Listen: How automation is boosting PenFed’s annual origination assets to $15B

PenFed owes its multibillion-dollar growth in annual origination assets to a sweeping automation overhaul. The McLean, Va.-based credit union has automated much of its front- and back-end business processes, including origination platforms, decisioning and modelling capabilities, and credit-processing functions. And these technology overhauls were not just for show. Automation helped the credit union grow origination annual assets to $15 billion and total assets to more than $34 billion in a few years' time, Jay Fee, PenFed vice president of consumer banking, tells Bank Automation News in this episode of “The Buzz” podcast. “Origination annual assets when I got here a few years ago were $2 billion a year,” Fee says. “We're at around $15 billion for this year. That's been done through standing up a lot of new channels, a lot of new products, a lot of new automation features, and integration with over 35 different fintech partners.” While customer response has been largely positive, Fee tells BAN that PenFed’s automation journey is only “halfway” done, with backlogs going well into 2023. Prioritization is essential for credit unions looking to improve technology processes, Adelina Grozdanova, head of investor group at banking fintech Upgrade , tells BAN . Upgrade offers digital banking, lending and card solutions to more than 100 credit unions and is one of PenFed’s fintech partners. “We have to think about what else the credit union is working on,” Grozdanova says. “Some of them are thinking about core conversions. Some of them are thinking about improving their own member experience. Some of them are refreshing entire back-end systems. I think the first challenge for us is just making sure that we're in the right priority.” Listen as Fee and Grozdanova share insights and best practices for automating at community credit unions. Subscribe to The Buzz Podcast on iTunes , Spotify , Google podcast , or download the episode .

The following is a transcript generated by AI technology that has been lightly edited but still contains errors. Alijah Poindexter 00:05 Welcome to the buzz of bank automation news podcast. I'm Associate Editor Elijah Poindexter. Recently I spoke with Jay fee VP of consumer banking at PenFed. Mr. Fee and I discussed Penfeds automation journey, which helped grow origination annual assets of $15 million. I also spoke to Adelina Grozdanova, co-founder and head of investor group with Upgrade, who shared some Tech Best Practices for community credit unions. Obviously, Jay, you, you're one of the bigger partners with upgrade. But I'm curious from a defense perspective, you know, what, maybe you can take me through, you know, sort of what PenFed automation and digitization journey looked like maybe what were some what what were your customers asking for? What internally and externally Did you see that kind of puts you on this path towards, towards, you know, deepening your automation? And where are you guys at right now?Jay Fee 00:55 Okay, we're a little unique in the space. The fact that we're the second largest federally chartered credit union in the country, with assets now, getting close to 34, or over 34 billion. We're rapidly expanding in the consumer banking space for what what I run in terms of the auto loans, personal loans, solar, point of sale, student loan pieces, we've grown that the origination annual assets from roughly when I got here, a few years ago, it was 2 billion a year, we're at a run right now 15 million for this for this year, now after last month. And that's been done through basically standing up a lot of new channels, a lot of new products, a lot of new automation features, and integration with over 35 Different FinTech partners, who also originate for us. So it's been a combination of organic growth. Through a lot of automation, we've revitalized all of our origination platforms. Now on the front end, also with our decisioning, or credit modeling our our actual processing pieces, and then now in our servicing, and now our secondary market functions on the back end. So it's not just about origination, it's also with the ability then to turn around and sell to other credit needs. So it's been fairly rapid in terms of its growth, even though it's kind of an 8x growth curve. This, the process, though, is been enhanced with the help of folks like Adelina and an upgrade, when we want to do asset purchase. So that's, of course, far different from just lead generation origination and also what we consider our traditional bread and butter, which is our organic origination. Through through those platforms I just discussed. Are there any aspects Alijah Poindexter 03:39 J of the sort of new credit and loan origination and decisioning automations that you mentioned that are particularly interesting to you any that you might want to that you can go into a little bit of, you know, a little bit of deeper detail into that would maybe be, you know, relevant for the more technic, technologically, you know, sort of tuned in listeners? Jay Fee 04:00 Well, I think the biggest focus is time, and how it's relevant in different channels, time to decision time to fund and the time to response. It's very different from an organic origination, where you're maybe doing even still direct mail. Or you're actually going out and originating somebody through a channel that might be more traditional ToolBank, where you're dealing with a lead generation partner, you can't sit there and say, Oh, hey, we're going to pend your app, or we're going to get back to you 48 hours for comes through a lead generation channel. Then it's, it's got to be your approved at this amount or, sorry, you can't get this amount but we will give you this or you you work through a decline monetization process and send the two Two points that are really interesting to me these days is maximizing the whole origination channel through decline, monetization and insured, lending back ends. So if you can't actually do the loan and put it on your balance sheet, can you originate it? And then put it on another balance sheet. And maybe it's not your asset, but you still get the member. Maybe you get the asset, and you hold it, and then you sell it to somebody else who wants the asset. So perfecting that waterfall process, and decline monetization, and making sure that you're you're maximizing the so that 85 90% of your decisions are a yes or no. And then, while the member is still within the browser is probably the most exciting part. And the exciting changes that I've seen here just over the last two years, Alijah Poindexter 06:07 what was the customer response back? Jay Fee 06:09 So for our members, it's been largely positive. I don't think that kind of member experience existed at least penfed, several years ago. So it's been a transformation process across all of our channels that I mentioned before, student refi, auto, personal, unsecured, and going through that process, you know, our NPS scores are there, they're higher than apple. So from from the people that we survey on those products that have been transformed. So it's, I think, the expectation of when you hear a credit union is, it's going to be a, you know, it's gonna be a slow process. I come here for affinity and I come here for the great rates. And then when you actually have a quick and pleasant member experience, it's like, wow, okay. It's more than just more than just that. Alijah Poindexter 07:12 So Adelina, you know, obviously, over 100 credit union unions now signed to upgrade obviously, there's a deep level of experience there for you and upgrade when it comes to sort of working with these credit unions and dealing with their both collective and individual pain points and whatnot. So I'm curious if you could give me maybe two or three significant, you know, pain points, or headwinds, or really big challenges that the standard Community Credit Union here in the States faces, you know, when they're attempting to automate or digitize their processes. Adelina Grozdanova 07:41 I think the main determinant there is really the size of the r&d department. We have credit unions that have very sizable IT departments, others that have small, IT departments, third ones that just outsource most of the IP work. Typically, in order to enter into an asset purchase program with us, most of the credit unions will automate the ingestion of PII information so that they can memorize members. And some of the credit unions may as well automate the ingestion of the rest of the data that would provide on a daily or monthly basis so that they serve cross functionally work that they need from Treasury operations, and so on. In terms of the automation work, I think we always have to think about what else the credit union is working on. Some of them are thinking about core and LLS conversions. Some of them are thinking about improving their own member experience. Some of them are refreshing entire backend systems. So I think the first challenge for us is just making sure that we're in the right priority, in order to be able to launch an asset purchase program. Once that's the case, we typically spend time with our credit union partners to help them understand all the data that they will be receiving from upgrade on a daily or monthly basis, how to ingest the data, how to map the different fields of the data, how to set up an SFTP so that they can receive the data and then the rest of the automation that they may need. I think some credit unions have kind of more extensive regulatory reporting burdens, which requires more than ingestion of data. But overall, I think we spent sometimes a few days sometimes it could be a whole week, kind of helping helping credit unions ingest that data. In 2022. One of the core priorities for us is to start investing in technology partnerships with core providers, and outsourced automation firms so that we can make our credit unions lives easier on the automation side. Alijah Poindexter 09:52 So this is a quicker process, and I think myself and a lot of other people probably would expect Adelina Grozdanova 09:57 Yeah, yeah. No, for sure. Um, I mean, I think most of the underwriting process and the memorization process is done on our side, which is entirely automated. So the only time when the credit union has to ingest data is once the partnership is life and they need to absorb PII or other information to serve finance and Treasury functions. So, depending the you'll receive a ton of data from us on a daily and a monthly basis. And it's really a matter of how quickly they can be adjusted, which, as I mentioned, can can last anywhere from a few hours of work through a week, Alijah Poindexter 10:35 we spoke about sort of where Penn Fed was where they are right now, with their automation journey, and the digitization and whatnot, maybe you can take a little time and sort of discuss in whatever way you know is possible for you, of course, discuss where Penn Fed is heading on this sort of automation journey, and maybe what consumers can expect next, Jay Fee 10:54 well, we're still, I would say, only halfway down the path with the transformation of our products. We're we've got you know, backlogs that certainly go through this year, and probably into next year, for the plans that we have for improving the member experience, adding features. And then of course, launching other products and integration with other partners. So we have big designs and the point of sale space. We have a lot of partners that are bringing new products to us. As we expand it to longer terms and launch things similar to the the the upgrade card and launch more flexible products, convertible products in the space. So the the the future is, is pretty that horizon is pretty far away, to get to where we want to go. And then I would say the point of sale space, going back to that is something that we're we're very big on its we can originate something on penfed paper at the at the point of retail, then and then memorize them and then service them, then that is really kind of that's that's key for us. Because it's not only it's not only customer acquisition, but then it's that we can manage the member in on an ongoing basis through our platforms Alijah Poindexter 12:56 for Adelina, you know obviously 100 credit unions that's that's a massive achievement, what's next for upgrade. Adelina Grozdanova 13:02 So we've been very successful in the in the unsecured personal lending space, both with our personal loan products and the personal credit line. So there's still a lot of room to grow the both the card product as well as our personal loan product. And then we obviously have big ambitions. Beyond that. I think we're looking at a few different secured adjacent verticals. We're looking at some products in the security space. And I think that's where we'll look to continue expanding our partnership with Jay and the rest of our credit union partners. Alijah Poindexter 13:35 You've been listening to the buzz, a bank automation news podcast. Thank you for your time and be sure to visit us at Bank automation news.com For more automation news. You can also follow us on Twitter and LinkedIn. Please don't hesitate to rate this podcast on your podcast platform of choice. Thank you

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Listen: How automation is boosting PenFed’s annual origination assets to $15B

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