November 26, 2019

Ensuring the Next Big Fintech Helps Your Credit Union

fintech

Nick Evens, President of The Veridian GroupAlkami recently hosted the second year of VentureTech, an event where capital seeking fintechs from across the U.S. can showcase their company to investment capital from the credit union industry.

Before the event, we sat down with Nick Evens, President of The Veridian Group, Veridian Credit Union’s wholly owned CUSO, and one of the minds behind VentureTech to learn how credit unions can get involved in investing. Here are the big takeaways from our conversation.

Ensuring the Next Big Fintech Helps Your Credit Union

What’s the Opportunity for Credit Unions to Invest in Fintechs?

The trade press is full of headlines on how credit unions should be collaborating with fintechs. And there’s plenty of opportunity for partnering with fintechs.

Many CUSOs and fintechs have appeared since 2008 during the economic downturn that left many credit unions in need of assistance. There’s a lot of capital in the industry, but it’s not being utilized in a way that could benefit all these companies that continue to enter the credit union space. According to Evens, “Credit unions need to find a way to work with fintechs instead of fearing what they could do to us.”

“All you hear in the industry is that [fintechs will] disintermediate all of banking, and they’re going to take all of our members. We seem to be afraid of them and running the other way when we should be collaborating. One way of collaborating is through utilization of capital,” Evens said.

When there’s abundant capital for ventures, there’s less fear of bootstrapping their businesses because they know there’s money around to help them grow. This leads to more innovation that helps both their customers and investors.

Fintechs can make things easier for a lot of credit unions, especially those of a certain size. Fintechs are able to help credit unions reduce cost, gain more members, or make more loans: all key areas for credit unions. Smaller credit unions that don’t have sufficient resources to focus on these areas can particularly benefit from a fintech partnership.

How Credit Unions New to Investment Can Get Started

Credit unions in the $100 million to $1 billion space might be the best candidates to consider a fintech partnership right now. The right credit unions for this opportunity should also be seeking growth in the key metrics like members, deposits, and volume (especially loan volume).

First-time investor credit unions should identify fintechs that are not only up and coming and on the cutting edge, but that can also make the investment process easy. Fintechs who have already taken investment from several credit unions will be able to show you how these fintechs operate with investors, and you can turn to the several credit unions that are already in their cap table for help and advice. If your credit union is looking to invest in a young startup, be aware that the only stipulation to credit unions investing in fintechs is that the fintech has to become a CUSO. More experienced fintechs will have already gone through that process.

Evens stated the best way to get started is to begin exploring opportunities: “You’ve got to dip your toe in the water, and there’s no better place to do that than at VentureTech.” VentureTech, however, is invite-only, so if you’re not on the list yet, you can find similar investment events near you. The Northwest Credit Union Association, Mountain West Credit Union Association, and Heartland Credit Union Association now host similar events. MEMBERS Development Company, a group with a membership of about 70 credit unions, is also exploring a venture fund to invest in promising fintechs.

How to Select a Fintech

Every credit union has different needs, but the most common and important one these days is reducing friction between the credit union and the member. Your fintech of choice should be able to reduce friction for members but also internally at your credit union. Whether it’s for a new member application, a loan application, or the loan process (all the things that contribute to a successful, growing credit union) a fintech should make things simple for everyone involved. Another crucial consideration: does that fintech have the capability to integrate with your systems that are in place?

Ideally, a fintech will meet you where you are. The smart ones find trends among credit unions of certain sizes to focus on and find what credit unions they’re going to target. Credit unions of your same size can also recommend or vouch for fintechs that can help you as much as you help them.

There’s more to come from VentureTechh as their investment event evolves. Keep an eye on their site to learn how you can get involved.

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