Feb 06 2018

Weighing the Risks of a Fintech Partnership

As credit unions continue to upgrade and adopt new fintech options to stay competitive, during the process of partnering with vendors and fintech firms, occasionally credit unions experience frustrations or problems with their fintech partnership that might have been avoidable. From Filene's Center for Emerging Technology comes this new report that addresses a variety of risks that any credit union leader thinking about adopting new technology should know about, and provides a roadmap to avoiding potential pitfalls.

Richard Swart
Visiting Researcher, University of California, Irvine
Report Number 440

Executive Summary

Anyone who’s watched The Social Network has seen what can happen when a technology partnership goes bad.

Given the ever-growing presence of technology in our lives and the reality that many credit unions lack the financial resources and technical skill to build their own solutions, it’s likely your credit union either already has partnered or will soon partner with a fintech—a financial technology company. Though you shouldn’t have to worry about an Academy Award-winning movie to chronicle the event, you do face a host of other risks.

What steps should you take before you enter a fintech partnership? What pitfalls can others’ experiences help you avoid? And how can you mitigate risk when dealing with a nonfinancial partner in a compliance- laden world?

What Is the Research About?

Fintech (generally described as any sort of financial sector technical innovation, whether an app or another system) has gotten a lot of attention—and garnered billions of investment dollars—in recent years. What was historically seen as a space occupied by organizations with some link to the financial services industry has been blown wide open and attracted companies of every size and background, from start-ups to Google.

There’s no reason to believe fintech innovation and adoption will slow down anytime soon. A host of challenger banks, start-ups, and new technologies will continue to fundamentally alter many of the services and technologies consumers rely on. Thousands of conferences and webinars have breathlessly anticipated these changes, but rarely has the industry paused to explicitly consider how these technologies present risks to credit unions (Peat, Kelly, and Broby 2017).

Market forces will continue to compel the credit union system to adopt fintech solutions to remain competitive in the marketplace. The challenge is to find the right innovative products to retain and attract members, while not overinvesting in technology which could create financial risk for the credit union. This report will help credit union executives and boards ask crucial questions to help them make prudent decisions about their fintech strategy.

In addition to the full report, Filene created a practical tool called Evaluating Fintech Relationships, to help CTOs and CEOs better navigate new fintech partnerships.

What Are the Credit Union Implications?

This report is designed to stimulate thinking about the broad strategic and operational implications of a fintech partnership and to help credit union executives anticipate key decisions around security and risks, business models, talent acquisition, and training. This report provides crucial information to help credit union leaders better navigate fintech adoption.

  • Credit unions, regardless of size, can’t afford to ignore fintech. It’s a must-have in today’s financial services world, and especially important in attracting younger generations who have a greater trust in products provided by players outside the traditional financial services world (Hartmans 2016).
  • Choosing the right fintech partner requires time and diligence. There are both risks and benefits. It’s critical to ask tough questions of your potential fintech partner before creating a relationship.
  • Many fintech providers have little understanding of the credit union system and regulatory environment. Credit unions must factor this into their evaluation process and should leverage their expertise in these areas as they establish fintech partnerships.


Filene thanks its generous sponsors for helping to make this research possible.