Because of their smaller size and scale relative to banks, many credit unions find it hard to draw the attention of fintechs. A new venture capital offering has set its sights on fixing that problem.
The Curql Fund, which announced its first close in April, now has 30 credit union investors and has raised more than $100 million.
The fund launched in 2020 and is managed by Next Level Ventures, the largest investment firm managing credit union assets, in collaboration with the credit unions in the Members Development Company CUSO. It is steered by a group of former founders, operators and leaders in the fintech and VC spaces.
One of its participants is the $7.3 billion-asset Idaho Central Credit Union in Chubbuck, Idaho. CEO Kent Oram said the company is proud to partner with other forward-looking organizations by investing in the Curql Fund.
“By ourselves, it is difficult to make inroads into the fintech world. By combining resources, we expect to cultivate relationships and solutions to improve the offerings we offer to our membership,” Oram said.
Next Level recognized a need to provide access to technology for the continued growth and stability for the credit union industry, according to NLV Managing Partner Craig Ibsen.
“The simple fact that this fund was created and credit unions are coming to the table as investors at a faster pace than we anticipated is a clear indication of the importance the industry is placing on technology,” Ibsen said.
Chris Otey, chairman of South Bay Credit Union in Redondo Beach, California, said any fintech involvement is good for the credit union movement.
“Understanding which fintech solutions are out there to eat your lunch, sell you lunch or eat lunch with you is a tall task,” said Otey, who is also chief revenue officer for the firm CU 2.0, which works to match credit unions and fintech solutions.
The Curql Fund — and others like it — have the potential to start leveling the playing field for credit unions, Otey said. CUNA Mutual Group launched CMFG Ventures in 2016 as its venture capital arm focused on strategic, early-stage investments in the credit union, financial services and insurance industries.
“As we see financial services broken down into their smallest parts by the fintech solutions specializing in these small parts of the industry, banks and credit unions are faced with building their own solution to compete, partnering with fintechs to provide those solutions or buying solutions,” he said. “Credit unions should be leveraging their cooperative ethos to help the industry as a whole move forward and remain competitive.”
Curql offers a key competitive advantage as the gateway for fintech access to credit unions — and the only gateway that can deploy money at the speed of a VC, Ibsen said.
Vincent Hui, managing director at bank consultant Cornerstone Advisors, said it will be interesting to see how many credit unions can invest in the fund and others like it because they may not be considered an allowable investment by regulators.
“Having said that, CUs are investing in CUSOs where fintechs have a big role, like VyStar’s investment in the
Hui said larger credit unions like the $10.7 billion-asset VyStar Credit Union in Jacksonville, Florida, have not consistently had trouble accessing fintechs, but their smaller peers may have some difficulty getting their attention due to their size and the amount of business that can be generated.
Michigan State University Federal Credit Union in East Lansing, Michigan, was an early investor in the Curql Fund. President and CEO April Clobes said the $6.2 billion-asset credit union thinks the fund creates opportunities for credit unions to collaboratively make investments in fintechs to enhance their members’ experiences.
“By partnering with fintech, we can provide robust digital services and remain competitive in the financial services industry,” she said in a press release.
