Banks and Credit Unions Are Losing to Fintech

Both banks and credit unions continue to lose market share to digital lending platforms that offer better user experience and more personalization. 
Fintech startups issued 38% of all US personal loans in 2018, while banks provided 28% and credit unions accounted for 21%, according to TransUnion. This is a significant change from 2013, when fintech startups issued only 5% of US personal loans, banks issued 40%, and credits unions 31%.

Fintech: Build, Partner, Grow

Over the last ten years, fintech startups have targeted single underserved financial products with better UI, digital marketing, and branding. These fintech companies put their focus on personalization and use digital channels to deliver services more efficiently and holistically.

Today, fintech is moving beyond a one-product model, with companies launching new services to expand the customer’s digital footprint. This includes improving connectivity by partnering to grow their line of business beyond the initial use case.

Big Banks & Fintech

Over the last few years, mega-banks including Citigroup, Goldman Sachs, and JPMorgan have actively invested in fintech startups across data analytics, alternative lending, personal finance lending, and more. The Goldman Sachs AI lending platform, Marcus, is the fastest lender to reach $2B issued, just a year after its launch. For the largest banks, they have the means to take up their own digital capabilities. Now, the largest consumer banking institutions are building out and launching their own products to compete.

Leveling The Playing Field

So what is the solution for credit unions and banks? It involves finding the ‘sweet spot’ by identifying the customer segments most important to their banking strategy. Financial institutions are then forming partnerships with fintech providers to align these competencies.

One of the most compelling reasons to partner with fintech providers is it enables you to stop turning away the kind of business that builds high-value relationships with customers you need most. Second, financial institutions should evaluate providers that easily sync with their existing infrastructure. This includes loan origination systems, new account opening software, and home banking. Lastly, seek out fintech with a core focus on innovation. Offering personalization and real-time engagement with AI, along with robotic process automation (RPA) means you can service customers after business hours.

To compete, credit unions and banks must partner with fintech providers to offer an elevated user experience to meet the rising demands from fintech incumbent.  

To learn more about Fintech partnerships with Shastic, visit our homepage.