Top Credit Unions Invest in FinTech Partnerships to Speed Innovation

Innovation is top of mind for consumers — nearly half of them say they would entertain the idea of switching their allegiance to a financial institution (FI) that serves up the digital-first products and services designed to make day-to-day financial management easier.

PYMNTS Intelligence and Velera delved into the paths to success that can be paved for credit unions — available here in the “Roadmap to 2030: The Seven Strategic Planks for Credit Unions to Capture Top of Mind” report.

The conventional wisdom may hold that smaller FIs are at a disadvantage vs. their larger competitors (measured by asset size) when it comes to bringing new digital initiatives from concept to reality. 

But in fact, the top performing credit unions have a few clear avenues of success, demonstrable in the ways they help convert a majority of CU memberships to primary account status. In those instances, members use their CUs as the places where they have their paychecks deposited, their savings accounts established and credit card loyalties — all of which benefit the CU with revenue streams.

The data shows that FinTech collaboration and earmarking a significant percentage of assets for investment and innovation are determinants of success. And given the fact that our innovation measurements show that forward-thinking, top-performing CUs meet the digital expectations of their members 77% of the time, there’s quantifiable success tied to those approaches. 

In a deep dive into the offerings most prized by consumers — and thus, where CUs wind up solidifying consumer loyalty — 89% of top-performing CUs offer real-time payments. There’s a two-way street of communication when it comes to innovation: Our research shows that 49% of top performers implement in-house procedures to gather member suggestions for improvement. Roughly 50% of top-performing CUs test innovations in-house and with members before coming to the wider market with new products or services.

The proof is in the pudding: Only 1.7% of top performing CU memberships churned, which means that customer acquisition costs are low, and there remains the potential to cross-sell new offerings to a readily receptive and stable base of installed users.

PYMNTS Intelligence research shows that top CU innovators invest about 5.6% of their assets into innovation. At the same time, partnerships, particularly with FinTechs, can speed the time to market for the new initiatives that drive revenues and membership use, in a virtuous cycle.

Top-performing CUs have about twice as many products developed with third parties as bottom-tier CUs, at 6.1 versus 3.3. The number goes up a bit depending on asset size, where the data shows that CUs with $5 billion or more in assets fully or partially developed with third parties were able to jointly develop a bit more than 8 products and services.

There’s a bit of urgency: PYMNTS Intelligence found that Generation Z and millennials are even more open to switching their allegiances to FIs than older Americans, with about half reporting this willingness. Younger consumers, of course, have longer customer relationships with their FIs, and so should be key considerations along any innovation journeys. 

Fifty-seven percent of CU members say they are active users of mobile banking, indicating that mobile channels are among the most important ways to deliver innovations to end users. Almost a quarter of Generation Z consumers have said that they see mobile credit card management apps as an innovation priority.

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