By John San Filippo
Finopotamus has assembled a panel of experts in a recurring series, The Hippodrome Experts Panel. Each month, we ask the panel a relevant technology question and share their informative responses. To kick off the new year, we asked our experts for their 2024 fintech predictions. Respondents are presented in alphabetical order by company name. The names below are hyperlinked for your convenience.
This article includes responses from:
Landon Glenn, Chief Executive Officer, ASA
In 2024, credit unions will expand their digital presence by providing members the ability to securely and privately transact online. Credit unions, with their strong network of members, are well positioned to become the channel for all things digital. Imagine your members connecting to fintech apps, through a customized credit union co-branded app store but instead of the credit union paying for access to each fintech app, the fintech apps pay the credit union a percentage of all revenue generated. Members securely and anonymously utilize technology, without sharing username, password, email and bank routing account numbers.
With this digital expansion credit unions provide members with the ability to access, permit, and use technology apps without sharing personally identifiable information; placing credit unions in a position to comply with regulatory data, privacy and security proposals. This allows credit unions to retain control of member relationships and data while providing members with digital experiences they crave.
By expanding their digital capabilities, credit unions will become the trusted network through which members can anonymously verify their identity, connect banking data and engage in commerce. Credit unions become the center of their member’s digital experience. A member, through their credit union, can access a trust network where they could buy a car online knowing that both parties are authentic know your customer (KYC) verified participants and the funds can sit in escrow, ready to be deployed upon close of the transaction.
Increased trust, privacy, and convenience will result in credit unions providing members with greater access to and adoption of financial technology in the new year.
Paula Beck, Channel Solutions Executive, Avivatech LLC
In 2024, my top financial technology prediction revolves around the widespread adoption of advanced cash automation solutions in the fintech industry. As cash continues to play a vital role, it has become increasingly challenging for banks and credit unions to manage the associated complexities of handling and processing physical currency.
The ongoing labor shortage and rising costs of manual cash handling processes have created an urgent need for innovation. Financial institutions (FIs) will prioritize strategic investments in cutting-edge cash automation solutions. These technologies are designed to automate labor-intensive tasks such as counting, moving, and overseeing cash, addressing the challenges faced by FIs in efficiency, accuracy, and security.
By embracing advanced cash automation, FIs can achieve immediate efficiency gains. These solutions not only streamline the labor-intensive processes but also provide detailed operational data that can be analyzed to uncover trends and issues. This data-driven approach frees up leaders from tedious manual tasks like spreadsheet management and report generation.
The operational advantage(s) gained through automation extend(s) to various aspects, including CIT (cash in transit) planning, teller staffing optimization, maintaining optimal cash on-site, and ensuring the performance and security of cash handling devices. Regional branch managers and retail banking operations executives can make informed decisions based on real-time data, leading to improved overall branch efficiency and security.
As the industry faces economic headwinds in 2024, the adoption of advanced cash automation solutions will not only address the immediate challenges posed by manual cash handling but also position financial institutions for long-term success by leveraging data-driven insights for informed decision-making. This strategic investment will be crucial for FIs looking to navigate the evolving landscape and maintain a competitive edge in the fintech sector.
Manish Gupta, Founder and Chief Executive Officer, Corridor Platforms
We believe the comprehensive need for digitization of credit unions, encompassing both front, middle and back-end processes, is one of the most important technology trends worth paying attention to this year.
As credit union leaders are aware, today’s members expect swift and intuitive digital transactions, spanning account opening, deposits, fund transfers, loan originations, and credit card applications. They want their credit union to promptly understand and predict their needs, address queries and deliver tailored products and services in real time.
The challenge these leaders are facing is how to create this level of process automation – this will require critical upgrades to the data infrastructure, as well as analytical talent and digital decisioning capability modernization. The decision to build, buy or rent becomes pivotal in achieving this functionality. While outsourcing provides a quick solution, credit unions that take ownership will cultivate greater self-sufficiency, gaining a strong competitive edge and a comprehensive understanding of its regulatory compliance details.
Ensuring your technology infrastructure is modernized with personalized decisioning will also be imperative for securing member loyalty. National banks and fintechs, having invested in cutting-edge technology and advanced data capabilities, can leverage members’ financial activity details with consent, offering competitive rates and superior digital experiences. This creates a pull for credit unions to enhance the speed of decision-making processes to compete effectively and retain members.
Likewise, credit unions have the capability to integrate proven technology to elevate their member experiences and match the speed and capabilities of larger institutions. Investments into understanding data, developing artificial intelligence (AI) models, refining response mechanisms, enhancing product offerings and risk-based pricing and automating these processes will be crucial for next-gen banking. Additionally, advancing the tech stack to leverage customer data insights will enable credit unions to deliver competitive rates on deposits and loans, as well as successfully win new members and retain a loyal membership base.
Philip Paul, CEO, Cotribute
In 2024, my top financial technology prediction for the credit union industry is the widespread integration of advanced technologies to re-imagine the member acquisition process and revolutionize the member and the credit union employee experience. The adoption of innovative solutions tailored to the unique needs and constraints of credit unions is needed to overcome historical challenges. The key focus will be on decisioning intelligence in account opening while automating and streamlining these processes to enhance operational efficiencies, drive membership growth and ensure sustained profitability. The urgency of this matter is exemplified given recent statistics that demonstrate only 6% of new accounts are opened by credit unions, in stark contrast to 47% by digital banks and fintechs.
Credit unions must strategically address the challenges posed by direct-to-consumer fintechs eroding market share. To successfully differentiate against these competitors, streamlined onboarding must be a considered directive. The goal is to eliminate manual steps, identify fraud, reduce onboarding time and optimize overall operations, while closing the gap in financial and technological resources compared to consumer fintechs.
Credit unions are facing challenges such as resource constraints and the imperative to align membership growth, loan growth and deposit growth with operational efficiency and member experience. Overcoming these challenges will require a strategic approach involving collaboration, technology partnerships and innovative solutions tailored to the unique needs and constraints of credit unions. The road to implementation involves bridging the resource gap and positioning credit unions competitively against the rising tide of consumer fintechs.
Kirk Drake, CEO and Co-Founder, CU 2.0
AI, AI, AI. 2024 is the year that every credit union should jump on the AI bandwagon and begin using it in every single area. You should be able to measurably improve all employees’ productivity during the year.
Liquidity improvements and balance sheet optimization through use of real-time liquidity tools and fintech partnerships to buy/sell loans and bring on deposits.
Overdraft/nonsufficient funds (NSF) changes are coming. Get your toolkit in order to weather the storm with more transparent member driven solutions.
Simon Marchand, Vice President, Fraud & Risk Strategy, Geocomply
Amidst the recent news taking the crypto world, with Binance's CEO pleading guilty to federal charges around AML and violation of the BSA, I expect financial institutions to revisit their own practices when it comes to compliance with all rules and regulations they must operate under.
It's evident that relying solely on technologies like IP-based location is no longer sufficient. And as this topic takes more importance for the regulators, realizing how ineffective it is to fight money laundering, it seems unavoidable to see regulators start to work on what should be the next level of mandated geolocation to prevent criminal activity. And we expect the new requirements of advanced geolocation to be quite high.
I anticipate collaborative efforts between compliance, fraud, and risk teams to scrutinize their location technology stack. They'll likely be compelled to do so, earlier than later to give them time to carefully assess available options, vendors, and negotiate contracts with suitable technology providers and partners. All before a formal mandate is put in place and rushes the decision-making which could lead to costly last-minute omissions in the selection processes.
I'm expecting to see a surge in requests not only for advanced geolocation applied to compliance, but for a technology that includes strong antifraud capabilities; the ability to locate fraudsters taking over accounts, to prevent fraudulent account openings, to better inform decision-making on risky money transfers, etc. all of that will make some vendors stand out. And the ability to provide expert support from in-house analysts will be the key differentiators for smaller buyers such as regional banks and credit unions, because it will be the best way to maximize their investments by reducing fraud losses, all while positioning themselves as champion of compliance, from a single tech stack.
What was once considered peripheral and niche tech—advanced geolocation — now stands poised to be the linchpin of many financial institutions' strategies in 2024. Undoubtedly, 2024 will mark the gradual demise of weak and ineffective IP-based location systems.
Rick DeLisi, Lead Research Analyst, Glia
Consolidating the tech stack is a top trend, and we’ll see more credit unions seeking to unify member experience technologies in 2024. For many that starts with moving from legacy telephony-based support systems with disparate point solutions to a single-platform solution.
It has become critical for organizations to prioritize the evolution of how they interact with their members in today’s ‘always-on’ environment, embracing an inclusive service approach that breaks the limitations of legacy telephony platforms to offer effortless, personalized member experiences. To overcome the obstacles of the call center paradigm, many are looking to adopt a unified platform that enables multiple channels – such as voice, digital, SMS and chatbots – within a single platform. By seamlessly blending digital, phone and automation on one platform, credit unions can serve members when, where and how they prefer assistance.
The unification of member interactions is also extremely beneficial for agents and managers. Internal processes are streamlined and reporting, staffing, training and management of previously siloed channels are centralized, saving time and enabling smarter business decisions. Such a strategy has been proven to simultaneously increase revenue, operational efficiencies and member loyalty, and we expect more credit unions to adopt this approach in the coming months.
Griffin McGahey, President, HC3
Fintech sustainability. While the fintech sector has been synonymous with innovation and disruption, 2024 marks a turning point where leaders emphasize long-term profitability. Fintechs are increasingly under scrutiny to demonstrate their viability as sustainable businesses, moving beyond rapid customer acquisition and proving their ability to generate consistent revenue and profits.
According to a report by CB Insights, “Fintech funding fell 3% quarter-to-quarter to hit $7.4B in Q3’23, leveling off after seeing sharp declines in most quarters since the end of 2021. Meanwhile, deal count fell by 18% quarter-to-quarter .”
Investors and stakeholders seek a more balanced approach combining innovation with financial stability. Fintech companies must showcase robust business models, effective risk management strategies, and a clear path to profitability. This shift towards long-term sustainability is essential for fostering investor confidence, ensuring regulatory compliance, and securing the longevity of fintechs in an ever-changing financial landscape.
Jerry Young, Chief Executive Officer, ieDigital
We all know that the fintech sector is defined by constant evolution. It has never stood still since the first digitally driven payment solution was implemented many years ago.
However, even by its own dynamic standards of change, 2024 is set to be a pivotal year, one marked by a noisy fintech crescendo.
Here are the top three trends we can expect to see during the 12 months ahead.
Trend 1: Emerging Technologies
Hyper-automation and AI integration: Embracing hyper-automation will be crucial for streamlining operations, enhancing efficiency, and extracting meaningful insights from vast data sets. This includes leveraging AI for tasks like fraud detection, credit scoring, and personalized financial advice. This trend will not only continue but will enter the highest gear possible in the year ahead. Quantum computing and encryption: The rise of quantum computing poses a potential threat to existing encryption methods, demanding investment in advanced cyber security measures to protect sensitive financial data. This will be another area to watch during the next 12 months.
Trend 2: Evolving Customer Demands
Seamless omnichannel experiences: Customers expect a seamless experience across all channels, from mobile apps to in-person branches. We will see more financial institutions investing in creating integrated platforms and personalized services during 2024 that cater to individual preferences.Sustainable and responsible banking: Environmental consciousness is a rising trend, pushing demand for green finance products and services. We will see an increasing number of financial services providers adapting their offerings and demonstrating their commitment to sustainability.
Trend 3: Operational Maturity
Cybersecurity and fraud prevention: With a heightened reliance on digital systems, robust cybersecurity measures are essential to combat cyberattacks and financial fraud and is something we will see much more of in the year ahead. This includes continuous vulnerability assessments, employee training, and adoption of advanced security technologies.
Talent acquisition and upskilling: Implementing new technologies requires a skilled workforce with expertise in areas like AI, data analytics, and cybersecurity. Upskilling existing employees and attracting new talent with these skills will be crucial.Regulatory compliance: Navigating the evolving regulatory landscape is another hurdle. Adapting systems and processes to meet updated regulations while maintaining agility for innovation will be a balancing act, one we will see continue at pace during 2024.
Addressing these challenges effectively will require a flexible and proactive approach, with a focus on continuous innovation, customer-centricity, and robust risk management. By doing so, financial institutions can thrive in the evolving digital landscape and deliver exceptional value to their customers.
One thing is for sure: 2024 will go down in history as a pivotal year for the fintech sector. Watch this space!
Shanon McLachlan, President of Credit Union Solutions, Jack Henry
We’re continuing to watch many trends in 2024, some of which include:
Open Banking
Credit unions and technology providers alike are starting to understand the importance of embracing an open banking infrastructure. Part of this infrastructure is having access to open banking rails, allowing for consumers to permission and revoke their data, as well as viewing their financial relationships and transactions in one place. The other part is embedding third-party fintech solutions to offer relevant services inside of the credit union’s digital banking experience.
The combination allows members to have a complete understanding of their finances, helping to improve their financial health, while also simplifying their financial relationships and eliminating the need to explore competitors’ services. For credit unions, this helps solidify their role in members’ financial lives and reduce the financial fragmentation that continues to leave a growing number of Americans financially vulnerable.
Payments
Our annual survey revealed 90% of financial institutions plan to add new payment types, helping them stay competitive and relevant. Providing more ways to send and receive payments meets members’ modern expectations of money movement and helps to increase deposits. This has led to rapid adoption of new payments rails like FedNow and open-loop person-to-person (P2P) alternatives.
With real-time payments comes real-time fraud, which is why credit unions will need to prioritize enhanced security and fraud mitigation. We’ll see credit unions start to leverage AI and machine learning for real-time fraud detection and prevention.
Business Banking
Credit unions are understanding the value of offering tailored services to small and medium-sized businesses, further helping their local communities thrive. This year, more credit unions will focus on providing full-spectrum business banking services that can scale with the business. Integrating features like embedded invoicing and payment acceptance into their digital platforms will be important. The addition of these services will help the credit union better serve members’ businesses, while attracting new businesses and growing deposits.
Generative AI
Generative AI will continue to gain popularity, unveiling new use cases to transform the member experience and boost engagement. Credit unions will use this type of AI to tailor conversational support, refine financial models, and support compliance and regulation efforts.
Each year presents new opportunities for credit unions. Now is the time to embrace change and collaborate with fintechs to offer services unique to their members’ needs. Ultimately, credit unions that act as secure platforms integrating the most pertinent fintech innovations will stand out and simplify financial complexities for their members.
Cody Willis, Integration Strategist, Kinective
2024 will be a year of refined strategies that maximize digital investments. Transactional process improvement will be the top priority for CEO’s and growth-oriented leadership teams to make way for a refined client experience focus.
Many institutions have transformed their digital channels to allow consumers to transact in lower cost/more efficient channels, but the sales/product services strategy has not been properly addressed in parallel. This leaves consumers hungry for expert opinions and questions like “why should I bank with you.”
As I see it, there are three key channels (client touchpoints) that need to see a refined strategy to meet the needs of the market and help teams meet their growth goals.
Digital Touchpoints
It’s no secret that Digital or “Mobile first” has become the buzzword of the decade. We all know that transitioning a consumer from a retail transaction to digital can reduce cost by three-to-four times, but if they never buy another product or leave your bank/credit union in the next six months is that worth the savings? It’s imperative to create strategies that combine a fantastic digital and branch experience to really see the ROI.
Looking at Chase’s “mature market strategy” they found six times in new digital account sales when combined with a branching strategy of at least 6% of the total bank/credit union branches in a specific market.
Self-Service Touchpoints
ITM and physical self-service options have the opportunity to decrease attrition and increase new deposits, but the use cases are very specific. These large investments have become common conversations as a cost savings tactic, but the largest advantage could be using them to attract new customers in ways that have not fully been explored to increase deposits.
In a study performed by Shikantani Lacroix Inc, titled “Function of Branches” their team found that even the most mobile-centric consumers (60%) still use a branch and close to half of all digital power users would like to visit a branch more often, but they experience the following problems:
1Banking hours don’t meet their needs and schedules.
Minimal ATM options available and/or extended service ITM’s.
As you build your ATM/ITM investment case, use the above reasons to create a consumer-focused physical self-service strategy. Will this help us meet customers during the hours they want services and/or provide a larger breadth of transaction options to increase “while I’m here” events? If the answer is yes, then the next step would be training your staff to serve/convert these opportunities into win-wins.
Branch Touchpoints
A quote from a colleague I really stand behind is: “Branches can be your largest albatross or your golden goose, it’s all how you position them.”
Branch transactions are declining, but financial product needs are up. Consumers are switching their primary deposit accounts at the highest rate in history. “Digitally opened accounts have higher attrition and fraud rates, while at the same time lower transaction rates and balances when compared to branch opened accounts,” according to Celent. With the above being known, now I understand why Chase has put a lot of their eggs in their “golden gooses’” basket.
So, what should you be focusing on to shift your retail focus from declining transactions to advise-centric? Process automation and unique experiences influenced by tech.
The role of tellers being responsible for cash, checks, receipts, and other tangible items needs to be absolved immediately as these “low value, high responsibility” actions are taking priority over the actual interaction that can lead to the most likely cross-sell, in-person. Using technology like cash recyclers, teller capture, and paperless receipts will be essential for the high-growth institutions that move frontline staff to advice-oriented roles.
People crave a great/unique experience. Using technology in branches like a customer relationship management (CRM), tablets, or my company-provided RTA (remote transaction assist, from Kinective) can empower your retail staff to provide a unique experience that delivers on expectations and opens the door at a higher rate to additional opportunities.
All in all, while there are many exciting technological advancements, I predict that 2024 will bring a new focus on bridging the gap between technology and branch experience.
Pete Major, Vice President of Fintech Solutions, Member Driven Technologies
As capital remains a widespread challenge, I expect more credit unions to prioritize initiatives that will help them bring in additional sources of deposits and fee income. While it can be daunting, now is not the time for credit unions to pause efforts in their loan processing capabilities. Instead, institutions should focus on making improvements to these processes now – this will serve them well once rates start to decline.
I also expect more credit unions to take a tailored approach to marketing strategies, leveraging technology to reach the right members with the right offers at the right time. This is an area credit unions have really grown more sophisticated, which will likely continue. Such technology and insights can also help to more accurately identify members that are at risk of churning.
And, we can’t talk about innovation and technology without mentioning AI. More credit unions will consider how to implement AI-driven tools to increase efficiencies, like helping them with routine member inquiries or supporting the loan approval process. AI also has the power to transform how large sets of data are analyzed, which could really positively impact the credit union space.
Ultimately, a credit union’s top technology priorities should always align with their overall strategy. For instance, the credit unions that really differentiate on the digital experience will likely have very different tech priorities than those that still heavily rely on physical branches and touchpoints for brand recognition and attracting members. At the end of the day, technology is most impactful when it supports the overarching strategy of how an institution differentiates and competes.
Stuart Mackinnon, Chief Operating Officer, NCR Atleos
Consumer preferences are changing, making the self-service channel increasingly critical for credit unions. Members want greater choice and flexibility around when, where, and how they bank and access financial services, including cash.
My top financial technology prediction for 2024 is that more credit unions will invest in the necessary technology to evolve their branch strategies and facilitate a more modern, robust self-service experience. This could entail outsourcing partial or complete management of ATM operations through an ATM-as-a-service model, incorporating greater automation across the branch, and/or exploring innovative strategies like a shared utility model where credit unions can plug into a network with ATMs located in trusted retail locations such as grocery, convenience/fuel and big box stores.
Self-service technologies help solidify credit unions’ position in the financial lives of their members and communities, expanding access to financial services and cash. Such strategies also enable credit unions to operate more efficiently and expand their presence without the hefty overhead of new standalone branches. This year and beyond, credit unions will increasingly invest in technology that optimizes their physical footprints, prioritizing ways to enable both digital to physical and physical to digital transactions.
Doug Brown, President of Digital Banking, NCR Voyix
I expect 2024 to be all about data. The current challenges facing credit unions– including widespread financial anxiety, disruptive new technology and member expectations that are continuously increasing – require more personalized member interactions than ever before, which all hinges on the power and quality of a credit union’s data.
For example, personalizing financial fitness and offering contextually appropriate resources will be a top priority this year as members continue to face inflation, interest rates, a rising cost of living and, most recently, the resumption of student loan payments. Data must be used to curate valuable and effective programs, offerings and resources, improving member trust. This is especially critical as younger generations – millennials, Gen Z and Gen Alpha – decide where their loyalty lies.
Data should be the cornerstone of all strategy decisions. For example, as money movement options continue to multiply, with mobile wallets to real-time payments and FedNow, credit unions must be able to determine how to optimally enable choice. This means being able to identify the payment methods that are most critical to their unique risk profile and member base – which all hinges on being able to properly analyze the data.
More credit unions will take the steps necessary to make their data actionable, which means embracing a digital-first strategy and investing in the systems and resources necessary to accurately leverage data, establishing baseline metrics, identifying trends and tracking progress and growth. This is one area where new innovations in AI will play a key role, as this technology has the power to effectively organize, mine, and analyze vast amounts of available data across the enterprise.
Credit unions that prioritize the ability to effectively and meaningfully leverage data this year will be strongly positioned to strengthen member trust and competitively differentiate themselves.
Bob Child, Chief Operating Officer, Origence
AI tools will continue to grow more sophisticated. Moreover, its application for financial institutions will also continue to develop. Tools like document process automation (DPA) and automated underwriting can instantaneously complete manual processes, which allows credit unions to dedicate their recovered man hours to other activities. AI tools can also help detect suspicious member activity and bolster security practices. With the Fed likely to introduce some interest rate decreases in 2024, we should expect that AI technology will become more complex and more widely utilized.
Electric vehicle (EV) lending will be a growth opportunity for credit unions. In 2023, EV sales represented 7.2% of new car sales, a 100% year-over-year increase. While banks have usually had the edge in new car lending, the EV boom represents an opportunity for credit unions to gain market share with embedded financing opportunities, and those credit unions will utilize new technology to help them do so.
Personalization and improving the member experience will continue to be a significant priority for credit unions, and they will invest in technology that allows them to offer a better member experience. With tools that monitor member behavior, credit unions can offer their members specialized offerings based on their needs and preferences, which increases lending opportunities and enables credit unions to serve their members better.
Kristiane Mandraki, Vice President of Growth, Praxent
Our top technology trend is not necessarily about technology itself but how credit unions and fintechs will approach software and digital initiatives in 2024. There is a pervasive challenge facing software teams to accomplish what they want within the original timeline – and often through no fault of the engineers themselves. Factors such as murky expectations and ingrained technical debt present formidable obstacles. The result is often delayed outcomes and subpar member experiences.
Instead, this year there is going to be a major focus on software reliability. One way organizations will accomplish this is by embracing more defined frameworks that outline specific processes and expectations for how to complete each sprint of a project. The adoption of such frameworks can enhance a team’s overall ability to meet deadlines, providing clarity and structure to the development process while reducing ambiguity in project requirements. Plus, it sets expectations for each phase of the project, allowing teams to allocate resources efficiently and optimize their workflows.
And, there is a peer component to this framework. When there is enough trust within a team, peers can provide feedback to one another, ultimately building a culture of continuous improvement, in which team members actively help each other grow and provide accountability.
By implementing the right technology operating model, credit unions and fintechs will be able to facilitate and execute upon a higher standard in the software development processes, turning ideas into reality across the dynamic landscape of financial technology. Such efforts will have a notable impact on the member experience, continual innovation, and revenue.
Vladimir Jovanovic, Vice President of Innovation, PSCU
In today’s rapidly evolving landscape, technology is defining a new chapter of the digital age. Here are two key areas that will help shape the future of financial services in the year ahead:
Open Banking Will Gain Momentum
Open banking is expected to gain momentum in 2024 as more financial institutions adopt the sharing of financial data and services through standardized APIs (or application programming interfaces). The potential for mandatory open banking regulation, as put forward by the Consumer Financial Protection Bureau (CFPB) in its rulemaking proposal, could accelerate its adoption and bring the U.S. more in line with the practices of the U.K. and the EU. Expanded open banking access in the U.S. would contribute to more competition for consumer relationships, but also to collaborative partnerships between fintechs and financial institutions, fostering innovation and increasing options for money movement, including instant and real-time payments, as well as faster payments through debit rails, wires, ACH and account-to-account (A2A) transfers.
AI Will Continue Transforming Financial Services
Significant investments in AI-driven technology are anticipated to drive further advancements and adoption of AI in the financial services industry in 2024 – creating opportunities for increased efficiency and improved ROI. The growth of AI in the industry could also be fueled by instant payments and real-time access to financial data through open banking. With the increasing prevalence of faster payments, AI will play a crucial role in faster and more effective fraud detection and prevention. Financial institutions will continue to integrate AI into their offerings, ranging from fraud prevention to member experiences and communications, providing greater personalization, enhanced efficiency and new innovations.
Dr. Kathy Snider, Senior Vice President, Group Product Manager, PSCU/Co-op Solutions
Credit unions’ reluctance to partner with fintechs will continue to dissipate in 2024. Two factors will bring about the shift in mindset:
Credit unions will experience increased pressure to provide elegant tech-centered banking solutions that analyze, understand and anticipate member preferences and needs.
Fintechs seeking scale will pursue credit union partnership with greater intention and offer brand innovation that is capable of rapid scale and support.
Realizing they can leverage the movement’s large and loyal member base to scale quickly, numerous fintechs have already pivoted their go-to-market strategies. This has generated a fear of missing out (FOMO)-like intensity within the fintech community, making even more disruptors eager to partner with the tried and true.
Credit unions, too, are becoming convinced of the value of seeking relatively easy and affordable fintech integration. Much of this is due to white-label options that allow credit union brands to take the lead with members. It also doesn’t hurt that so many fintechs have established seamless connections into the most popular credit union core processing and digital banking providers. Further value and emphasis will be found in models or solutions which offer consolidated access for rapid market expansion while reducing integration cost.
In 2024, we expect more credit unions will opt to collaborate with plug-and-play fintechs that have intentionally created efficient onboarding processes specifically for the credit union environment.
Will Bryant, Chief Operating Officer and Co-Founder, Quantalytix
2024 will see a continued convergence of artificial intelligence (AI) and regulatory frameworks. The seismic shift experienced in 2023 highlighted the significance of AI in reshaping the fintech landscape globally. In the coming year, I foresee a heightened emphasis on responsible AI implementation and the formulation of comprehensive regulations.
The frenetic race to integrate AI into business roadmaps will likely persist, but with a greater focus on ensuring ethical and transparent practices. As legislators grapple with the civil impact of AI, we anticipate the development of clearer rules and regulations. This regulatory framework will play a pivotal role in fostering innovation while addressing societal concerns, striking a delicate balance between technological advancement and responsible use.
Additionally, the trajectory of cryptocurrencies will remain a key focus in 2024. The continued rise observed in 2023 prompted widespread discussions and contests within the financial technology sector. However, the year ahead may witness a more discerning approach as the industry consolidates. Companies will need to navigate the evolving landscape, considering the sustainability of concepts and initiatives in the cryptocurrency space.
There is a need for strategic foresight and adaptability now more than ever. As AI and cryptocurrencies reshape the industry, success will hinge on our ability to embrace innovation responsibly, navigate regulatory complexities, and make informed decisions that position our organization at the forefront of this dynamic and transformative era in fintech."
"From a technology perspective, AI and more AI talk and probably some acceleration in deployment for Credit Unions. Fintechs will continue to grow and hopefully more adoption will come albeit prudently and carefully. Cloud migrations will also continue.
Then there is cyber fraud. Cybersecurity and fraud management demand more vigilance than ever.
Consolidation continues as we are witnessing with major associations and some key processors. It will be interesting to see how the PSCU CO-OP merger will evolve, which should go well, under the management in charge of it.
Refreshing to see one of the major legacy core providers evolving nicely. However it is sad and concerning to see another struggling at this time. And finally we have a new entrant into the core space that is starting to show some promise. They have background in our space so that will help a great deal.
Get ready to suit up. Here we go again!
Jim Van Dyke, Senior Principal, TransUnion
Members’ attitudes about their personal data are changing. More individuals are considering things like privacy and control when they choose which technologies to engage with and which to decline.
Consumers consistently express concerns over the availability of their personal information and the threats this exposes them to. In fourth quarter of 2023, 78% of Americans surveyed by TransUnion’s Consumer Pulse study said they were concerned about sharing their personal information online. Of those, 74% feared having their personal identities stolen.
This increasing consumer awareness and, in some cases, demand for risk mitigation, signals that the financial services industry is on the cusp of significant transition of power. In 2024, we’ll start to see that shift, and it’ll be in favor of the consumer.
We’ve already seen several bellwethers of this transition, particularly among regulatory bodies. State-level regulation like the California Consumer Privacy Act, combined with some federal privacy policy movement, are inching us closer to a framework for consumer data protections. By their very nature, regulated financial institutions and their fintech partners will be heavily impacted by these legislative pressures.
To prepare, financial institutions and fintech companies will begin to build more trust-centered experiences between organizations and consumers. Data-enriched relationships will become less transactional and more of a mutual partnership. Artificial intelligence will become one of the industry’s go-to assets in the pursuit of better controls for consumers, empowering them to choose who can access which personal data, when and for how long.
Baron Conway, Senior Vice President of Client Relations, TruStage Digital Storefront
My top financial technology prediction for 2024 is that more credit unions will prioritize the use of data to better understand their members, and also prospects – what they currently have and what they need – and then leverage innovative technologies, such as AI and targeted experiences that deliver those insights as products and services to members and prospects in a simple and engaging way.
Credit unions have more than enough data at their fingertips to anticipate the needs of their existing members and even identify new members and unlock a great number of opportunities to help in these uncertain times; and technologies such as AI and the ability to deliver targeted products and services play a pivotal role. AI can analyze vast amounts of data, giving credit unions more insight into their members' needs and allowing them to present relevant members with a digital menu of products and services instantly available through their online banking portal.
Imagine logging into your credit union's online banking and easily finding a curated selection of offerings like Certificate of Deposits (CDs), pre-approved loans, insurance, and credit cards. Empowered to weigh a broad range of attractive options, you can select what they want — rather than receiving a single product offered to tens of thousands of prospects in hopes that they are in the market.
A one-size-fits-all approach does not work anymore to meaningfully engage with members. Instead, credit unions must present personalized offers that are unique to the financial situations and life stages of members – making them feel valued and understood. Credit unions can acknowledge member milestones, tailor communication efforts and make relevant recommendations to create long-lasting, trusting relationships that help the credit union become top of wallet. For instance, as student loans resume, younger members may seek guidance to avoid falling behind on payments, while older members might benefit from advice on maximizing their savings.
Becoming a trusted and personalized financial home for members and their financial needs requires credit unions to harness the full potential of their data and technologies such as AI to make it actionable. Those that do will foster new relationships and long-term growth, setting a positive trajectory for the industry in 2024.
Brian Kaas, President & Managing Director, TruStage Ventures
We continue to see a rise in interest and appetite for credit unions partnering with fintechs. Credit unions and fintechs are understanding how mutually beneficial these partnerships can be. Partnerships are transforming the way credit unions serve their members and do business. The collaboration is allowing for greater innovation, further propelling our industry forward. In 2024, I expect more credit unions to prioritize partnerships with fintechs, solving key business and industry challenges.
One of these challenges includes dealing with a shortage of liquidity. Credit unions have become much more strategic about lending to ensure they generate solid returns. While lending is cyclical, unsecured consumer lending and credit card technology has gained greater traction. Credit unions will continue to explore partnerships in these areas as they seek higher yielding lending opportunities. They will also look for solutions to grow deposits, partnering with companies that provide customer acquisition and engagement tools.
And more credit unions will partner with fintechs using AI. Credit unions are trying to leverage AI to automate different areas of their business, improve efficiencies and drive down costs. For example, we are seeing a significant rise in AI being used in the fraud mitigation and detection space, helping credit unions become more proactive and respond to fraud in real-time. AI will be a trend to watch as more companies use it and new use cases emerge.
Barry Kirby, Co-Founder & Chief Revenue Officer, Union Credit
Last year, as most credit unions prioritized deposits to offset shrinking margins, competitive fintechs were building their loan portfolios, filling a market void, and acquiring customers. This is another example of how credit unions’ conservatism is holding them back behind their competitors. To stay in the game, in 2024 credit unions need to consider the pace of change in today’s operating environment and keep an eye on the future. The next generation wants to connect, shop locally, and have trusted providers. The credit unions that can break through the old ways to meet consumers where they are, with the products and services that they truly want and need, will win lasting relationships within their communities.
In 2024 the path to new member acquisition and growth includes addressing the aging membership challenge, shifting focus from large to small deposit acquisition and reviving lending.
Winning credit unions will address the aging membership challenge by investing in an embedded finance strategy to appeal to modern, young, and digital-savvy consumers. This approach integrates competitive offers directly into younger consumers’ everyday shopping interfaces, simplifying interactions and making it more convenient to engage with and join the institution.
To attract younger demographics, credit unions will also shift their focus from deposit acquisition tactics that target high-income individuals, like Certificate of Deposits (CDs), to ones that appeal to a diverse customer base with modest deposits. This will build financially healthy behavior amongst younger members while driving growth and long-term engagement for the institution.
Lastly, credit unions will view lending as a long-term vision and a chance to make a meaningful impact on their communities. This approach may require a shift past traditional methods like indirect lending and into more targeted approaches for new prospects that will breathe life into the institution.
Darron Dunn, Chief Services Officer, ViClarity
Credit union risk managers will prioritize fintech oversight in the coming year. They’ll step up their efforts to both inform internal teams of third-party fintech risks, as well as hold feet to the fire when it comes to ongoing vendor due diligence.
As a result, fintechs that sell into highly regulated spaces will invest more in proactive compliance with the rules that govern their clients.
This will manifest in a lot of ways, but many of them small. It's the low-hanging fruit, like website compliance, that generates easy fines while advancing consumer protection. A broken link to loan disclosures or Fair Housing logos placed in the wrong position online is enough to warrant a finding.
Credit unions must remember that the compliance buck stops with them. Even tenured, well-vetted fintech providers can make mistakes. When they do, credit union examiners will not come for them. They’ll come for their credit union clients.
Scott Earwood, Director of Community Solutions, White Clay
In the last few years, many credit unions have started to offer commercial lending and credit to support small and medium-sized businesses in their communities. I expect this trend to continue into 2024, as more credit unions understand the value of providing these services will outweigh the challenges. Small businesses make up 99.9% of American businesses, employ 61.7 million Americans, and generate over 60% of net new jobs. This presents a major opportunity for credit unions to help these businesses with accessible and affordable services, and help their communities grow.
Credit union successfully serving small businesses will partner with fintechs to build complete member visibility profiles. The profiles enable credit unions to know if they have a primary or secondary banking relationship (i.e., only loans) with that business, helping them identify which relationships they may want to expand or improve. For example, credit unions can determine if the business qualifies for an additional loan or line of credit based on performance, helping to minimize future risk and delinquencies. This information can also help institutions understand how each relationship impacts capital and liquidity, and which relationships are most profitable. Credit unions may decide to prioritize existing business relationships because of it.
Having a single, accurate view of commercial banking relationships will be especially important in 2024. Credit unions must be able to accurately price commercial loans and deposits, so they have the liquidity to fund loans, offer more competitive rates, and keep deposits in-house.
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