First Financial Of Maryland Doubles Down On AI-Powered Lending

After nearly four years of success with its short-term loan product powered by AI and machine learning, First Financial of Maryland Federal Credit Union ($1.3B, Sparks, MD) is using those tools to put credit cards in members’ digital wallets.

In October 2020, First Financial used internal talent to launch AnyTime Express loans, an unsecured short-term loan product that relies on artificial intelligence and machine learning. In just under four years, those efforts have resulted in nearly $10 million in total loans and almost 8,000 applications. Members complete a mostly pre-filled application either online or through the credit union’s app.

“The AI/ML decision engine then decides to approve the application and fund the loan or pass it off for a second look to one of our human underwriters,” says Michael Powers, the Maryland cooperative’s chief innovation and strategy officer. “Approved members are presented with loan documents, and upon digital signing, the loan records are created on the core and the members have their funds available immediately.”

The model has proven to be popular among members — adding convenience and a new instant decision capability for more sub-prime borrowers — and efficient for the credit union.

Expanding A Proven Model

Now, First Financial is expanding its offerings to include Express Visa credit cards, taking members from easily applying on their phones to adding a new card to their digital wallets in approximately 90 seconds. Along with ease, this also provides members instant access to higher loan limits and spending power than are currently available with the AnyTime Express loans, which max out at $2,000.

We’re punching above our weight class here and improving sales and overall member satisfaction through a quality experience.

To expand from installment loans to credit cards, First Financial had to retrain its AI model to include the underwriting pattern for its Visa cards.

“We used a different data source for our credit card underwriting that reflected our historical underwriting decisions,” Powers says.

So far, the expansion is going well.

“Now, members in a retail store or walking through the parking lot can get a credit card they can use instantly,” Powers says.

Credit Union Service, Big Bank Tech

Although $10 million in loan volumes is impressive on its own, it’s especially noteworthy given AnyTime Express loans are only available in relatively modest amounts, ranging from $1,000 to $2,000 on a 12-month note. The $10 million figure includes approximately 100 Express Visa cards, as well. First Financial has not only brought a “big bank” tech experience to its members but also added solid performing products with an attractive net yield to its balance sheet.

“These are good assets to put on the books, especially when our cost of funds has increased and we don’t want to take on a lot of interest rate risk,” says Powers, adding that application volumes sometimes double or even triple following promotions.

Prior to AnyTime Express, the credit union ran personal loan promotions in the summer and winter, but participation in those pre-approved programs had been waning for years. AnyTime Express loans are available year-round and are easy to promote as needed. They are also lower cost and require less processing labor than the previous pre-approval program.

The Maryland cooperative has used a variety of marketing channels to spread the word, but Powers has found banner ads within the credit union’s digital banking platform to be particularly effective in driving applications.

“You’re already authenticated and we already have your information, so it’s the perfect opportunity to click a link, quickly complete the application, and receive your funds or digital card,” he says.

Currently, First Financial is promoting its Express Visa cards by sending targeted advertisements via e-mail and using banner ads in its online banking system. The cooperative also has plans to send postcards to members who it believes have competing credit cards.

Unexpected Benefits And Lessons Learned

The sales lift and decrease in abandonment trends are striking.

“Getting people what they want right away is key,” says Powers, pointing out that approved applications needing a second look by a human frequently don’t make it to disbursement because members move on after not getting an immediate approval. “They just have to sign the docs, but they don’t do it. It’s an important lesson.”

The credit union also learned that historical snapshots of relevant underwriting parameters — even those that might be overwritten in the core banking system — can be useful for training AI models.

First Financial is one of a growing number of credit unions to tackle AI in-house, and Powers encourages other leaders to lean on their existing talent to explore the benefits of these models.

“It goes beyond efficiency or even member convenience,” he says. “We’re punching above our weight class here and improving sales and overall member satisfaction through a quality experience.”