By Ray Birch
MADISON, Wis.—A new program established by CMFG Ventures and the Filene Research Institute is looking to help credit unions “break the ice” in establishing fintech partnerships.
As CUToday.info reported here, CMFG Ventures, the venture capital arm of CUNA Mutual Group, and the Filene Research Institute have launched the FinTech Catalyst Incubator to test new fintech products and services at credit unions.
Partnering with fintechs can bring benefits to credit unions, such as streamlining existing processes and products and keeping the organization relevant with members, many experts have stated. But getting started can be a daunting process, explained Brian Kaas, managing director, CMFG Ventures.
“I think when many credit unions try to go out on their own and do this, it can be really hit or miss with some of these companies that are on the market,” Kaas said.
‘Take Away the Fear’
Kaas said he has spoken with many credit union leaders about the process of working with fintechs for the first time.
“I think this can be a little overwhelming and daunting for many because there are so many fintech companies,” Kaas continued. “We want to take away the fear of the unknown by bringing fintech and credit unions together for this program.”
The FinTech Catalyst Incubator will test fintech and insurtech products and services that could fill credit union system gaps and create new opportunities for credit unions to innovate, grow, and better serve their members, Kaas explained.
‘Need to Adapt’
“I just think with all of the change and disruption that is occurring within financial services that credit unions will need to adapt to these changes and setting up an incubator program like we have here with Filene gives credit unions an easier opportunity to interface with fintech companies and begin working with them,” Kaas told CUToday.info. “In many ways this is a light-touch approach to working with fintechs. The credit union can ask a lot of questions…It gives credit unions the opportunity to reach out and be part of a pilot program with a fintech where there’s no type of threat and no monetary commitment—and this program is free. Only cost is CU time and resources. I think this will get them more comfortable in pursuing partnerships with fintechs, and help them understand better ways to use fintechs.”
Kaas said each fintech product or service will be tested by a group of up to 12 credit unions of varying asset sizes, locations, and consumer demographics for six months, and all of the testing is virtual—there is no travel. The program keeps a list of interested CUs and reaches out to them. During testing, participating credit unions will offer their members the new fintech product or service while receiving tools and support from the Filene Research Institute to test a unique hypothesis. Kaas said these credit unions “get a head start on bringing needed solutions to their communities and can shape final outcomes by sharing feedback and insights throughout the testing period.”
Research to Be Published
Research findings, including next steps and launch recommendations for viable products, will be published by Filene Research Institute upon completion of the testing period.
“We already had our inaugural fintech company go through the program and there was some really interesting dialogue with some of the credit unions that participated,” explained Kaas. “It really created insights into in what these kinds of partnerships can bring to credit unions.”
An advantage of using the program, said Kaas, is CMFG Ventures and Filene perform the due diligence with each fintech.
Brian Kaas
“We're carefully vetting the companies, we are doing that legwork on the front end before we bring a fintech company into the Incubator,” said Kaas. “I think a lot of times credit unions might not have the resources and time to do that, as well as the understanding of which companies are out there.”
The Biggest Benefit
But the biggest benefit, Kaas stressed again, is the Incubator is a good way for credit unions to get exposed to fintechs and how to work with them.
“Credit unions can learn and work with these companies and not have a long-term commitment,” Kaas said. “It allows credit unions to learn whether a fintech offering will be relevant for them and work for their members. They can examine real results before making any type of commitment to the fintech company, and we think that is a great way to start.”
Second Round Underway
Kaas said the second round of testing began in July and runs through December.
“It's still early on in the process, and it’s hard to pinpoint the number of pilots that we will be able to run,” said Kaas. “But I’d say we’d like to have two very six months. We would love to get as many credit unions to sign up for the program. It's just a great way for credit union to dip their toes in the fintech waters.”
Credit unions interested in participating in the FinTech Catalyst Incubator should sign-up on CMFG Venture’s interest form, or learn more at filene.org/fintechcatalyst.