Why community financial institutions make perfect fintech partners
Community banks and credit unions, the underdogs of financial services, are actually more dialed-in with consumers than bigger institutions, which allows them to build intimate fintech partnerships. One big deterrent, legacy tech platforms, can be successfully dealt with, as one institution shows.
Who really wants to stand in line to conduct simple transactions in a brick-and-mortar bank that is only open to fit the lifestyle of retirees? Almost any major financial transaction from financing a car to securing a mortgage can be conducted using mobile apps developed by fintechs. But these innovations have not made their way to the majority of traditional banking institutions yet.
It is not a lack of interest in elevating the personal banking experience that keeps banking stuck in the digital dark ages. In reality, most community banking institutions are seriously constrained by the legacy technology that powers their current banking systems. Most banks and credit unions run on platforms that are provided by three legacy core providers with slow turnaround times, minimal options, and high costs. This makes personal banking ripe for disruption, especially among community institutions. They don’t have the buying power or the ability to force widespread technological changes like large banks, so they are the most constrained by the current system.
Fintechs recognize this and have jumped into the market in a big way. At the close of 2018, there were 39 venture-capital-backed fintech unicorns (valuations of $1 billion and up) worth $147 billion, according to CB Insights. However, these fintechs are technology companies, which means they don’t reside within the highly regulated and complex banking ecosystem, so they need guidance to navigate unique rules and regulations. To overcome these hurdles, partnerships have emerged.
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