conference was The Changing Fintech Landscape and What Credit Unions Can Expect.
The session featured an all-star panel of experts and thought leaders, including Barry Kirby, SVP of CuneXus; Mark Meyer, CEO of Filene Research Institute; Matt Roe, Chief Revenue Office of Open Lending; Sam Kilmer, MS & Fintech Advisor for Cornerstone; and our own Neetu Bhagat, CFO for Origence. Over the course of an hour, they shared eye-opening insights on how the evolution of fintech is impacting credit unions, touching on topics like changing member expectations, digital lending trends and how credit unions should prepare for the future.
Fintech Is Having Its “Moment”
For better – and sometimes worse – fintech has changed the way many people live, shop and manage their money on a day-to-day basis. The Buy Now Pay Later (BNPL) trend is one of the latest innovations gaining widespread popularity, With global fintech funding having exploded to $131.5 billion across 4,969 deals last year1, some of the biggest players in fintech, like Crypto.com, are becoming household names, complete with major ad campaigns featuring the most recognizable celebrities on the planet. As touched on in the presentation, fintechs are now almost inescapable, impacting every aspect of our daily lives – from mobile payments to health savings accounts to our credit cards, and beyond.
With all that attention there will inevitably be a bit of blowback. Many thought leaders in the lending industry are beginning to point out that some fintechs have over-promised and underdelivered. Consumers are becoming more skeptical – and investors are as well.
Funding is the lifeblood of the industry, and in the summer of 2022 it’s no secret that the stock market sentiment has changed. With the shadow of a recession looming, fintechs are facing a tougher fight to secure funding, and even some of the biggest players might be at risk. Winners and losers are about to be picked, and how it all shakes out in the years ahead is something that credit unions needs to monitor and prepare for.
Here’s What’s at Stake…
Fintech companies are usually of two broad types: the enablers, who take an existing process and enhance it, and the challengers, who are seeking to replace an existing process. For credit unions, the stakes are high in the battle between the two camps, since technology that helps originate loans and new memberships faster is obviously better then technology that subverts or eliminates traditional lending and banking activities.
According to research from CuneXus that was presented during the session, the average cost to acquire a new member is $700. Members will hold an average of 2.52 accounts with their credit unions, while consumers will carry about 7.4 banking products across all their relationships.
Fintechs can help credit unions improve many of the most important key metrics by providing new capabilities and new experiences at the consumer point of influence, for example during the account opening process. Research from the Cornerstone Advisors report, Key Marketing & Lending Benchmarks for Credit Unions, showed that lead generation and lead nurturing are two of the areas that credit unions rank themselves lowest at, perfectly illustrating prime areas for improvement.
Future success factors that will help fintechs succeed will include capabilities that create unique value regarding lifestyle preferences, like on-the-go loan origination, content delivery competencies that help empower and enrich consumers with new knowledge, innovations that help relieve consumer pain points (like in customer service), and resources that track risks, costs and benefits.
It’s important to keep in mind that, for credit unions, working with a fintech doesn’t have to be all or nothing. There are CUSOs that can replicate the capabilities of a fintech, while holding the mission to be a true partner to credit unions, because they share in the risk and rewards with credit unions. Pure fintechs function essentially as a vendor, selling products or services to clients without much of a stake in that client’s future success. For many credit unions, the technological solution that creates a modern digital experience and a next-generation marketing experience might wind up coming from a company that they’ve already known for decades.
Dig deeper into the subject of fintech and credit unions with the helpful resources listed below, and book a demo of Origence arc anytime.
References:
¹CB Insights 2021 State of Venture Report