TruStage Ventures unit chief Brian Kaas says large retailers like Amazon and Walmart are disintermediating credit unions. Startups can help them push back.

“ We’re starting to see some momentum return to the fintech space,” says Brian Kaas, president and managing director of TruStage Ventures on the CVC Unplugged podcast. After two years of investor caution, there is growing appetite to spend on emerging technologies, he says, and one area of the financial services industry ripe for startup-inspired innovation is credit unions.
These not-for-profit financial cooperatives are under pressure today to diversify their revenue streams, as they face competition from new entrants into their market, and struggle to attract younger customers.
As the investment arm of TruStage Financial, a US insurance company which offers services to credit unions, Kaas’ team at TruStage Ventures has a view on how these smaller financial services providers need to adapt.
New competitors
One of the biggest threats facing credit unions is the increasing expansion of the financial services that large retailers are providing to their customers. As they develop more point-of-sale and direct-to-consumer services, credit unions are getting pushed to the side in every-day transactions.
“If you’re not at that point of sale you’re going to be completely disintermediated,” says Kaas.
A major battleground for this is in the vehicle marketplaces.
“Credit unions fund roughly a third of all the auto loans in the US. So when you have EV manufacturers now having a very different financing model, that starts to chip away at credit unions’ ability to provide funds for those loans.”
“Credit unions fund roughly a third of all the auto loans in the US. So when you have EV manufacturers now having a very different distribution model and a very different financing model, that starts to chip away at credit unions’ ability to provide funds for those loans,” says Kaas.
Even the big-name retailers like Amazon and Walmart are throwing their hats into the ring to compete for people’s auto loans. Before, the primary way most people bought cars was through dealerships – who had partnerships with credit unions to finance them. Now credit unions have to team up, for example, with point-of-sale startups to not get cut out completely.
These are also platforms where companies like TruStage can embed their insurance products.
It’s through a platform like Carsaver – which is in TruStage Venture’s portfolio and is the one through which Walmart is building its car marketplace – that a credit union can access a retail giant’s marketplace, whereas by itself if would never be able to.
“We’ve now created this ecosystem where we’re able to kind of introduce credit unions into something that no credit union is large enough to be able to launch a partnership independently with Walmart,” says Kaas.
TruStage Ventures has also invested in auto financing platform Caribou, which lets people refinance their car loans, investing as part of their $115m series C in 2022.
Attracting younger members
Another challenge for credit unions is their aging membership. Credit unions have roughly 140 million members across the US, who tend to be loyal. But this membership is ageing, with the average age north of 50. Here is where fintechs can help too, with new banking technology aimed at young adults and teens, which credit unions can use on a white label basis and offer through family members.
One of the startups TruStage Venture has invested in in this area is Goalsetter, which provides a financial education platform for young people. Like a growing number of teen-focused platforms that look to gamify financial education, this one uses formats familiar to its target audience.
“ [Goalsetter] provides more of a social media, TikTok feel to really resonate with preteens and teens. It provides financial education and it gives credit unions an opportunity to gain exposure to the next generation of credit union members.”
Credit unions are also under pressure as loan delinquencies are up, the risk of fraud and cybercrimes continues to rise and regulations – which have had both credit unions and fintech companies under more scrutiny – have limited the kinds of fees financial institutions can charge.
AI shows promise in being able to bring down costs internally, says Kaas. TruStage Ventures has invested in income verification platform provider SteadyIQ, for example, which can help cut down on fraud.
Fintech startups are becoming more amenable to collaborating with fintech incumbents these days, says Kaas. Both sides are seeing the value in partnerships. Startups are finding out that it’s hard to compete against the larger name brands, and are turning towards partnerships and new business models to stay in the game. A number are even abandoning their direct-to-consumer offerings in favour of a more B2B approach, as they also strike agreements with more established players to reach the end consumer.

Fernando Moncada Rivera
Fernando Moncada Rivera is a reporter at Global Corporate Venturing and also host of the CVC Unplugged podcast.