The downloadable version of this guide is available here.
This 2.0 Guide is intended to show the state of liquidity-enabling and deposit generating fintechs and how they help credit unions maintain their ability to meet short-term obligations.
For the purposes of this guide, managing liquidity comes in two primary forms. First, there’s generating deposits. Second, there’s the ability to buy, sell, or otherwise manage loans and deposits. We’re focusing on these two facets of liquidity specifically to meet the credit union need for liquidity, especially under the more intense regulatory scrutiny in a post-COVID, high-rate environment.
Particularly for deposit-generating fintechs, we’ve been judicious about which fintechs we include in this guide. Here’s why:
There are many fintech solutions that may increase deposits but could be difficult to measure, such as any solution that helps members pay down debt or improve their cash flow. Additionally, there are many solutions that may indirectly increase deposits as a result of their primary function, such as digital account opening providers.
For this guide, unless the fintech directly increases deposits, we’ve omitted it. We’ve included debt-reduction fintechs only if they can demonstrate a path to deposit generation. Naturally, the above stipulations about deposits don’t pertain to fintechs that enable liquidity, such as through loan syndication, participation, and sales, or through a deposit network!
Liquidity and Deposit Trends and Statistics
Credit unions face increased credit risk.
Inflation, high interest rates and borrowing costs, declining member savings, and the end of COVID-era stimulus programs have contributed to increased credit risk.
Delinquency rates are steadily climbing as savings rates continue to fall.
Furthermore, the rapid expansion of loan portfolios toward the end of the pandemic hasn’t performed consistently, especially recently.
For this reason, credit unions may want to consider partnering with fintechs that help members pay down debt and build savings.
Liquidity risk is an ongoing concern.
Consistently, experts have tried to forecast interest rate levels, and consistently, timelines get pushed back. It’s hard to gauge the long-term impacts of high inflation and high rates, which has led to understandably conservative guidance from the NCUA.
For now, the NCUA is looking for increased focus on forecasting and more stringent approaches to cash flow and risk. The need for contingency funding has created a liquidity challenge and a barrier to both earnings and capital.
Consequently, credit unions should consider working with any fintechs that facilitate loan buying and selling, and any solutions that increase member deposits.
Credit unions can’t just stop making loans.
“Credit” is the first half of “credit union,” after all!
Moreover, credit unions have tightened credit boxes to manage credit risk. As a result, delinquencies are starting to drop, but so are originations. With that trend comes a new risk of tightening loan requirements to the point where credit unions risk losing members to competitors. Members (and prospective members) still need loans, and failing to lend risks the relationship. However, credit unions can syndicate, participate, and buy/sell loans to ensure their portfolio meets their needs. These solutions allow credit unions to continue lending—even large amounts—while still effectively managing credit and liquidity risk.
Evaluation Strategies
Not all liquidity and deposit fintechs operate the same way. In fact, in our research, we’ve discovered that all solutions are unique in function and features, even if their end results are similar.
Consequently, there are several things to consider when evaluating liquidity and deposit fintechs:
Impact on deposits
How much additional deposits can the solution generate per member (on average)? How many members will use or benefit from the solution?
Member experience
Is the product attractive and easy to use? Does it encourage loyalty and engagement? Will the fintech help members achieve their financial goals?
Integration and compatibility
Does the solution require core or digital banking integration? Will other systems have easy access to the solution’s data?
Risk management
Will the fintech help your CU mitigate loan defaults or liquidity shortages? Can it help you balance your portfolio?
Support and training
How much training will the product/service require? Will the vendor provide ongoing support?
Employee experience
Does the product automate any employee tasks? Will it make anyone’s job easier? Or will it add complexity to someone’s workflow or duties?
Flexibility and scalability
Can the solution grow with the credit union? Are there any modular elements that credit unions can customize for their own strategic goals, or is it plug-and-play?
Fintech Categorization
Most fintechs fit into 3 categories:
- Those that want to steal your lunch. These are generally direct competitors or short-time partners that reduce your share of the member’s wallet.
- Those that want to sell you lunch. These fintechs will provide you and your members a service, and they’ll charge you the same whether it’s successful or not.
- Those that want to share lunch with you. Some fintech financial success is contingent on their product success, so they’re uniquely incentivized to ensure good outcomes for partnered credit unions.
Generally, CU 2.0 recommends looking into fintechs that want to share lunch (and avoiding those that want to steal your lunch), but there are good partners across the spectrum.
Additionally, these groupings are estimates, and we may not have the correct information about all fintech partnership success models.
This is one of the charts that we put on our downloadable version. If you want to see how we categorize these fintechs, click here or scroll down to get the PDF!
Fintech Ratings
Rating Methodology
CU 2.0’s rating methodology attempts to score fintechs based on the 4 most important factors for credit unions:
- Income statement: (1) Non-interest income and/or deposits, (2) interest income, (3) both
- Balance sheet: (1) Deposits, (2) loans, (3) both
- Member impact: By members affected: (1) 1–33%, (2) 33 – 66%, (3) 66–100% and/or memberization
- Employee impact: (1) Improves workflows, (2) automates some, (3) automates a lot
We score each category above on a scale of 1 to 3 according to the scale above, with scores of 0 indicating that the solution has no known impact. Additionally, in some guides, providers will have very similar scores.
Our ratings don’t necessarily correlate to quality, nor do they suggest which solution is best for you.
Fintechs with higher scores aren’t automatically better, or a better fit, for your credit union and members. Additionally, please note that these ratings are estimations based on our understanding of the product or service.
| Fintech | Description | Income Statement | Balance Sheet | Member Impact | Employee Impact | Solves for |
| Changed | Changed rounds up spare change from transactions and uses it to pay down user debt (mortgage, student, auto, etc.) or increase savings. | 1 | 1 | 2 | 2 | Credit risk, deposit generation |
| Debbie | Debbie improves member finances with automated savings and competitive, high-yield interest rates. | 1 | 1 | 3 | 2 | Deposit generation |
| EarnUp* Learn more | EarnUp turns vulnerable people with debt into healthy members with payment plans. | 3 | 3 | 1 | 3 | Credit risk, deposit generation |
| Guac* Learn more | Guac strengthens bonds between credit unions and their members by automating savings and driving deposits. | 1 | 1 | 3 | 2 | Deposit generation, credit risk |
| LoanStreet | LoanStreet is a loan participation and trading platform that helps credit unions manage their portfolios. | 3 | 2 | 0 | 0 | Liquidity |
| ModernFi* Learn more | ModernFi helps credit unions grow deposits and member relationships by providing accounts with extended NCUA insurance to attract and retain large-value members. | 2 | 3 | 1 | 1 | Liquidity |
| Nickels | Nickels helps members pay down credit card debt and promote credit union products to help with debt and savings. | 3 | 2 | 1 | 1 | Credit risk, deposit generation |
| Painted Hills* Learn more | Painted Hills optimizes credit union balance sheets with its loan marketplace and syndication capabilities. Partners with Quilo. | 2 | 3 | 1 | 2 | Liquidity, credit risk |
| Personetics | Personetics offers a self-driving finance product that powers debt repayment and deposit generation. | 1 | 1 | 2 | 2 | Deposit generation, credit risk |
| Plinqit | Plinqit partners with financial institutions to offer automated savings based on the user’s goals and financial picture. | 1 | 1 | 2 | 2 | |
| Quilo* Learn more | Quilo is an AI-powered loan syndication network and marketplace with inbuilt ALCO and automated balance sheet optimization for lenders in network. Partners with Painted Hills. | 2 | 3 | 1 | 2 | Liquidity, credit risk |
Did we miss a fintech? Please let us know at info@cu-2.com
Recommendations
Choosing the right fintech partners is never as easy of a decision as we’d like. There are no one-size-fits-all solutions.
At CU 2.0, we discover, research, and work with fintechs all day, every day. Often, we’ll have unique insights about a company’s product, team, or operations that won’t show up on a sales sheet.
So, although we can’t give blanket recommendations through a downloadable guide, we can do something even better. Book a 30-minute consultation with us at no cost here:
Each quarter, we’ll review and discuss fintechs you’re looking at. We’ll also introduce other fintechs that may be of interest!
