The banking industry is going through a technological evolutionthat according to some experts could leave credit unions and othercommunity financial institutions behind unless they pay attentionto fintech innovation.

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Even the term fintech has changed. At one time it was short forthe financial technology companies that laid the foundation andprovide much of today's banking technological infrastructure. Nowfintech defines groundbreaking companies that have leveraged newsolutions to rapidly respond to customer demands.

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However, according to research commissioned by London-basedFraedom, legacy systems prevent 64% of U.S. commercial financialinstitutions from developing fintech applications. The study alsorevealed a mounting proclivity for financial institutions topartner with fintech firms to help bring new products to marketfaster, attract new customer segments and help differentiatethemselves from competitors.

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Credit unions, facing challenges from traditional andnontraditional competitors and members seeking a better userexperience, seem ready but maybe not quite able to integrate fintech so easily.

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Legacy platforms encumber just about any financial institutiontoday, Mike Dionne, managing director of North America forFinastra, mentioned. “There are many platforms that can go back tothe seventies, written on COBOL maybe running on IBM AS400s, andother older architecture of that ilk.” Dionne added it is alegitimate challenge that credit unions and banks alike face.

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Fintechs are very nimble, very fast to market, not afraid tofail. And if they do fail, they quickly move on to the nextopportunity, Ted Bilke, president of Monett, Mo.-based Jack Henry& Associate's Symitar division, explained. A recent trenddetected by Symitar finds credit unions embracing more fintechpartnerships to speed new product development and differentiatedigital services.

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Symitar sought to overcome legacy system constraints through itsopen Episys core to make it easier for credit unions to deployfintech innovation such Amazon Echo connections.

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Ryon Packer, SVP, product management at Fiserv Credit UnionSolutions, maintained the Brookfield, Wis.-based firm provides anentire technological ecosystem that extends beyond basiccore-accounting functionality. The Fiserv DNA core provides an openarchitecture to support new products and expanding businessmodels.

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Although fintechs have raised nearly US $110 billion since 2009,the World Fintech Report from Capgemini and LinkedIn, incollaboration with EFMA, found most are likely to fail without aneffective partnership ecosystem. Additionally, both traditional andfintech firms stand to gain from a symbiotic, relationship.

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Read the full article in the March 28 issue of CUTimes.

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Roy Urrico

Roy W. Urrico specializes in articles about financial technology and services for Credit Union Times, as well as ghostwriting, copywriting, and case studies. Also: writer/editor of a semi-annual newsletter for Association for Financial Technology since 1997 and history projects funded by the U.S Interior Department, National Park Service and Warren County (N.Y.).