Have you ever wondered why launch customers of the newest payment innovation are almost always national or regional banks, neobanks, fintech, or alterative financial services providers? There’s a paradox where our industry partners driving payments innovation of the highest magnitude are working for and against us at the same time, still enabling us to be successful while creating more value and faster opportunity for our greatest competitors.
I’ve had what I call the privilege of leaving “Credit Union Land” after 17 years, for a brief 5-year hiatus to experience payments and alterative financial services from the embedded finance and payment networks perspectives. But I’ve returned to our industry because of our purpose-filled missions, and I am now armed with a broader perspective of the parallel industries where we compete.
Whether the focus is cards, real-time payments, stablecoins and digital assets, or other experiences built around money movement, the pace of technology and innovation is hyper-speed compared to just a few years ago, and we need to ask ourselves if being enabled to be successful is enough? Or should we be fighting for larger scale value creation and similar fast-paced access to new payment capabilities and flows that are afforded first to many of our competitors?
What are you talking about, Christopher? We’re doing just fine!
I agree our industry is doing fine, and second quarter performance data released by the National Credit Union Association (NCUA) illustrates that, with credit unions growing assets by $82 Billion, or 3.6% YoY to $2.3 Trillion, and adding 2.8 million new members reaching 143.8 million everyday Americans proves it. However, I am challenging credit unions as an industry to pause for a moment and ask ourselves, “Is that going to be enough for us going forward?”
So, what is stopping us from achieving the growth rates of our competing financial services sectors, and does our ability to access payments innovation inform how we grow, and our future relevance to the communities and members we will serve tomorrow?
Here’s a simple litmus test of the above: If we believe our access to payments innovation directly influences how we as an industry can grow and we look back at the past few years of innovation announcements from Visa® and Mastercard, how many of these solutions are enabled for your credit union today for your members? Comparatively, how many national or regional bank, neobank, fintech, or alternative financial service providers brands are in market instead?
The payments innovation enablement gap
An enablement gap exists for credit unions compared to our greatest competitors, which informs why they are outsized in representation as launch customers when a new payment “flow” or capability is developed. What is preventing our credit union brands from being represented on center stage, too?
There are a few key differences, such as their national brand reach, broader consumer appeal through bespoke digital experiences, immediate scale at launch with customer bases in the millions, and more direct ownership of technology platforms and system enabling faster go-to-market capabilities.
And much of the technology that enables our experiences today are solutions wrapped a few different times through resellers and other sales enablement functions (think Networks > Processors > CUSOs > Cores > Digital Banking > Credit Unions), which means there a lot of different partners that need to all align, support, and enable capabilities downstream before they are broadly accessible to us as credit unions and in turn our members. This chain of enablers contributes to the speed in which payments innovation is accessible by our credit unions and potentially at a higher cost based on size and scale of the Credit Union Service Organization (CUSO) and its ability to negotiate at scale.
Credit unions already work together to close the enablement gap
As an industry we continue to lean into the CUSO model which allows individual credit unions to be represented as a collective (scale), can enable hundreds or thousands of individual credit unions (national reach across individual brands), and with more direct ownership of technology that can connect the different partners that are part of the sales enablement process to simplify deployment for individual credit unions (faster go-to-market speed).
CUSOs as service providers are the most common utilization of this model, however, this model is also used to pool investment funds and sourcing non-traditional partners through fintech investment to innovate differently, and in turn enable access to payments innovation faster and more efficiently.
But are we doing enough with this operating model, and/or our existing CUSO partners and enablers doing enough with the model for us? Or are there new ways this model can be used to represent credit unions at scale to support more value creation and faster access to payments innovation?
What else should we do as payments leader?
In all of this, a key question for payments leaders in the credit union space is to ask ourselves “what else could/should we be doing?”
I’ll share four key steps I am taking as a credit union leader:
- Learn how the new stuff works: The devil is in the details, so make sure you really understand how the innovation works by staying ahead of the learning curve.
- Understand the enablement path: How does it connect to everything else, and who within your partners can be your most effective enabler? Spent a lot of time here.
- Develop a strategic voice and partnerships: Engage the broader industry and forge strategic partnership that help develop your voice as a leader, for your credit union, and for our industry. Influence can shape a better outcome for everyone.
- Explore new sources of innovation: Think outside of the traditional partner landscape and explore ways fintech and other alternative providers can unlock access to new payment flows and faster innovation.
Which of these are you already doing today, and what can you do differently for the greater good of your credit union and our industry?
