The Importance Of Being Innovative

Digital FCU knows better than to rest on its laurels. The trust of its members relies on it.


Digital FCU
DATA AS OF 09.30.19

HQ: Malborough, MA
MEMBERS: 856,779
ROA: 0.81%

By any metric, Digital Federal Credit Union ($9.1B, Marlborough, MA) is a successful financial institution.

The credit union has posted tremendous growth and has positively impacted thousands of members in the past decade. Even with a physical presence limited to Massachusetts and New Hampshire, the credit union serves members in all 50 states. Nearly half of its new members in those states are millennials.

But as a new decade dawns, DCU knows it cannot rest on its laurels. The financial services industry is changing. Members are changing. And DCU knows its success for the next 10 years depends on winning in two key areas: innovation and relevancy.

The Importance Of Innovation

Nancy D’Amico joined the credit union as the senior vice president of technology and innovation in June 2019. The executive oversees technology, devices, software, and the like; however, her role encompasses more than that of a traditional chief information officer.

“It’s not your traditional technology leader role,” D’Amico says. “There’s an innovation focus.”

According to D’Amico, that focus starts at the top and is fully embedded in the culture of the credit union.

“Everyone is open to new ideas and what we can do better or do differently with technology,” D’Amico says.

As part of her innovation purview, D’Amico manages two teams focused on new ways of doing business. The first, Dixital, is a CUSO that tests technology-forward opportunities that specifically benefit DCU. The second, DCU’s FinTech Innovation Center, is an incubator located in downtown Boston dedicated to supporting seed-stage startups.

Since DCU launched the center in 2014, more than 50 early stage fintechs have graduated the program. And although the purpose of the center is to foster companies regardless of their potential for future partnership, three graduates of the program are sharing their solutions with DCU, solutions the credit union believes will meet the spending and savings, self-service, and security needs of its membership.

Project Finance

When D’Amico joined the credit union in 2019, DCU had started a conversion to a new online and mobile platform, Project Finance. When the conversion is complete in 2020, members will have access to a banking experience that is more focused on financial wellness than checking account balances.

“The platform includes goals-based functions and proactive financial insights that show members how they are spending and saving so they understand how they can change their behaviors to make better decisions,” D’Amico says.

DCU’s new online and mobile application will help members track their spending and saving habits. This includes the ability to see future account balances based on their present spending and saving activity.



Once the Project Finance conversion is complete, DCU will turn its attention to Posh, a conversational AI company founded by MIT graduates. Across a three-tiered implementation next year, DCU will add natural-language processing chatbot functionality to its website before upgrading its touchtone audio response and interactive voice response systems. In sum, the new technology will improve the credit union’s self-service offerings.

“I see self-service providing simple functionality for the members who prefer that experience,” D’Amico says. “It’s important for us to provide the capabilities so our members can handle their banking themselves.”


DCU is currently working to implement the solutions provided by Project Finance and Posh. With Coalesce, a security company that leverages artificial intelligence to detect and fight against synthetic fraud, the Northeastern cooperative has already formed a partnership.

Synthetic fraud occurs when imposters combine real and fictitious information to create new identities that are often undetectable by traditional protective methods. This type of fraud is a significant issue for banks and credit unions.

“We’re always focused on security and fraud,” D’Amico says. “This helps us take it to the next level.”

DCU often juggles hundreds of active technology projects in various stages of development at any given time. Before D’Amico arrived, DCU had a project steering committee; however, it was an early priority of the SVP to expand the team to include each of DCU’s seven senior vice presidents in hopes of formalizing project requests and better prioritizing projects and resource allocation.

“The goal is to ensure that we are focused on business opportunities that provide the greatest impact,” D’Amico says.

DCU’s FinTech Innovation Center welcomes the best and brightest fintech leaders from around the country for a yearlong term of study and exposure to the business world.

In its monthly meetings, the team reviews electronically submitted project charters in which internal project leads answer a few questions: What’s the idea? What’s the business value? What’s the member value? What’s the opportunity? What’s the risk?

From there, the steering committee grades each idea using a matrix that incorporates a handful of criteria, including gained efficiencies, simplified processes, multi-department impact, and regulatory impact, among others. The team prioritizes higher scoring projects over lower scoring ones, but it reserves the discretion to escalate projects that provide value not captured in the matrix.

Ultimately, the committee helps the credit union identify what innovations are worth investing resources toward. If the team is doing its job, new products and product upgrades will help DCU stay relevant to its members for years to come.

“We are focused on innovation and staying relevant, D’Amico says.” “We believe that speaks well to the future of DCU.”

The Importance Of Relevance

DCU is located some 30 miles from downtown Boston, whose high-density of students, recent grads, and young professionals is making it more diverse every year. Knowing that, it’s perhaps no surprise the credit union is focused on attracting that next generation of member. According to DCU, the credit union has found a measure of success, as nearly 50% of new members who join the cooperative are millennials.

We’re trying to meet the needs of a diverse demographic.

Craig Roy, SVP of Retail Lending, Digital FCU

But DCU is an organization that exists to serve the financial needs of its community, which includes more than just millennials. As the financial needs of its communities change, the credit union must change with them to remain relevant.

“We’re trying to meet the needs of a diverse demographic,” says Craig Roy, DCU’s senior vice president of retail lending. “We can’t be all things to all people, but what can we implement to meet those needs knowing we can’t do it all?”

The credit union relies on its project steering committee to prioritize high-impact projects, but maintaining relevance comes down to awareness, Roy says.

On the marketing side, this means targeting promotions and serving relevant offers based on member behavior. On the product side, it means tailoring loan products to millennial and underserved populations.

The millennial generation is entering its prime borrowing years. They are looking for home loans, home equities, and refinance options for student loans. Another area of need DCU has uncovered is in auto loans. Specifically, can the credit union give members a better rate than what they received at the point of sale? DCU thinks so and has made recapturing auto loans a priority.

“You don’t get the best rate from the point of sale in many cases,” Roy says. “We say, Come to us. We can give you a better deal.”

With the success of this program, the credit union’s auto loan penetration of nearly 30% bests the performance of its asset-based peers by more than five percentage points.

Elsewhere in the loan portfolio, DCU’s young professional members often have household incomes that would make them attractive borrowers. In the shadow of Boston, however, they face an expensive mortgage market wherein the traditional 20% down payment combined with other debt or financial obligations present a barrier to entry.

“The ability to set money aside to come up with a 20% down payment is just difficult today,” Roy says.

To aid this generation’s homebuying prospects, DCU launched a first-time homebuyer program in late 2018 that requires only 3% down and includes lender-paid mortgage insurance.

Also on the mortgage side, DCU is responding to the challenge posed by strict underwriting standards for mortgage sales to the secondary market. The credit union is in the early stages of development on a CUSO that will act as a community revolving loan fund for good borrowers who just miss the mark for a secondary market sale.

“We’re talking about helping people who are on the fringe of qualifying,” Roy says. “They are still good borrowers.”

Not every member needs an auto loan or a mortgage, however. Some need low-cost credit on short notice. As part of a stronger focus on the underserved borrowers in its community, DCU launched its Quick Loan, a pre-approved, short-term loan that members apply for solely through digital banking. Competing against the fast-cash business model of payday lenders, the credit union automatically approves the loan up to $1,000 in minutes without a credit check. Since the product’s introduction in June 2018, DCU has made more than 20,000 loans with balances totaling some $20 million.

“We’re even more committed this year to helping our underserved members meet their lending needs,” Roy says.

According to the credit union, most of its new members cite word of mouth as the main reason they join the organization. In fact, that’s been the case since DCU’s founding in 1979. To Roy, that underscores just how valued the credit union remains among its members, even now as it enters its fifth decade of service.

Relevance is key — it brings new members through the door and keeps the lights on. But to create a deeper, more meaningful relationship with members, DCU also offers a sense of trust. Members trust DCU. They trust the credit union to change with the times, to do the right thing, to serve their needs. It’s relevance that attracts them to DCU, but it’s their trust in the organization that keeps them there.

“Our members trust us,” Roy says. “We operate in their best interest, and they tell others. They pass it on.”

December 30, 2019

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