Does Fintech compete with or compliment traditional banks and lenders? Should credit unions and community-focused banks see Fintechs as friends or foes? The answer to both of these questions is that it depends.
Now a well-established part of the financial services marketplace, Fintechs vary widely in both what they offer and their ambitions in the market. With investors flocking to fund the latest banking app or challenger bank, traditional FS providers would be forgiven for seeing Fintechs as a threat, but not all are out to divide and conquer. Many Fintechs exist to provide banks with the technology they need to compete effectively.
Most Fintechs are, of course, disruptive, and this is perhaps where the fear factor lies. For credit unions, Fintech has a role to play in updating legacy technology and the customer experience – but is this as a partner or a competitor? Some credit unions have understandably viewed the Fintech world with suspicion, after all, while these providers have the potential to challenge traditional ways of working and interacting with customers in a positive and collaborative way, there is also the chance they will develop products which draw Members away from localised and community-focused banks. It is therefore important that credit unions choose their partners wisely so they can get on with the job of transforming and enhancing the services they offer.
Let’s not forgot that the ‘Fin’ in FinTech is very much the domain of credit unions and arguably a secondary concern to the technology companies developing Fintech’s many tools and platforms. This is especially prevalent in the credit unions sector where long experience of the customers and communities using their services is invaluable and cannot be replaced with technology alone.
Here at incuto, we work with teams at credit unions and community banks who combine decades of experience in helping individuals and families looking for financial advice and support. They fully understand the needs and motivations of these customers, providing a much needed human element to the service provided and deep understanding of how to provide effective financial education and resilience. It’s vital that this is not lost to Fintechs intent to championing functionality over function.
How do we move forward to cement a positive working relationship between credit unions and Fintech? Firstly, any Fintech provider must understand and accept that their remit covers the ‘tech’ and look to traditional providers to bring in the ‘Fin’. Working together, credit unions and technology providers can provide the best experience for customers, both utilising the skills they bring to boost service quality and availability to Members.
Secondly, to collaborate effectively, credit unions and their technology partners must have a shared goal – that of tackling poverty and promoting financial inclusion for all. Unless Fintech’s entering the credit union space fully understand the history and culture of our amazing community-focused banks and lenders across the UK, and their dedication to fighting poverty, they are never going to succeed.
Finally, technology needs to be fully focused on the end customer, or credit union member and, going back to the first point, this will never be achieved without a close and aligned relationship between ‘Fin’ and ‘Tech’. As we move into 2020, and new opportunities and challenges present themselves to the sector, technology investment will be vital. Choosing the right partner, who understands their role in relationship and sees the value of collaboration over competition, will be half the battle.