Why the credit union movement needs to bring fintech partnerships into the light

What do you hear when someone starts talking about “the shadow banking system?” A secret, Illuminati-like cast of hood-wearing creepers dictating rogue government policies in a secluded location, the single objective of which is to topple the global financial system?

Clearly they’ve been reading too many Dan Brown novels. Nevertheless, that appears to be the general mindset accompanying the misinterpretation still being bandied about the financial service and banking industries going into the 2020s concerning financial technology (fintech) and established financial institutions. This shadow banking system — this much-less, and in fact no-way-diabolical assemblage of digital lenders, brokers, and other financial companies and organizations — have evolved outside the realm of the traditional regulated financial banking establishment.

Responsible fintech startups typically fall into this industry category, and they’re increasingly gathering market share among banking customers. In fact, about a third of Americans have, at minimum, one account, or engage in a financial activity with said fintechs, according to a recent FICO survey. Completely unsurprisingly, that number leaps to 47 percent for Millennials.

It’s easy to see why traditional financial service providers viewed fintech as adversarial. But cementing such conservative thinking in this context only inhibits the potential for even greater revenue-generating opportunities. Any forward-thinking credit union leader is consistently looking out the window for innovative ways to create value and ease of accessibility for their membership. That’s what fintech partnership brings to the credit union movement — unique avenues that employ member deposits that keep the credit union competitive in an ever-evolving digital market.

 

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