How many credit unions or banks can say they grew revenue by 31% in 2023 and have a 41% efficiency ratio? Bancorp's January 2024 investor presentation outlines how they did this by leveraging embedded financing and BaaS models. Credit unions and banks in Canada could replicate this model, and you can be relatively small to accomplish it. Bancorp has less than $8 billion in assets, and other similar providers, Evolve Bank and Trust, Blueridge Bank, and Coastal Community, are all below $4 billion in assets. https://lnkd.in/g3nAusXB
Ajay Hans
6mo
Credit Unions have an opportunity to leverage and retrofit the super app concept that has garnered much attention as technology companies, online retailers, social media networks and financial institutions, among others, attempt to make their mobile application serve as a “one stop shop” for consumers. In retail banking, this means bundling all of a credit union’s services, along with those of its fintech partners, within a single mobile app. The thinking being that if members can manage everything from basic banking functions (balance transfers, check deposit, bill pay) to adjacent services (subscription management, P2P payments) to wealth management and financial wellness programs, to consumer, auto and/or mortgage lending – even business banking – then this effectively attracts new members and supports member retention by bringing what might have been a handful of disparate applications on a member’s mobile device all under the credit union’s single app.
Daniel Johnson
6mo
I really like how the Bancorp report illustrated the concept of platforming. I agree, the 80 year old business model is done and CUs need to embrace the digital business model which platformization is a core element. Thanks for sharing!
Tarique Khan
6mo
BaaS isn't as rosy as it's turned out to be. Some of the banks mentioned above are under a consent order from the regulators and Blueridge is exiting BaaS altogether. Most of those banks are under $10 Billion in assets and benefit from unregulated interchange due to Durbin. It's regulatory arbitrage, which doesn't exist in Canada. I would recommend following Jason Mikula's Fintech Busienss Weekly to get an inside baseball look at the going ons in BaaS. Even looking past the regulatory concerns, with raising rates and the cost structure with BaaS the unit economic don't make sense since a lot of it has been subsideid by VC money which is drying up.
Chief Executive Officer at League Data and Technicost
6moThe challenge is that running the cloud IT side is a complex, resource intensive and risky business itself. It requires a different way of managing and often conflicts with the credit union side of the house. Generally, assets are irrelevant in cloud contracts as the key metric is number of users and data volumes. The drive to aggregate will also mean making compromises to architecture and strategy to ensure a healthy base, and taking on more liability. It's not impossible, but I think credit unions need to be very clear on the model, including governance to make startup/VC types of decisions within the cooperative model. The BaaS can cannibalize the rest of the operation.