by DAWN SIRRAS, CONSTELLATION DIGITAL PARTNERS
The digital transformation movement within the banking industry has opened the door for new market entrants and has raised table stakes for market incumbents. The explosion of the fintech marketplace has brought with it some challenges, but also some opportunities for credit unions. Topping the list of challenges is competition. Neobanks and fintechs present a new competitor in a space that hasn’t seen much change over the last several decades. How credit unions respond to that threat can be the make-or-break opportunity they have been waiting for.
These new threats on the horizon are organizations that are purely digital. They don’t exist with overhead or legacy architectures. They don’t require the structure, nor do they incur the regulatory burden of traditional banks and credit unions. They exist without brick and mortar and provide quick and easy, personalized services that are typically delivered entirely via mobile device.
Their rapid success is built on both simplicity and a lower cost model. Neobanks and fintechs do not need to be, or strive to be, everything to everyone. They keep it simple offering a niche service that solves a problem and drives loyalty – think gamified savings apps. They don’t need or want to sell you a loan. They just want you to keep coming back to play. This minimalistic approach keeps overheads low and minimizes regulatory requirements, translating into lower fees or more investment for R&D. Their lack of legacy technology is perhaps the greatest feather in their cap. This new breed of competition is digital-first – whereas traditional financial institutions are often forced to bolt digital offerings on top of outdated banking applications.
The disruption being driven has not gone unnoticed by traditional credit unions. Not only is it pressuring them to accelerate digital transformation initiatives including modernization of legacy technology infrastructure, but also to discover new ways of delivering a compelling member experience.
Read the full article on CU Insight.