By Roy Urrico
The $9. 9 billion Marlborough, Mass.-based Digital Federal Credit Union, better known as DCU, is the winner of the 2022 Tekkie Award for Lending.
Prior to 2021, DCU considered its digital consumer loan application experience inferior compared to direct-to-consumer fintech competitors. DCU, which serves more than 1.25 million members in all 50 states, aimed to grow its consumer loan volume significantly and efficiently. To do so, it needed to attract and manage more loan volume, reduce friction for staff and members, and offer fully digital member engagements.
Caleb Cook, the credit union’s vice president of consumer lending recalled its existing vendors, which supplied loan origination (LOS) and point of sale (POS) technology, were unable to make enough progress building compelling digital user experiences. “We wanted the loan processed in the experience while the member's doing it. So ultimately, (members) could even close on the loan at the end of the experience.”
As a result, DCU partnered with San Francisco-based WithClutch, which delivered exactly what the credit union sought — a direct-to-member, end-to-end digital loan system with a compelling experience. “Our goal is to make getting a consumer loan from DCU as easy as ordering something off of Amazon.com,” Nicholas Hinrichsen, CEO of WithClutch, said. “We did just that with our revolutionary autonomous auto loan refinance experience.”
Cook explained DCU started out with car refinances because it is considered one of the easier loan use cases.
“The automated recapture efforts will drive share-of-wallet growth and allow us to efficiently scale external refinance auto loan volume,” said Cook. “The digital experience has reduced phone calls, emails, and other friction points for staff and members allowing us to fund more loans faster. We have been using this solution since the summer of 2021 and we continuously make improvements and expand capabilities.”
Since the WithClutch implementation, DCU increased its look-to-book ratio (the percent of auto loans funded against all auto loans processed) for approved member auto loan refinance applications from 46% to 81%. Also, the credit union reduced the time to fund applicants from an average of 7 days to 1.5 days.
Cook pointed out member reviews have been phenomenal with feedback such as “amazing virtual refinance experience,” “effortless auto refinance,” and “DCU keeps getting better and better each time I get a car loan”
In 2017, Hinrichsen and Chris Coleman sold their previous digital car retailer company, Carlypso, to Carvana.com. The two then co-founded WithClutch in 2020, which it says processes billions of dollars in loan applications.
Hinrichsen described how he and Coleman wanted to create the next generation point-of-sale system for lending, a software solution that would allow credit unions to compete with direct-to-consumer lenders, diminish labor intensity, aggregate data from multiple sources and offer borrowing experiences that members would rave about.
“We are just excited to help these credit unions who are incredible organizations with super loyal members and fantastic loan products, embrace technology to fully compete and dominate the consumer lending space,” Hinrichsen said.
In DCU’s case, for example, instead of requiring a member to fill out a lengthy web form with their personal and vehicle information, they can now apply with their mobile or online device quickly and efficiently.
“The first-time magic happens is when you give your phone number and the last four (digits) of the (Social Security number),” held Hinrichsen. Once the member verifies themselves via text message, WithClutch pre-fills their information and does a soft credit pull.
Behind the scenes WithClutch gets estimated mileage, books out the vehicle, and pulls payoff information from several different sources. “WithClutch leverages application programming interfaces (APIs) to pull in all known collateral registered to the member and they select which vehicle is associated with the loan they are refinancing,” said Hinrichsen.
At the end of the application experience the DCU member receives terms, rates, payments, and potential savings for each vehicle eligible for refinancing. Once the member selects their loan terms some also receive signing and closing documents via DocuSign in just a few minutes.
“It is fast, average is less than five minutes,” added Hinrichsen. “From the member’s perspective they are done with not only applying for the loan but also consummating it all in one easy digital session when certain conditions are met.”
‘Experienced’ Startup Creates Better Experiences
Cook pointed out DCU, recognized for offering fintech mentorship programs, knows something about newcomers. “We have worked with a lot of startups in the fintech space. I do not even refer to WithClutch as a startup though, they are a very mature startup. This is like working with an experienced startup.”
DCU began working with WithClutch in 2020. Said Cook, “DCU wanted loans to get processed in the experience while the member's doing it.” Six months later, that is what they got from WithClutch. Hinrichsen came to DCU with a prototype, “It was kind of our dream list of things that should just happen,” he added.
“We basically created a refinance experience where the member can apply, get their loan processed, go over all their terms and options,” pointed out Cook. “For some current members, if they meet certain conditions, they can contract at the end of the experience, sign their loan note, and then we flash at the end of it saying, “You're done.” The loan shows up in the member's online banking account within 24 to 48 hours. “The next day, we send a payoff to your current lender.”
Cook explained the coolest part is the member gets to see it happen, they are part of that experience, with no back and forth or emails with a credit union representative asking for VIN number or what options a car has and no need for a credit union rep to look up a car’s value and check its loan to value (LTV) ratio. “Now that just all happens within the experience and the best part is it just gets dumped into our existing loan origination system.”
Plus, Cook noted the process reveals debt DCU members have elsewhere. This presents in-session savings/refinance opportunities. “We’re able to turn every member touchpoint into a cross sale opportunity automatically with no human involvement,” Cook said. “Which in turn helps grow our loan portfolio, increase share of wallet and delight our members with unprecedented digital experiences.”
Integrating the WithClutch process did not require DCU to do any internal development or customizations. “All we had to do from our end was a URL redirect. We push those applications to (the WithClutch) portal.”
The other big difference from DCU’s old process, according to Cook, “We're doing a soft credit pull instead of a hard inquiry.” Members like that they can see how DCU can save them money on their car loans and get these personalized quotes with no impact on their credit.
On the DCU end, “Now instead of just getting an application with raw data and a credit report, we're getting the full application, plus all this other stuff,” said Cook. That other “stuff” includes the book sheet, a payoff statement and then for some current members a signed loan note, too.
DCU can now also process two or three times as many refinance applications a day because its reps are not going back and forth with members. “It helps them hit their goals, helps us grow quicker, more efficiently,” Cook noted.
DCU plans to expand the credit process. “WithClutch also is doing this kind of experience for personal loans and credit cards, probably the next products we are looking at to do with them.”
If a non-member applies, DCU tells the applicant they cannot consummate a loan unless they become a member. “Then we push them over to our online membership application system, which is a separate system,” said Cook. “But we're looking at integrating that experience so we can push all this data over there just to make that easy.”
Cook noted the in-session DocuSign capability further reduced labor for DCU’s staff and led to significant member satisfaction. DCU also preapproves its members quarterly. “If I click that offer, it is actually going to point me to the WithClutch experience.”
Said Cook, “We're really trying to have an award-winning member experience.”