Fintech Partnerships ‘Integral to Success’ of CUs: CMFG Ventures Webinar

Written by on January 26, 2022

Clockwise from top left: The NCUA’s Rodney Hood, CMFG Ventures’ Brian Kaas, Goalsetter’s Tanya Van Court, CUNA Mutual Group’s Carlos Molina and Visions FCU’s Tyrone Muse participate in a Fintech Forum webinar Jan. 25.

Fintechs are not credit unions’ competitors – they’re crucial partners that can help credit unions reach the next generation of members and bridge existing product, service and member experience gaps.

That was the key point made by panelists during Tuesday’s “Building Successful Fintech Partnerships” webinar, which featured NCUA Board Member Rodney Hood, Visions Federal Credit Union CEO Tyrone Muse, Goalsetter Founder and CEO Tanya Van Court and CUNA Mutual Group Senior Risk Consultant Carlos Molina. It was the second event in a webinar series hosted by CMFG Ventures, the venture capital arm of CUNA Mutual Group, and a part of CMFG Ventures’ new Fintech Forum, an online community of credit union leaders, fintechs and industry partners designed to foster innovation, share knowledge and discuss topics impacting the future of financial services.

Hood emphasized that given the importance of fintech partnerships to credit unions’ future success, the NCUA has been working to provide the regulatory flexibility needed to embrace these partnerships. Three recent initiatives that align with those efforts included approving the creation of an agency Office of Innovation and Access, the hiring of a director of fintech (which the NCUA is in the process of recruiting for now) and making a regtech tool, the Modern Examination and Risk Identification Tool (MERIT), available to credit unions, Hood said.

“Fintech to me is integral to the ongoing success of credit unions so they can use these platforms to not only meet the needs of their current members but that next generation by addressing tools that they want, such as cryptocurrency blockchain applications and financial data aggregation,” Hood said. “Some of our larger credit unions have the ability to build digitally native platforms, but not all of them have that luxury.”

Muse, head of the $5.5 billion Visions based in Endwell, N.Y., shared his credit union’s fintech partnership best practices, which include identifying problems at the credit union and choosing fintech solution integrations that can solve them, and appointing a liaison person at the credit union who can speak the fintech partner’s language and understand its value proposition. He said Visions focuses on four criteria when vetting a fintech partner: The viability of the fintech and its products and services, the talent the fintech can bring to the table, the fintech’s track record on solving the problems the credit union is looking to solve, and its level of flexibility.

“There is no longer a world where we’re not going to leverage [fintechs],” Muse said. “They’re the enabler to our success.”

Van Court said her company Goalsetter, which provides a youth savings and gifting platform, is an example of how fintechs can help credit unions introduce new solutions that will engage the next generation of members. She emphasized that in order for partnerships to be successful, each must be approached differently and according to the individual credit union’s needs, and that success can be measured by the quality of the member’s experience while using the solution.

“The reason credit unions partner with fintechs is to bridge gaps and fill holes that may exist. So the question becomes, how well did we help you fill that hole or bridge that gap?” Van Court said, adding, “The bottom line for me is, number one, how many members are we reaching? And number two, what’s the user experience when you do reach them? If they have a bad user experience, that’s not inspiring them to become the next generation of members, but if they have a great user experience, that’s absolutely inspiring them to stay with you.”

Forming fintech partnerships brings the challenge of mitigating the associated risks, which include compliance, cybersecurity and data protection risks. Molina said given that lawmakers and regulators have been generally behind the curve when it comes to their oversight of fintechs, credit unions must first understand where the fintech stands on things like privacy concerns, consumer protection, fair lending and data protection during the vetting process. Second, credit unions should consider the fintech’s reputation and the likelihood of a disaster occurring such as a technological failure that would impact a large number of members. Third, he said credit unions need to consider the unforeseen cultural risks of a fintech partnership, which can be overcome by appointing a key contact who can ensure everyone is on the same page and define the success of the partnership, as Muse does at his credit union.

Voicing an opinion shared by all of the event’s panelists, Molina said for credit unions, the choice to not embrace fintech partnerships poses the greatest risk of all.

“The biggest risk here in vetting is finding reasons to say no,” Molina said. “These organizations have the talent, the technology, the flexibility and the pulse of the market on what they can offer, and candidly, credit unions either don’t have the budgets, don’t have the talent or don’t understand how to do what these fintech companies can. That’s probably the biggest risk we have to overcome. We have to understand and accept that in order to be successful longer term.”

Credit unions interested in learning about future CMFG Ventures Fintech Forum events and becoming a member of the community, which is complimentary, can sign up here.

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