Pete Major of Member Driven Technologies shares key fintech strategies for credit unions, tips for evaluating fintech partners, and the role of AI in financial services.
Pete, please guide us through your background and your role as VP of Fintech Solutions at Member Driven Technologies?
I have over 25 years of experience in financial services, spanning front-office and back-office operations, payments, IT processing, consulting, mergers, conversions and integrations. Prior to MDT, I spent over 15 years at Jack Henry with my last position being the director of Symitar implementations.
Even in my previous role, I admired MDT’s deep commitment to clients, employees and its dynamic culture, which are major reasons I ended up here. My passion is helping credit unions leverage the most effective technology and solutions to meet their unique needs and ultimately enhance member service, helping solidify our credit unions’ position as the financial partner of choice in their communities. As VP of Fintech Solutions, I support our clients with fintech integrations and strategy, helping them navigate today’s complex landscape to remain competitive and successful.
For banks and credit unions, what are the key considerations when evaluating potential fintech partners?
When evaluating potential fintech partners, there are several factors that institutions should consider to ensure alignment with their innovation goals and strategic priorities. First, prioritize fintech investments based on cost-effectiveness and their impact on the institution’s overarching strategy. Does the solution solve a pressing problem or business need? Some common top priorities include digital banking solutions, payment systems, efficiency improvements, and security/fraud prevention technologies along with technology that can drive deposits.
It’s also critical to make sure the potential partner has a strong values and culture match. If the fintech doesn’t align with the institution’s long-term vision, the implementation is likely to be disruptive instead of transformative. Finally, thoroughly evaluate the fintech’s track record (which should include reaching out to others who have leveraged the technology), their approach to data security and compliance, and its ability to integrate seamlessly with existing systems.
Prioritizing fintech partners based on overarching strategy, culture and values alignment – as well as extensive due diligence – will be best positioned for success.
What are the common pitfalls that financial institutions should avoid during the fintech selection process?
A major one is innovation for innovation’s sake. Community-focused institutions in particular have limited time and resources, so it’s critical for their attention to be dedicated to deploying technology that squarely supports the organization’s high-level strategy. If innovation is not a key part of your credit union’s strategy, then avoid the ‘shiny new thing’ and focus on investing in technology that augments your institution’s competitive differentiators.
Another common pitfall is only assessing the fintech’s sales and business development team. While these contacts might be great, what will matter most is connection and collaboration with who the institution will be working with on a daily basis, such as the fintech’s operational and support teams. Make sure there is good chemistry between key players.
How important is it for a fintech solution to align with the existing processes and culture of a financial institution?
It’s extremely important; even the most advanced technology can be harmful rather than helpful if it doesn’t align with the institution’s overarching mission or long-term vision. As part of this ‘vibe check’, institutions should evaluate the fintech’s commitment to the customer or member experience, their risk appetite and their view of technology’s role in the broader ecosystem. It’s important to understand how well the fintech solution integrates with existing processes, complements the company culture and advances organizational goals.
Please keep in mind that this isn’t the greenlight to make new fintech solutions to fit into existing processes that have been in place for 20 years. You will likely not gain the efficiencies you’re looking for if you take this approach. Be willing to consider different approaches to existing processes and make the changes that make sense from an ROI perspective.
Can you share some best practices for conducting thorough due diligence on potential fintech partners?
There are several key areas that should be thoroughly vetted to ensure a successful and secure partnership. This includes factors such as the solution’s technical architecture, integration points with existing systems, security posture and the company’s financial position. While this process is arduous, it’s extremely necessary; there is great financial and reputational risk involved in partnering with a company that doesn’t employ proper controls or fails to meet security standards. Here, it can be extremely beneficial to rely on trusted strategic partners for insight and guidance.
By conducting thorough due diligence and thinking long-term, institutions can identify solutions that not only help differentiate but also foster growth and lasting loyalty.
How can smaller institutions, with limited technology resources, navigate the vast array of fintech options available to them?
Navigating the fintech ecosystem can be especially difficult for smaller institutions without the extensive technology resources or in-house expertise available. This is where the right partner can make all the difference, one that is able to provide comprehensive support to guide institutions through the complex fintech ecosystem. Partners that help institutions bridge the fintech gap and understand and speak the fintech language are often a gamechanger for smaller institutions.
When it comes to integrating AI, what steps should financial institutions take to distinguish between hype and substance?
There is a lot of literature out there about AI needing a very structured waterfall approach to implementing this technology. If we’re talking about narrow AI, this approach makes sense because this technology has been around for decades and you’re likely already using this technology without knowing it. If we’re talking about the new Generative AI (GenAI), I don’t think a structured approach here is the right path, particularly for small institutions.
People have a very difficult time switching to new technologies and if you’re going to get the efficiency lift that GenAI promises, you have to change behaviors. It’s just nature, we all love a good habit (maybe it’s just me). But we have found that the best approach here is to pilot GenAI technologies. This approach gives your team a chance to test the new technology in a controlled environment and allows you to figure out the pros and cons without making a major investment in a platform that will likely be very different a year from now. Engaging strategic, and consultive partners is key here if you don’t have the technical expertise on staff.
What role does education and literacy around AI play in helping financial institutions make informed decisions about adopting this technology?
Education and literacy are huge. In general, people tend to fear the unknown, so it makes sense that institutions that fail to properly educate themselves about AI will avoid it. Ensuring key stakeholders understand AI’s potential – and risks – is a critical first step before a strategy can be formed. You can’t avoid AI’s impact. Your employees are likely using this technology now. Lean on industry groups, reputable publications and trusted partners to help share the most relevant AI information and content.
Can you provide examples of small-scale AI use cases that financial institutions can experiment with before fully committing to larger implementations?
As the hype and buzz around AI continues (and frankly, it’s exhausting), financial institutions are exploring several small-scale use cases before committing to larger implementations. For instance, they can start by integrating AI into simpler customer or member chats, where the AI can handle routine inquiries and free up human agents for more complex interactions. Keep in mind, quality here is extremely important as the chatbot is talking directly to your members. Another promising area is AI’s role in supporting the loan approval process by automating preliminary assessments and streamlining documentation review.
AI also proves beneficial in enhancing operational efficiencies by optimizing workflows, improving work quality, and proactively informing decision-making. And, it can support with crafting more personalized offerings, tailored to individual customer or member needs. Even if immediate action isn’t taken, it’s crucial for banks and credit unions to consider how AI could align with and support their service and brand strategy. Engaging with trusted partners and peers is a great starting point to stay informed about the latest advancements and potential applications.
Looking forward, what trends do you see in the fintech landscape that banks and credit unions should be aware of?
Origination and servicing in digital channels continue to be top of mind. Ensuring member engagement after they open their accounts is also areas of interest for our credit unions. We expect loan rates to start to decrease and as a result, lending volumes will go up (no surprise there). Make sure you have the right technology tools for loan origination in place before volume goes up. Also, you cannot be passive with respect to fraud and security. Using technologies to help mitigate these risks is a must for every financial institution.
We see a lot of interest in technologies to provide services for non-interest income. Business Banking and the associated fee income is big right now. Also, is there a way to use Faster Payments (FedNow/RTP) to generate non-interest income? Perhaps.
BNPL (Buy Now Pay Later) continues to get a lot of press and frankly, the adoption numbers are really amazing. But with multiple due dates and rising delinquencies, it does make me wonder if this new service is really helping or hurting consumers.
Anything from the CEO Forum we could highlight?
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