The shape of the financial industry is changing.
In 2011, there were 7,094 NCUA-insured credit unions with $962 billion in assets. By 2021, there were 4,942 fewer credit unions, but their assets had swelled to $2.06 trillion. Conversely, the financial technology (fintech) industry is growing. With an average annual growth rate of nearly 25%, the fintech industry is among the fastest-growing worldwide. The latest fintech statistics suggest that the sector should hit a value of almost $310 billion by 2022 if this positive trend continues.
The banking business model as we know it has not changed for hundreds of years, but the world and the consumer has. The top five business sectors that are not only providing current economic profit but also long-term valuation, according to McKinsey Global Institute, are:
Semiconductors
Media
Software
Pharmaceuticals
Technology Hardware
And when we dive in a bit closer, we see that fintech software - PayPal, ANT group, stripe, and square are doing exceptionally well.
What do these companies offer that makes them so different?
They make the user feel this magic. Specifically, the transaction experience is consistently seamless and ubiquitous. The consumer doesn't think about if a p2p will work. They know that it does. They also collaborate with external ventures to align with the marketplace needs. This is a different way of thinking about financial services, a more innovative and disruptive view.
Take, for example, the collaboration between Apple and Goldman Sachs.
Many would say that Apple offers an established brand priced like a luxury brand with a solid core of growing middle to high-income millennials. Goldman Sachs is also an established brand as one of Wall Street's best-known names in investment banking. While it is non-traditional for an investment bank to offer a consumer offering, aka the bank issuer of the Apple card, it does allow the investment bank a foothold into a market that fits nicely into their latest offering, Marcus. Marcus is an online bank targeted to the same target Apple serves, growing middle and high-income millennials.
This combined offering solves the business problem of making the apple purchase experience an extension for their brand, specifically something new and different than anything on the market. They offer 3% cashback on apple purchases, interest-free monthly installment payments, and 2% cashback for all other purchases. It allows several partners to merge credit lines to form a single co-owned account. The cash function is deposited daily into the apple card housed in the apple wallet app (ideally leveraged on an apple phone) or sent directly to a bank account.
Credit unions have the same opportunity to identify fintech partnerships and build collaborations.
One of the fastest growing CUSO segments is fintech. As 2023 is underway, now is a perfect time to identify the short list of needs and wants that will help shape new collaborations and partnerships.
The member's needs
The credit union exists to solve four problems for its members:
Shelter problem
Transportation problem
Travel and play problem
Rainy day and Retirement problem
Identify new opportunities to solve member problems
1. Evaluate and optimize the core business.
What are the offerings and processes that the credit union does well, and what are the ones they can optimize?
2. Identify who else is in the member's wallet.
Your member currently has a relationship with PayPal, Venmo, and possibly robin hood. You know where they shop, what kind of car they drive. Review this spending and financial relationship behavior goldmine, identify trends, and look for member needs and potential collaborators. Perhaps a collaboration is a new rewards program for your credit and debit card that features retailers with which the members already have a relationship. Maybe a trend is a financial advice about investment or debt management.
The point here is how to think differently about two things. 1) your members' use of current products and services and how they align to the members' needs 2) who is a current disruptor that could also be a collaborator. This shift takes innovative thinking and openness to new opportunities, partnerships, and collaborations. Who will your credit union consider for a 2023 partnership?
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