Are fintechs your financial institution’s enemy or its savior. Or something in between. The correct answer is, all of the above.
In this episode of the Digital Banking Podcast, host Josh DeTar welcomed Don Shafer, the co-founder and chief evangelist at Quilo. Among other things, the two discussed how fintechs generally fall into one of three different “buckets.” They also looked at people’s expectations from banking and tech, as well as why you shouldn’t close your branches.
⚡ The three buckets fintechs fall into. Shafer groups fintechs into three buckets: those wanting to eat your lunch, those doing their thing on the side, and those you can leverage. “Some fintechs are taking everything they’re doing directly to the consumer, and they totally bypass the banks and the credit unions — just completely cut them out,” said Shafer. “Those fintechs are not there as your friend; they are there to eat your lunch. Then you have some other ones out there that are going directly to the banks and credit unions, just to use their money because they’re going to originate the loans, and they’re going to scrape two or three or four points off the top, and take no risk … Then you have fintechs that, literally, their whole business model is they have to work with the banks and credit unions, or they don’t have a revenue stream.”
⚡ How to choose a good fintech partner. Community FIs need fintechs to remain competitive. Shafer said that the first step in choosing a fintech partner is knowing your own strategic goals. “We don’t want to be chasing every shiny object that comes running through the door. Some vendor comes in, ‘Oh, that looks awesome. That’s great, let’s do it,’” he added. “Let’s back up. What are your strategic objectives for the year? … That’s my first filter — is it going to help achieve a strategic goal? And if it’s not, then put it on the back burner.”
⚡ Serving the “I want it now” generation. Today’s consumers expect to be able to conduct any transaction they want, any time they want, any place they want. Community FIs can only meet this demand through the smart use of technology. “The banks and credit unions — I don’t care what size — they need to have a digital lending solution so that anybody in America can pick up their phone and type in whatever kind of loan they’re looking for, and that banker credit union is going to pop up because now they’re using social media, they’re using Google search — they’re using those things,” explained Shafer. “Because it’s local, they have a big chance of popping up on the top of the screen. But people want it now. If it’s going to take them more than four or five minutes to apply and get a loan, they’re gone. They’re going to the next place.”