Keeping the DEI Momentum Going With Fintech

In May 2020 following the murder of George Floyd, it seemed every organization in the U.S. began shouting about their intentions to commence – or ramp up – efforts to embrace diversity, equity and inclusion through a megaphone. Within the credit union industry, new DEI-focused groups formed, DEI-specific executive roles were filled, and plans were made to infuse DEI into both workplace culture and the way member business is conducted. Credit unions and credit union organizations that had not yet explored DEI boldly said, “The time is now, and we’re going to do everything we can to contribute to positive change.”

Now almost two years later, with the number of announcements of new DEI programs, DEI executive hires and declarations of commitment to DEI having dwindled significantly, it can feel like the movement has lost steam. But in fact, the silence is an indication that credit unions have reached a new phase of their DEI journeys. Instead of launching new initiatives and proudly sharing details about them with the public, credit union leaders have been busy working on implementing these initiatives, tracking their results and making adjustments.

One way credit unions are keeping the DEI momentum going behind the scenes is through fintech partnerships. While DEI is first and foremost about people and can be highly emotional – we’re talking about unpacking generational trauma and working to give people life-changing opportunities they’ve been previously denied of – it would be remiss to ignore technology’s important role in making DEI programs successful.

For example, worthy borrowers often get overlooked for loans because traditional credit scoring models deem them to be too high of a risk for lenders. According to a global financial inclusion study from TransUnion released this month, as many as 45 million American consumers are considered either credit unserved or credit underserved, and people with little or no credit history are often unable to access financial products and services, such as mortgages, car loans and credit cards. Credit unions are working to address this by partnering with companies whose lending technology is designed to help approve loans for individuals who are typically excluded – like Zest AI, which teamed with four credit union leagues representing 10 states, and Scienaptic AI, which partnered with two leagues representing three states.

In a recent CMFG Ventures Fintech Forum webinar titled “Using Fintech Partnerships to Become More Financially Inclusive,” Jason Gross, founder and CEO of the New York, N.Y.-based fintech Petal, discussed how his company’s technology helps credit unions evaluate potential borrowers via alternate means. Petal uses a “Cash Score” – a measure of creditworthiness based on income, spending and savings history – and offers its own branded credit card in addition to partnering with financial institutions interested in leveraging the Cash Score model.

“Traditional credit scores are a barrier for many people,” Gross said. “We’re using technology to extend credit to people with a thin file. We use the financial data they have, and often find they are credible but just haven’t been given a shot.”

The Orlando, Fla.-based Home Lending Pal, another fintech featured in the webinar, helps connect credit unions with first-time homebuyers who may be struggling to secure a loan. The company runs an artificial intelligence-powered “Mortgage Advisor” tool, which consumers can use to search for home loans from institutions that are likely to approve them, and helps eliminate bias by keeping applicant characteristics like race, sex, age and sexual orientation invisible.

Home Lending Pal Founder and CEO Bryan Young said his company assists a lot of minority and millennial first-time homebuyers who are facing at least one of the three main barriers to home ownership: Access to credit, affordability and not knowing how lifestyle can impact affordability level, and down payment assistance. He said credit unions send Home Lending Pal dead mortgage leads so the company can work with those consumers, and that providing education to first-time homebuyers – and making it fun and engaging – is a big part of what his team does.

A bonus benefit for credit unions that partner with fintechs focused on making lending more equitable is membership growth. Shruti Miyashiro, president/CEO of Orange County’s Credit Union ($2.3 billion, Santa Ana, Calif.), who also participated in the webinar, said fintechs like Petal and Home Lending Pal connect credit unions to people who were previously unaware of them. “These partnerships are very powerful, especially when we look at blending technology with purpose in who we’re trying to reach,” she said.

Promoting fair lending is just one example of how technology can help credit unions further advance their DEI efforts for both members and employees. Tech can also be leveraged to, for example, make the process of evaluating job applicants more equitable, collect data to identify specific financial needs that may be tied to a member’s demographic group or lifestyle, make working or banking easier for people with disabilities – and the list goes on.

Things may seem quiet on the DEI front for credit unions if one were to judge by public announcements alone, but the industry is much, much further along on its DEI journey compared to two years ago. As two guest authors note in this print issue, CUNA research released in March 2022 found that the percentage of credit unions focused on DEI efforts increased from 37% in 2019 to 60% in 2021, a jump of 23%; and that 80% of credit union members now belong to a credit union that is focused on DEI.

If we continue to make progress at this rate, it seems that pretty soon, a credit union (or any organization for that matter) that rejects or neglects DEI altogether will be thought of the same way we now think of workplaces of the 1960s, where in-office drinking and smoking was the norm and the only female employees were secretaries – outdated, out of touch and just gross.

Natasha Chilingerian is executive editor for CU Times. She can be reached at nchilingerian@cutimes.com.