How FinTechs Are Staying Regulation-Ready With Credit Unions

The 2020s have been a decade of unlikely partnerships. FinTechs that once vied for deals with national banks are now joining forces with credit unions, the community-rooted cooperatives once viewed as too small or too slow to drive digital innovation.

According to PYMNTS Intelligence’s “Credit Union Innovation Readiness Index: How FinTechs Are Shifting Their Partnership Strategies” (August/September 2025), in collaboration with Velera, nearly half of all FinTechs, 48%, now partner with credit unions to deliver end-user products and services. That is up 19% from 2024, while partnerships with national banks have fallen 56% in the same period.

The trend reflects a broad recalibration of the FinTech ecosystem. Large, well-capitalized banks are building their own technology in-house, while smaller financial institutions need external partners to compete in areas such as real-time payments, biometric authentication and artificial intelligence (AI)-powered customer service.

Going Small to Go Far

For credit unions, the appeal lies in access to innovation they might otherwise struggle to develop or afford internally. As member-owned organizations with limited tech budgets, most credit unions move more slowly than commercial banks in deploying new solutions. FinTechs, by contrast, can deliver plug-and-play services that enhance members’ digital experiences without the need for wholesale infrastructure overhauls.

Those services are centered on safety and convenience. Among the FinTechs surveyed, 31% already offer or plan to offer card-transaction management or alert tools through third-party partners, and 26% intend to introduce biometric authentication or digital-identity solutions by 2031.

FinTechs working with credit unions see more than just another client segment. They see an opportunity to differentiate. Thirty-four percent of FinTechs that sell to credit unions cite “helping financial institutions be more competitive” as a core advantage, roughly 2.5 times the share among other FinTechs.

That focus matters because credit unions compete less on scale and more on community connection and member experience. A FinTech that helps a credit union deliver faster onboarding, smarter fraud protection or better data visibility can strengthen both the institution’s competitiveness and its long-term member loyalty.

The report suggests, however, that many FinTechs still underestimate this strategic leverage. Two-thirds of those serving credit unions do not yet emphasize competitiveness as a selling point — a missed opportunity at a time when smaller institutions are actively seeking technology partners to help them keep pace with larger players.

Why Regulation-Ready Matters

If there’s one barrier that defines the FinTech-credit union relationship, it’s regulation. Credit unions operate under stringent compliance mandates that cover everything from know-your-customer and disclosure to member privacy and capital management.

Eighteen percent of FinTechs that do not serve credit unions cite regulatory complexity as their biggest obstacle to entry. For these potential partners, being “regulation ready” — fully aligned with compliance frameworks and able to integrate seamlessly without introducing risk — is table stakes.

The good news is that regulation need not be a deal-breaker. Nearly half of FinTechs already serving credit unions (42%) say they face no major impediments at all when partnering, proving that compliance can be mastered with the right preparation.

Two-Way Street of Innovation

Partnership readiness runs both ways. While FinTechs must understand credit unions’ governance structures and legacy systems, credit unions also need to adjust their procurement and onboarding processes to accommodate faster technology cycles.

For now, the data suggests optimism. FinTechs that once focused on chasing large-bank contracts are finding that smaller, regulation-minded partners can deliver bigger long-term dividends — provided they approach the relationship as a compliance-anchored collaboration rather than a sales channel.

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