CU 2.0 Fintech Friday: Unadat

It’s CU 2.0 Fintech Friday! Today, Chris Otey sits down with Unadat to discuss all things credit union, fintech, and digital innovation.

There is over $3,000,000,000,000 in outstanding personal debt in the U.S. right now. That’s three trillion. That’s the numeral 3 followed by twelve zeros. That’s enough to buy the New York Yankees more than 800 times. In short? That’s a lot.

Unadat seeks to help people outsmart their debt. Unadat works with mission-driven organizations like DCU to help people improve their credit scores and save on debt payments.

Unadata is a web-based platform with integrations into existing points of sale, such as those in credit unions. People can visit the website to find their best loan rates. Then, in order to ensure that they don’t get their loan applications rejected, Unadat finds ways to improve the applicants’ credit scores and perceived creditworthiness.

The goal is to help people manage their debt more strategically and effectively. Then, with Unadat behind them, they can stay more financially flexible and viable.

If this sounds like an intriguing credit union–fintech partnership, check out the video and Unadat snapshot below!

Credit Union Fintech Snapshot: Unadat

Top 3 Problems Solved

  1. Credit score improvement
  2. Debt management
  3. Financial wellness

Unadat Founder: Sean Smirnov

Unadat Market Strategy

Credit unions and anyone with debt.

Interested in seeing more fintech entrepreneurship? Check out the CU 2.0 fintech infographic, Death by 1,000 Cuts. You can see firsthand the impact fintechs have had on the credit union industry, as well as how fintech innovation can improve your income statement, balance sheet, interest margin, services, and more.

Credit Union 2.0 believes fully in the power of credit union and fintech partnerships. With the shared goal to redefine multifaceted financial services models look like to members, more credit unions are looking to partner with forward-leaning fintechs.

If you want to learn more about credit union–fintech partnerships, click here.

CU 2.0 Fintech Friday: Tunnel

It’s CU 2.0 Fintech Friday! Today, Chris Otey sits down with Tunnel to discuss all things credit union, fintech, and digital innovation.

Tunnel is a forward-thinking payment system that seeks to provide better payment rails. Their platform is built on distributed ledger technology (DLT), which has two significant benefits: security and scalability.

The reality is that current payment rails have been around since at least the 80s. Considering how different the world of payments is now than it was then, it’s almost unimaginable to think that we’ve been relying on outdated technology for so long.

Older payment rails have good—but not great—security, speed, scalability, and associated cost. However, Tunnel saw room for improvement.

Tunnel offers real-time, low-cost, secure payments using DLT. DLT allows Tunnel to offer a payment portal (or Tunnel—get it?) that incorporates new security features like two-party authorization, biometrics, and more, which will drastically improve fraud detection.

Plus, distributed ledger technology requires fewer intermediaries than traditional payment rails, which speeds up payment processing while costing much less.

Tunnel’s goal is to address challenges in the financial sector, but that can be a tough market to break into. Much of the older technology is entrenched—essentially grandfathered in—despite its shortcomings. Nevertheless, Tunnel is deploying in the U.S., where their adoption curve is steady and strong.

But don’t worry international market! Tunnel’s coming to you very soon.

If this sounds like an intriguing credit union–fintech partnership, check out the video and Tunnel snapshot below!

Credit Union Fintech Snapshot: Tunnel

Top 3 Problems Solved

  1. Payment processing
  2. Fraud detection
  3. Distributed ledger technology

Tunnel Founder: Frank Makrides

Tunnel Market Strategy

Financial institutions and consumers.

Credit Union Fintech: Tunnel in the News

An interview with Frank Makrides

Understanding the blockchain

Interested in seeing more fintech entrepreneurship? Check out the CU 2.0 fintech infographic, Death by 1,000 Cuts. You can see firsthand the impact fintechs have had on the credit union industry, as well as how fintech innovation can improve your income statement, balance sheet, interest margin, services, and more.

Credit Union 2.0 believes fully in the power of credit union and fintech partnerships. With the shared goal to redefine multifaceted financial services models look like to members, more credit unions are looking to partner with forward-leaning fintechs.

If you want to learn more about credit union–fintech partnerships, click here.

CU 2.0 Fintech Friday: Project Finance

It’s CU 2.0 Fintech Friday! Today, Chris Otey sits down with Project Finance to discuss all things credit union, fintech, and digital innovation.

Project Finance is a white-label online and mobile banking platform for banks and credit unions. Their platform is designed to assist members and customers with their financial goals. They do that by providing a layer of digital advice and guidance throughout the online banking experience, especially at the decision points people have when managing their money online.

One of the ways Project Finance accomplishes this is by leveraging machine learning. They source data from several sources, including from the banking cores they integrate with. From there, machine learning helps users better understand their current financial situation, provides predictive modeling to show their financial future, and offers recommendations and tools designed to help people better manage their money to achieve their goals.

What’s noble about Project Finance is their mission: they want to make people’s lives better. Although they come from a banking background, they’re diving into the world of credit unions because it fits with their philosophy. They want everyone to live financially happier, healthier lives.

Some key features of Project Finance’s software include:

  • Enhanced accessibility with biometric capabilities
  • Wide-ranging account management tools
  • Secure internal and external payment systems
  • Analytics-driven marketing and recommendations
  • Extensive third-party integrations

All of that is customizable through a powerful admin system that allows financial institutions to adjust user experience settings to better serve customers’ needs.

If this sounds like an intriguing credit union–fintech partnership, check out the video and Project Finance snapshot below

Credit Union Fintech Snapshot: Project Finance

Top 3 Problems Solved

  1. Online and mobile banking platform
  2. AI-driven banking
  3. Financial wellness

Project Finance Founders: Jeff Cole, Peter Cole, and Colby Ross

Project Finance Market Strategy: Banks and credit unions

Credit Union Fintech: Project Finance in the News

Project Finance assists with consumer finance

Project Finance thrives in the DCU Fintech Innovation Center

Interested in seeing more fintech entrepreneurship? Check out the CU 2.0 fintech infographic, Death by 1,000 Cuts. You can see firsthand the impact fintechs have had on the credit union industry, as well as how fintech innovation can improve your income statement, balance sheet, interest margin, services, and more.

Credit Union 2.0 believes fully in the power of credit union and fintech partnerships. With the shared goal to redefine multifaceted financial services models look like to members, more credit unions are looking to partner with forward-leaning fintechs.

If you want to learn more about credit union–fintech partnerships, click here.

Fail Forward Fast: Credit Union Lessons from the Fintech World

There are a lot of fads that deserve to be forgotten. Fidget spinners are one example. The mannequin challenge and Harlem Shake videos are others.

Let’s not get started on eating Tide Pods.

But some trends show us that there are other ways of accomplishing goals. Sometimes, hopping on a trend is less about fitting in, and more about finding a better way of doing things. Without trends, we wouldn’t have text messaging, YouTube tutorials, or ridesharing apps.

Here are a few things that credit unions can learn from the fintechs with whom we partner (and against whom we compete).

 

1. Push the Pace

 

Did you know that Amazon makes a software change roughly every 11 seconds? That’s about 8,000 changes per day.

Granted, technology changes are one of Amazon’s core competencies, but still—that’s a lot of changes.

Amazon is helping countless startups, fintechs, researchers, and individual users embrace machine learning, natural language processing, cloud hosting, and more. These kinds of technologies could drastically disrupt our industry (as well as many others).

Meanwhile, many credit unions still aren’t on the cloud.

At what point should credit unions consider these technologies an existential threat?

Well, that depends. If your credit union doesn’t trust new technology and wants to stick with the old-fashioned, tried-and-true way of doing things, then you should consider emerging technologies and software changes a threat now.

However, if you’re an early adopter of innovative technologies and software changes, then the future holds a lot of promise.

 

2. Understand Trends

 

Remember all that nonsense about fidget spinners and Tide Pods? Sure, they were obnoxious, but they revealed something incredible:

People are willing to try things.

One of the more interesting trends that has emerged in the last decade is the pop-up business model. Pop-ups are essentially strategically-deployed short-term shops. Pop-up retail shops see higher sales than online stores. Restaurant and bar pop-ups pave the way for new brick-and-mortar establishments.

South Bay Credit Union decided to hop on the trend: we set up a branch for $2,300, and we’re using it to reach new members, provide another location for existing members, and help people near our pop-up location better understand their finances and financial options.

It’s a risk, but it’s a risk we’re willing to take.

Understanding trends means a lot more than hopping on bandwagons, though. Understanding trends also means being engaged with new developments and changing regulations.

Most importantly, understanding trends means understanding members. Listening to member needs is critical to the future of credit unions. It’s the credit union’s job to give its members what they want (within reason, of course). Often, adopting emerging technologies or rethinking old strategies is the best way to make that happen.

 

3. Think Like a Fintech

 

Again, within reason. Here’s why: 90% of startups fail.

The reasons for that are various, of course. Sometimes it’s a bad product. Sometimes it’s lack of money. Sometimes their competitors just get there first. Sometimes the development cycle takes too long, or the scope of the project gradually expands, hogging resources.

Nevertheless, many startups make it. The ones that make it share several attributes that allow them to overcome obstacles or changes in direction, like prioritizing agile processes and hosting hackathons.

Here are a few of the most common attributes of great fintechs and startups:

  • They have a great product
  • They don’t ignore things—they actively listen and seek out feedback
  • They work on the business not in the business (minutiae of the day-to-day)
  • They emphasize growth
  • They recover quickly from setbacks

Credit unions already have a leg up in most of these areas. Great product? Check! Our rates are better than banks, and our customer service is unparalleled. Seek feedback? Double check! Taking care of our members is priority number one.

On the other hand, credit unions aren’t exactly in the business of creating new products or technologies the way fintechs do. With that in mind, here are some ways that credit unions can still serve as incubators of innovative ideas:

  • Meet with startups and fintechs
  • Roll out live betas
  • Listen to new ideas
  • Communicate with partners
  • Look outside typical networks

As technology continues developing at a rapid pace, we can play our part by keeping up with it. As we do, we’ll come across products, services, and strategies that benefit our members, our credit unions, and our communities.

Plus, we won’t be stuck with typewriters and personal checks when the rest of the world is using ipads and Venmo.

 

4. Create a Culture of Innovation

 

Fortunately, we’re moving into an era in which people appreciate creativity, effort, and authenticity. At no point in history have humans had such a green light to experiment, try new things, pursue exciting avenues for growth.

We support each other’s artistic works in progress on social media. We cheer on our friends as they train for their first triathlons. We let people know we support their efforts, even if they don’t always make it. You will likely find more support if you try and fail than if you never try at all.

Creating a culture of innovation means incorporating the above three ideas into one. Credit unions have to be willing to try new things and fail like a fintech or a startup. They have to understand what people—and the market—need. And, perhaps most importantly, they have to do it quickly.

Here are a few suggestions about how your credit union can speed up:

  • Build a culture of experimenting
  • Budget for unknown opportunities and failures
  • Create trust with the board
  • Report progress
  • Keep contracts short or cancelable
  • Think of vendors as partners
  • Learn at every opportunity
  • Don’t be afraid to pull the plug

The ultimate question is this: are you putting yourself out there? The answer should be “yes.”

Not everything is going to work out. Sometimes, it might seem like nothing will. However, surprisingly often, pushing for innovation will help you to discover or create something really cool. Or, at the very least, you’ll distinguish yourselves from the status quo.

You’ll rise above a sea of complacency, and you might even have fun doing it.

 

Tasting Our Own Cooking

 

At South Bay Credit Union, we’re experimenting with new technologies and ideas. We may not be making a software change every 11 seconds, but we’re doing our best to stay on top of critical developments and changes in our industry.

We opened a pop-up branch in a business center. We introduced CU Live video chat to support video banking for our members. We introduced Lease Look Alike and Visa’s Credit Card MobiMoney for our members’ convenience.

Not everything we’ve tried so far has worked. But that’s okay. We’re not here only to learn how to succeed.

We’re also here to learn how to fail. And we’re failing forward.

If you’d like to learn more about some technologies that can help your credit union, then check out the following blogs:

Email Marketing vs. Automated Marketing for Credit Unions

What Credit Union Marketing Automation Is, and Why It Matters

Jennifer Oliver is the President and CEO for South Bay Credit Union. She was previously the CEO for California Bear Credit Union. Overall, she has 30+ years of credit union experience, and 22+ years executive leadership in credit unions, including a focus in progressive management, sales & operations.

 

CU 2.0 Fintech Friday: Everyday Life

It’s CU 2.0 Fintech Friday! Today, Chris Otey sits down with Everyday Life to discuss all things credit union, fintech, and digital innovation.

Everyday Life Insurance is a fintech that provides affordable, appropriate life insurance. Everyday Life Insurance uses AI and machine learning to provide life insurance recommendations. After giving its recommendations, Everyday Life serves as a digital agent, helping people select and purchase plans.

Life insurance is slowly but surely going the way of the dinosaur in the United States. Especially for low- and middle-income families, the premiums associated with life insurance can be prohibitively expensive.

Unfortunately, a lack of life insurance can also be a burden on families. In the last year, there were more than 125,000 GoFundMe campaigns requesting memorial service funds alone. That number doesn’t include other costs, nor does it cover other crowdfunding platforms.

Clearly, life insurance for lower- and middle-income earners is necessary. However, much of the industry in its current form can’t accommodate these demographics.

And then there’s the way that life insurance is frequently sold. First, new tiers of service, additional perks, and complicated upgrades get confusing. Then, insurance salespeople make commissions on their sales, which incentives upselling to policies that people don’t need, while also contributing to higher premiums.

It shouldn’t be so difficult.

Everyday Life Insurance aims to make the process of purchasing life insurance easier. By using AI and machine learning, they can quickly determine the best policies for people. By using these new technologies—and by refusing sales commissions—they can often recommend life insurance plans that can save 80% off the cost of traditional policies.

If this sounds like an intriguing credit union–fintech partnership, check out the video and Everyday Life snapshot below!

Credit Union Fintech Snapshot: Everyday Life

Top 3 Problems Solved

  1. Life insurance recommendations
  2. Life insurance purchasing
  3. Life insurance advocacy

Everyday Life Founder: Jake Tamarkin and Dipali Trivedi

Everyday Life Market Strategy: Individual consumers and credit unions

Credit Union Fintech: Everyday Life in the News

What’s wrong with life insurance?

What kind of life insurance do you need?

Interested in seeing more fintech entrepreneurship? Check out the CU 2.0 fintech infographic, Death by 1,000 Cuts. You can see firsthand the impact fintechs have had on the credit union industry, as well as how fintech innovation can improve your income statement, balance sheet, interest margin, services, and more.

Credit Union 2.0 believes fully in the power of credit union and fintech partnerships. With the shared goal to redefine multifaceted financial services models look like to members, more credit unions are looking to partner with forward-leaning fintechs.

If you want to learn more about credit union–fintech partnerships, click here.

CU 2.0 Fintech Friday: CU Student Choice

It’s CU 2.0 Fintech Friday! Today, Chris Otey sits down with CU Student Choice to discuss all things credit union, fintech, and digital innovation.

CU Student Choice works with credit unions to provide prospective university students with student loans. Their goal is to simplify the college loan process for students. This simplification, they hope, will help students find good-value educational loans to finance their education. They also make it so that the borrower doesn’t have to reapply for loans each year.

For all of us who have taken out federal student loans at some point—that setup sounds like a breath of fresh air. Nobody likes filling out FAFSA forms year after year.

It sounds even better for those of us who took out private student loans. The interest rates on those often exceed any reasonable boundaries.

The current loan landscape is fraught with difficult decisions. CU Student Choice wants to help make those decisions easier. To that end, they look to partner not only with credit unions, but with other fintechs as well. For example, they work with Edmit to streamline the college search as well as the finance journey.

If this sounds like an intriguing credit union–fintech partnership, check out the video and CU Student Choice snapshot below!

Credit Union Fintech Snapshot: CU Student Choice

Top 3 Problems Solved

  1. Student loans
  2. Student loan refinancing
  3. Finance for students

CU Student Choice Founder: Scott Patterson

CU Student Choice Market Strategy: Credit unions and fintechs

Credit Union Fintech: CU Student Choice in the News

CU Student Choice provides student borrowers with new loan options

CU Student Choice partners with FutureFuel.io to assist with student loan repayment

Interested in seeing more fintech entrepreneurship? Check out the CU 2.0 fintech infographic, Death by 1,000 Cuts. You can see firsthand the impact fintechs have had on the credit union industry, as well as how fintech innovation can improve your income statement, balance sheet, interest margin, services, and more.

Credit Union 2.0 believes fully in the power of credit union and fintech partnerships. With the shared goal to redefine multifaceted financial services models look like to members, more credit unions are looking to partner with forward-leaning fintechs.

If you want to learn more about credit union–fintech partnerships, click here.

Ready to partner with a fintech? Here’s what you need to know

With the shared goal to redefine what a multifaceted financial services model looks like to members, more credit unions are looking to partner with forward-leaning fintechs. But does this approach make sense for all credit unions?

“The biggest challenge I have seen between fintechs and credit unions is the culture shock,” said John Best, CEO of Best Innovation Group. “Fintechs are used to being lean and moving fast. They expect to have technology in place that will allow them to do this. Credit unions are a bit more slow-moving and sometimes don’t have the technology that a fintech would expect.”

During a recent web seminar exploring this topic, Capstone Managing Director John Dearing noted that over the last five years, 20 fintech companies — incuding TradeKing and Openpay — have been acquired by banks, and 40 percent of these acquisitions occurred in the last eight months. In April 2018, for example, Goldman Sachs acquired Claritymoney, a PRM app.

“We would love to have a slide next year that has credit unions on the left hand side and show all the investments that have been done through CUSOs or other partnerships,” said Dearing.

Joining Dearing was CU 2.0 founder Kirk Drake, who noted that one of the leading reasons fintechs want to partner with credit unions is because CUs have a loyal member base.

“It’s hard for a fintech to get 30,000 or 40,000 users, so there is a lot of interest partnering with credit unions,” he said.

Among barriers credit union executives face is that many fintech companies come to the table with “half-baked” concepts that “lack proof-of-concept” or a proven business model, said Drake. But he views this as an opportunity — getting in on the ground floor.

“Credit unions are risk-averse and they don’t know how to structure [fintech] deals to minimize the risk,” said Drake. And with so many new fintechs popping up, he said, it becomes difficult to pick the “winning” partner.

Whereas vendors traditionally came to credit unions with solutions designed to last five years or more, he said, fintech models are constantly evolving and may only have a shelf life of 12 to 24 months.

“Oftentimes it’s not the best tech or user interface that wins, but the business model and the market,” said Drake. “This challenges the traditional credit union vendor-management program.”

Fintech and CU success stories

Big banks are not the only FIs in the fintech game. Credit unions have thrown the proverbial hat in the ring as well, including the Boston-based Digital Federal Credit Union (DCU) and its Fintech Innovation Center.

“First and foremost, we are looking for opportunities to partner and learn from fintechs,” said David Arauno, DCU’s SVP of technology and innovation. “We are currently hosting 20 different fintech companies in our space. Some of them have alignment with our initiatives and some don’t, but regardless of alignment, it is a tremendous opportunity to learn from these entrepreneurs.”

Araujo further explained that there is “no set path for success” at the center or how best to work with fintech startups.

“We simply learn about their product, what their needs are to gain traction in financial services, educate them on our industry, and where it goes from there can vary,” he said. “We have run pilots, done proof of concepts and signed contracts with these companies.” One successful partnership born from the Center is Digital Onboarding (digitalonboarding.com), he added.

When working with a fintech company, Araujo said credit unions must keep in mind the age of company — especially when interfacing with a management team tasked with reviewing proposals.

“The companies we work with are early stage and are looking for guidance as they figure out their path to market. The CU management team has to look at the possibilities of what they are working on and be patient to help them down that path,” he said. “It doesn’t always mean a longer delivery expectation, but simply a different conversation from buying something off the shelf.”

While a guestimate, Best Innovation Group’s Best said perhaps 5 to 10 percent of all credit unions may be presently working with fintech companies. And while it would seem logical that larger credit unions are leading the charge, it’s not always the case.

“I have started seeing $200 and $300 million dollar credit unions engaging. The trend is that the current CEO is retiring and the new CEO inherits the capital that the CU was sitting on and needs a place to invest,” said Best. “Because they are smaller, they can move a bit faster as there aren’t as many services to overhaul in order to move toward a digital investment.”

Finding the best partner

During Drake and Dearing’s webinar, the pair suggested credit unions develop a strategy, be proactive, define ideal outcomes and select a market/sector to focus on, all the while remaining objective.

But for fintech companies, getting used to regulatory compliance measures that credit unions face remains a hurdle.

“Finding the right partner can be tough and time consuming you may have to go through a lot and might need to try a few to see what is the best fit over time,” said Dearing. “Being proactive and defining your ideal outcome and staying objective [is important]. Look at the passion of the entrepreneur, their background and geographic scope and technology development cycles. There are ways to prioritize and vet potential partners.”

In most cases, there are three possible partnership models: joint venture, CUSO investment and working with a vendor. While Best said one option isn’t necessarily better than another, he prefers either the CUSO or vendor approach as opposed to the “scarier” joint-venture model that is often not as organized.

Since a CUSO is formed around the fintech, Best said this generally is a good approach because the fintech depends on scale to be successful. Examples would be a payments platform or a messaging platform.

“There is a built-in customer base, ability to control some of the roadmap or direction of the organization,” said Best. “There is reduced cost due to scale and better support and there could be a revenue opportunity.”

The downside to a CUSO model is if the fintech has banking customers or other pursuits, which may result in the CUSO getting lost in the shuffle, noted Best.

“The diversity of CUs can sometimes cause issues for the fintech, such as different cores or different regulatory issues, as they are used to a one size fits all approach,” said Best. “The CUSO will be regulated as though it is a credit union and this can also cause issues for the fintech.”

Credit unions that partner with vendors such as PSCU, CO-OP and CUDirect, added Best, have the opportunity to leverage existing frameworks to work with a fintech.

“They have resources to vet the business opportunity as well as the technology and staff to support a fintech, so the credit union’s risk is reduced,” said Best. “The cons are that the vendor may not see the value in the fintech that the credit union does or may be interested, but cannot move as fast as the credit union that desires the fintech services would like.”

Should CU’s Partner with Fintech Companies?

A common question we get at CU 2.0 is, should credit unions partner with fintech companies. Then, if the answer is yes, how should the partnership work and which fintech companies should credit unions work with.

The answer is in fact yes. However, as with most things in life, the question goes deeper than you would initially think. For example, if you believe your credit union can develop code better, faster, and more customized than a fintech, then this article is probably not for you. If you are a do it yourself shop, maybe this is not a path you should walk down. However, if you recognize that you exist in a pretty big space with tons of players, please read on.

It is important to realize that innovation rarely, if ever, comes from incumbent vendors. Very little innovation comes out of the traditional, legacy core providers. As the internet continues to age, some of the early providers of mobile and online banking have aged with the internet to the point that they have such large existing books of business and backlogs of development that they cannot be viewed as innovative anymore.

Before we get started, we want to ensure you have the full picture. It’s important to know the difference between being a fast follower and being a company that is not afraid to fail forward fast. Being a fast follower is just a polite way of saying that you have no original thoughts and that you follow trends as soon as you find them. Failing forward fast does not mean that you court failure. It simply means that you take ideas (your own and/or from others), implement them, measure them, and move forward, whether good or bad. Despite what you may have heard, integration, while important, is NOT innovation, and waiting for a legacy provider to help you remain relevant, is not something a credit union should depend on.

Now that you understand the key concepts, here are several fundamental points to use when evaluating new technologies offered through fintechs. Be aware that fintechs are not following traditional revenue models. A basic traditional model involves a credit union paying their legacy provider a large capital outlay to acquire the solution then 20% maintenance on that solution in perpetuity. Oh, and don’t forget the 3%-7% CPI increases each year. Think about that, if you have been on a core solution for 12 years, how much are you actually paying? I would have to say it is much more than the market would bear today. Meanwhile, fintech companies, at least the good ones, would rather participate in your success. When evaluating a fintech solution, pay attention to the revenue model. If the fitech gets paid when you make money that is a winning solution. If the fintech want a large upfront payment and “maintenance” or “per application” fees, be leery. Almost all the fintech companies that CU 2.0 works with have a model in place that pays them based on the success of the credit unions that deploy their solution. For example, a provider of alternate loan decisioning and offers should only take a piece of the loans made when they are paid. The per application model is dead. This is just one example of hundreds of fintech ideas out there. Do your due diligence before partnering up with a fintech.

If you are a credit union evaluating whether to adopt or partner with a fintech, choose a fintech that wants to participate in your success and your members success.

Want to learn more about what fintechs are out there? Click here to view the CU 2.0 Fintech Database.