Do Fintechs make good Partners?

By Dean Michaels, CO-OP's Head of Corporate Development & Strategic Partnerships. Maybe you'd rather partner with fintech than fight it. But how do you make sure the partnership is a win for everyone?  If you’re tired of looking over your shoulder at the threat of fintech startups, you might be considering a different approach. The idea of credit unions partnering with fintech companies has been getting more play recently, and with good reason. Certainly, it’s more appealing to think of joining the fintech movement than to be run over by it. Will credit unions see real benefits from partnering with fintech companies? As the head of Corporate Development and Strategic Partnerships for CO-OP, my emphatic answer is yes — although with a few serious qualifications. Fintech companies and credit unions have a lot to teach each other. But the way you forge and cultivate these relationships can determine their success. The following are a few observations about the power of unlikely partnerships. Starting at Uncomfortable Many credit unions see fintech as a threat. That’s not a mistake: To the extent that credit unions fail to meet the challenge of digital integration and innovation, fintech certainly is a threat. Fintech is also the credit union industry’s opposite number. Fintech startups excel at innovation that’s unencumbered by traditional thinking or regulatory concern. Their brands are brand new — shiny and attractive but with relatively little history or brand equity. Credit unions, on the other hand, represent time-tested stability. They’re experts at working with complex regulatory environments and legacy technology. Not only do credit unions have an established member base, but they are also widely seen as the “good guys” in financial services. These differences make fintech and credit unions an uncomfortable fit. It’s also exactly why these partners are valuable to each other. Fintechs struggling to establish authority, scale or distribution envy credit union market share. Credit unions need that innovative spark. Though they make an odd couple, fintechs and credit unions complete each other. The Power of Partnership But that doesn’t make every fintech + CU partnership a match made in heaven. Smaller credit unions, for example, may lack the resources to invest or partner with potentially risky startups. Leading-edge technology companies struggle to make the cultural leap when working with traditional industries. At CO-OP, we’re asking these questions daily as we work to connect credit unions with fintech through our evolving ecosystem. For example, this year CO-OP will implement fraud detection based on machine learning in partnership with the fintech company Feedzai. Our credit union clients will have access to leading-edge security without the effort of finding the right fintech partner and developing individual solutions. In a parallel vein, CO-OP’s new Co-Creation Councils are bringing credit unions together to identify and develop ideas that will benefit the industry — with CO-OP facilitating fintech partnerships as needed. Playing this role is a key strategic function for CO-OP. Instead of vying for resources and market share as rivals, credit unions and fintech companies should be creating synergy as partners. By helping to develop and manage these rela- tionships on behalf of our clients, CO-OP is making unlikely partnerships more feasible — and productive. With active leadership and the cooperative expertise the CU industry is famous for, real symbiosis is possible.