Credit unions eagerly seek fintech partnerships

Credit unions need to keep up with changing consumer expectations, shaped by the latest offerings from digital challengers. Their previous technology priorities, such as mobile wallets and digital account openings, have become unavoidable, forcing them to turn to new services to stay competitive.

“There are new areas beyond those priorities for credit unions,” said Owen Wheatley, senior banking and financial services partner at Information Services Group, a Stamford, Connecticut-based consulting firm. Wheatley’s list includes real-time payments, cryptocurrency services, and personalized product offerings, such as AI-powered loans.

Lacking the budget to grow their own real-time payments, bitcoin accounts, and AI-powered loans, credit unions are working with third parties to launch services, reach new members, and stay relevant to young people. consumers.

Implementation of real-time payments

Introducing real-time payments is a priority for credit unions to keep pace with larger institutions and payment technologies, such as Venmo and PayPal, that offer simple real-time payments. A December 2021 survey by Cornerstone Advisors, an advisory firm in Scottsdale, Arizona, found that 24% of credit unions plan to roll out real-time payments in 2022. That number jumps to 30% for 2023.

“Credit unions must participate in real-time payments if they are to remain the primary financial institution for their members,” said Keith Riddle, president and CEO of Sherpa Technologies, a credit union-owned services organization. Corporate One Federal, based in Columbus, Ohio. Credit Union, which helps credit unions modernize their payment systems. “Many consumers use non-banking services like Venmo because they are heavily focused on moving money.”

“Use cases include paying auto dealerships in real time when purchases are funded by credit unions and mortgage settlements,” said Melissa Ashley, president and CEO of Corporate One, left. Thomas Novak, chief digital officer of Visions, middle, said his institution’s strategy was to give members “more value than they could get from other financial institutions and standalone fintechs.” Mark Willden, chief information officer, right, said “an increasing number of ICCU members are registering and becoming active with their bitcoin accounts every day.”

Currently, of the 190 financial institutions connected to the Clearinghouse’s RTP network, only 31 are credit unions, including two corporate credit unions. According to Melissa Ashley, President and CEO of Corporate One, individual credit unions can generally only receive incoming payments.

Corporate One and Sherpa Technologies are piloting sending business-to-business payments over the RTP system with four members of the Corporate One credit union. “Use cases include pay car dealers in real time when purchases are funded by credit unions and mortgage settlements,” Ashley said.

Alloya Federal Corporate Credit Union in Naperville, Illinois, launched an educational initiative on real-time payments for its members. “Our goal is to help members build a roadmap for faster payments so they can deliver an improved customer experience and stay relevant to young consumers,” said Kurt Stevenson, senior vice president of payments. of the institution with assets of $7.1 billion.

Offer Bitcoin Accounts

In December 2021, the National Credit Union Administration said Federally chartered credit unions can provide cryptocurrency services in partnership with crypto companies. Bitcoin accounts are both a challenge and an opportunity for credit unions.

“As trusted financial institutions, credit unions are well positioned to offer crypto, and it’s a good way for them to attract younger members,” said Wheatley of the Information Services Group. . “But, until effective cryptocurrency regulation is introduced, credit unions should be cautious because of the potential damage to their reputation if something goes wrong, and stick to offering basic services. such as buying, holding and selling crypto.”

Visions Federal Credit Union in Endwell, New York, launched a basic bitcoin account, accessible from its digital banking platform, in January. Unlike a cryptocurrency exchange that allows customers to trade Bitcoin with each other, Visions, with $5.6 billion in assets, only allows members to buy, hold, and sell Bitcoin. from their Visions account. Purchases are funded from the institution’s checking or savings accounts, and sales proceeds are returned to the same accounts. NYDIG, the New York-based bitcoin company, acts as custodian.

Visions chose NYDIG because the fintech has a strategy of partnering with financial institutions, said Thomas Novak, chief digital officer at the credit union. “Our fintech partnership strategy is to leverage banking as a service and integrated fintech for our members by giving them more value than they could get from other standalone financial institutions and fintechs,” a- he added. According to Novak, Visions’ own research and NYDIG research found that many customers want to transact Bitcoin through their trusted financial institution.

Idaho Central Credit Union in Chubbuck launched a Bitcoin account with NYDIG in January. “Since this is still a new area, broad adoption is likely still a few years away,” said Mark Willden, chief information officer at the institution with $8.3 billion in assets. “But a growing number of ICCU members are signing up and becoming active with their Bitcoin accounts every day.”

ICCU and Visions plan to offer additional digital asset services to members with Bitcoin accounts held through them, such as allowing cardholders to accumulate Bitcoins instead of cashback or rewards points and allowing members to use bitcoin as collateral for loans.

Automation of the loan process

Implementing AI-powered loan underwriting technology can help credit unions use their own data to approve loan applications from members who traditional credit reporting systems could reject and compete with fintechs offering instant loans.

The Michigan Credit Union League in Lansing has partnered with New York-based Scienaptic AI to help its 208 member credit unions improve their lending decision-making capabilities. MCUL membership has a total membership of 5.8 million and assets of $92 billion.

MCUL will offer its members Scienaptic’s AI-powered loan decision tool, which uses machine learning to analyze large amounts of data and make rapid underwriting decisions.

“With downsizing, credit unions cannot do the loan assessments that Scienaptic can do,” said Patty Corkery, president and CEO of MCUL. “Technology can prevent members from being rejected based on their credit score only when data, such as their history with the credit union, shows that they are able to repay a loan.”

In a similar deal, Los Angeles-based Zest AI has partnered with three credit union leagues – Minnesota Credit Union Network, Montana’s Credit Unions and Wisconsin Credit Union League – to bring its underwriting tool based on AI to their members. In September 2021, Curql Collective, a CUSO that invests in fintechs on behalf of credit unions, invested in Zest AI.

ICCU is prioritizing the introduction of automated loan decisioning in 2022, Willden said, while Visions plans to apply machine learning to automate components of its loan processes. “We have high lending automation rates, but we would like to fully automate parts of our lending operations,” Novak said.