In the past, financial institutions and FinTechs competed with one another, jostling for clients’ accounts, loyalty and debit card spending.
Times have changed, Velera Vice President of Innovation Vlad Jovanovic told PYMNTS. There’s now a collaborative mindset between traditional financial institutions, particularly credit unions, and purely digital upstarts to work together to bring financial services innovations to the masses.
In doing so, the whole can be larger than the sum of the parts, as each side of the partnership uses its core strengths to give rise to those innovations, with shortened time to market amid shared expertise and resources, which means that their account holders benefit too.
However, as 2025 gets underway, several changes are on the horizon. Regulators are focused on three areas: accountability, risk and consumer protection. For regulators, protection “is the paramount one,” said Jovanovic, adding that “as we think about these ecosystems and these partnerships, protections and data security are key.”
Greater scrutiny from the likes of the Consumer Financial Protection Bureau, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency will clarify compliance responsibilities “and ultimately will lead to enhanced accountability by the banking sector as well as the FinTechs … along with how risks are shared and managed between all participants,” he said.
What’s Changed
The shift toward collaboration came as FinTechs eyed the opportunity to take market share from banks — but quickly found that they needed to operate within the highly regulated financial services industry even as they were focused on providing niche solutions to clients, Jovanovic said.
“Initially, they were focused on simpler services like payments, and now we see them expanding into lending, investments and … more,” he said.
Along the way, the FinTechs have begun to integrate more deeply into core banking systems and credit union tech stacks.
“This means that the credit union market is embracing [collaboration with] the FinTechs,” he said.
We’re headed more fully into the age of open banking, which, through Section 1033, is tied to the standardization of how financial data is permissioned by consumers and shared between credit unions and third parties.
Asked about the core strengths that each side of the equation brings to the table, Jovanovic said that credit unions have strong community ties and have gained the trust of their members. They also have the regulatory expertise that FinTechs don’t. FinTechs can move quickly, be agile with tech stacks, and help credit unions sidestep the technology burden of legacy systems.
Combined Strengths
When combined, those strengths can help credit unions and FinTechs meet rising consumer demand for personalized digital experiences, delivered simply and conveniently.
“Credit unions leverage their member-first approach while the FinTechs use technology and data to help personalize services,” Jovanovic said.
Consumers want help improving their financial health, automating their savings and boosting their credit scores. They want to be able to do it all through a self-service model, where mobile apps and chatbots, along with budgeting tools, foster a sense of empowerment.
“We have an opportunity where we can leverage all this data and technology to move toward a proactive banking future where we help members and become a one-stop shop for all their financial needs,” Jovanovic said.
