Credit Union System as a Service

By: Ronny Chapman, Senior Vice President, Fintech Solutions

In the current financial services landscape, consolidation amongst credit unions is a reality and is showing no signs of slowing down. Today, even as the total number of members and assets continues to grow, there are just over 4,700 federally insured credit unions in the U.S. That is a dramatic decline over the last five decades when the industry peaked at over 23,000 institutions. Significant drivers include rising costs and increasingly demanding improvements relating to digital channels, personalization, security and efficiency.

Many credit unions are known as the lifeblood to their communities, serving with passion and drive to help promote financial health. The loss of small credit unions endangers the ‘local community’ model that credit unions are often known for, as well as the health and diversity of the financial services ecosystem overall. To remain a key resource to their community’s financial needs, credit unions must seek alternative collaboration strategies that offer ways to scale and grow the reach, sustainability, and impact of not only each organization, but of the credit union system as a whole.

Working with large retailers and auto dealers, for instance, is an effective strategy for credit unions to help achieve scale and provide access to a new range of digitally enabled products and services without having to merge; and most importantly, they can keep their brand. Moreover, the credit union benefits from improved customer loyalty, while also gaining a new source of revenue while retailers have the ability to build out local captive consumer finance options.

Application Programing Interfaces (APIs) are the great unifier for enabling credit unions and retailers to connect, share data and functionality, while ultimately creating a more streamlined and interconnected ecosystem aimed to help better serve consumers in their moments of financing need. An API can serve as the single end point that allows individual retailers and large auto dealers to access the ‘credit union system’ and vice versa.

As your credit union evaluates technology partners, it is important to consider providers who see value in serving institutions of all sizes – while many gravitate towards large asset credit unions, some recognize the importance and significance of supporting small market credit unions as a key part of the credit union system overall.