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05-24-2023

3 ways embedded banking helps Credit Unions to serve small businesses | BankiFi

North American Credit Unions

Credit Unions are financial institutions that are member owned and provide financial services to the members exclusively. Additionally, Credit Unions are not-for-profit organizations, with their primary role being to serve their members with their financial needs. Their membership tends to be focused on a specific field or common bond: employees of a specific company, or people who live in a specific community, for instance. Credit Unions tend to prioritize personalized customer service and, much like traditional banks, are typically insured by government-backed deposit insurance.

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Are they a key player to the survival of SMBs?  

Credit Unions place a strong emphasis on serving individuals, they also provide specialized services and financial products designed specifically for small businesses. They recognize the significance of local businesses and the communities in which they operate, hence offering tailored solutions. These encompass a range of offerings, including business accounts, business digital banking, business loans, business credit cards, and cash management services. The extent to which they serve small businesses may vary depending on the specific communities they serve. Nevertheless, their community-oriented approach and dedication to personalized service make them an essential and integral part of the small business landscape in the communities they cater to. 

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What kind of technology do Credit Unions utilize at the moment and are there any issues with this? 

When it comes to technological decisions, Credit Unions often align closely with other financial institutions that prioritize dependable, scalable, and user-centric solutions. In fact, Credit Unions and community financial institutions often lead the way in adopting new technological trends, particularly in the specific of user experience. They are willing to take risks that larger, more established institutions may shy away from, especially when these technologies offer unique and valuable experiences for their members. By embracing user-focused innovations, Credit Unions strive to provide their members, whether they be individuals or small businesses, with exceptional and distinctive services. 

How can Embedded Banking technology change how Credit Unions serve their SMB customers?  

Embedded Banking and Banking as a Service can be very helpful for Credit Unions in some key areas:  

  1. Revenue Generation: As mentioned above, the Credit Unions who are most forward thinking will recognize the threat to their business by non-banks and Fintechs who are partnering with other financial institutions to offer, or embed, banking functionality within their offeringsIt is important that Credit Unions choose providers wisely; ideally a partner who will help them compete in this space as the market continues to growFor example, the ability, especially in today’s banking climate, to easily add deposits by embedding account open into an app with a much larger reach would be a clear win for the Credit union, with very little up-front effortThese relationships can also lead to loan income through in app offerings for small businesses that need assistance
  2. An improved value proposition: by providing a comprehensive suite of financial solutions tailored to small businesses. This includes features such as business accounts, loans, payment processing, and cash management, all seamlessly integrated into the small business's preferred platforms. By offering these integrated services, Credit Unions can position themselves as one-stop financial partners for small businesses, fostering stronger customer loyalty.
  3. Leverage partnerships: Embedded banking technology enables Credit Unions to leverage partnerships with fintech companies or technology providers. A collaboration like this allows Credit Unions to tap into innovative tools and services which enhance their small business banking offerings. By staying at the forefront of technological advancements through embedded banking, Credit Unions can then start to differentiate themselves from competitors and remain relevant in an ever-increasing digital banking landscape.

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How can Credit Unions overcome any challenges that come with embedded banking? 

Many of the embedded banking products available today function primarily as utilities hidden behind the user experience of fintech or non-bank applications. While this setup may serve the purpose of increasing deposits, it can inadvertently obscure the member's relationship, which Credit Unions highly value. The optimal approach entails partnering with non-banks and fintechs, where the Credit Union's brand can take a more prominent role.

This collaboration benefits both parties: the fintech gains the trust of individuals through the Credit Union's brand, particularly if it has a local focus, while the Credit Union seizes the opportunity to directly engage with members, fostering a stronger connection and better serving their needs. Additionally, Credit Unions must ensure that they maintain a seamless and secure user experience across various platforms and applications. 

Are you a Credit Union wanting to serve small businesses better?

Then you came to the right place. Click the button below to request a demo of our embedded banking platform and explore how we help you to get small businesses manage their financial admin, pay and get paid on time.

 

 

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