From rivals to partners: FinTechs & Credit Unions forge a collaborative future

By Gloria Methri

The financial services landscape is undergoing a significant shift as FinTechs and credit unions (CUs) move beyond rivalry to embrace collaboration. A PYMNTS Intelligence report, “Dream Team: Credit Unions and FinTechs Partner to Deliver Financial Innovation,” in collaboration with Velera, highlights this growing synergy, revealing that 90% of FinTechs now view CUs as collaborators rather than competitors.

The Rise of Collaborative Innovation

Consumer demand for seamless, digital-first banking experiences has driven FinTechs and CUs to work together, leveraging each other’s strengths. The report shows that 66% of FinTechs see CUs as clients, while 43% actively offer products to CUs. These partnerships focus on delivering self-service solutions and improving member experiences, giving CUs a competitive edge over larger financial institutions.

One such example is the collaboration between Scienaptic AI and Kentucky Credit Unions. This partnership integrates AI-driven underwriting technology, enhancing lending capabilities and expanding offerings for underserved communities. Scienaptic’s platform, which has processed over $80 billion in credit decisions, exemplifies how technology can transform traditional credit union operations.

Challenges in Collaboration

Despite the potential, partnerships between FinTechs and CUs face challenges. The report identifies slow decision-making as a major obstacle, with 68% of FinTechs citing it as a key issue and 47% naming it the primary barrier. Other roadblocks include limited innovation readiness (40%) and budget constraints (28%).

Experts suggest that incremental improvements, such as focusing on specific areas like self-service platforms or lending practices, can help both parties address these challenges effectively. Instead of overhauling entire systems, this approach allows for manageable and sustainable progress.

Meeting Digital-First Expectations

The rise of digital-first consumers, particularly among Generation Z, is reshaping financial priorities. According to the report, 23% of Gen Z consumers choose financial institutions based on self-service banking options, compared to just 15% of older generations. Recognising this trend, CUs are partnering with FinTechs to introduce seamless self-service solutions.

For instance, Pinwheel and Candescent have introduced a direct deposit switching tool for CUs, simplifying the process of transferring payday deposits. This reduces onboarding friction, enhances the member experience, and strengthens member relationships, enabling CUs to capture more deposits and reduce churn.

A Win-Win Future

The collaboration between FinTechs and CUs offers mutual benefits. CUs gain access to cutting-edge tools like AI-driven platforms and self-service banking solutions, enhancing their appeal to younger, tech-savvy consumers. Meanwhile, FinTechs tap into CUs’ established consumer base and industry expertise, expanding their reach in the financial market.

By aligning goals, addressing operational challenges, and focusing on incremental innovations, FinTechs and CUs are paving the way for a future where financial services are more accessible, seamless, and digitally enabled. As these partnerships continue to grow, they are poised to redefine the financial landscape, delivering greater value to both institutions and consumers.