Vystar Credit Union: creating a movement

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Determined to improve the financial lives of its members and with a mandate to advance the credit union industry, VyStar Credit Union is leading a new path in lending. By their nature, credit unions are not-for-profit financial institutions that are supposed to serve the needs of their members. However, VyStar has refined this basic vision into a movement to strengthen the credit union industry as a whole. They combine revolutionary technology to make lending to credit unions more accessible, inclusive and fair.

Established at Naval Air Station Jacksonville in 1952 as a credit union for military and public service members and their families, VyStar is today a regional powerhouse serving more than 775,000 members in Florida and Georgia . With assets exceeding $ 13 billion, VyStar is one of the 15 largest credit unions in the country, offering a full range of financial services ranging from deposit accounts to mortgages, auto and consumer loans, credit cards and commercial and small business loans.

While they have the scale and strength to partner with reputable fintechs used by big banks, VyStar has instead launched two separate but integrated investment funds to support cutting-edge fintechs primarily serving the co-op sector. credit. Their technological focus is formed on products that truly make a difference to all credit unions, and that will be part of the ecosystem fit for the purpose they are striving to build.

“We want to strengthen the entire credit union movement by funding fintechs that don’t just go to banks, but that support our industry,” said Jenny Vipperman, director of loans at VyStar. “We are looking for fintech partners who provide a solution to the problems encountered in our industry in a unique and valuable way.”

Fund recipients include Zest AI, an artificial intelligence and machine learning company that creates more accurate and inclusive loan decision models, Payveris, creator of an API-based cloud-based digital payment platform open and the banking as a service developer Nymbus, selected by VyStar as a digital loan provider. VyStar is also a member of the CURQL fund, co-created by Joel Swanson and several credit union peers. CURQL is a consortium of 55 credit unions pooling their resources to fund fintechs with great ideas and great execution that need funding to grow while continuing to create innovative products specific to credit unions.

“The credit union movement is a cooperative with a shared mission: to serve the under-served. In fact, credit unions serve more rural, low-income, minority areas than banks, ”Vipperman said. “It is essential that inclusive services that improve the financial lives of every American be available to the credit union industry, because we are the ones who serve these populations and geographies.” These investments represent an important step towards this goal.

Ah, make decisions

Rethinking lending criteria is a central part of VyStar’s quest to serve borrowers long neglected by banks and credit unions. To this end, they rely on a pair of partners specializing in predictive analytics for financial institutions: Zest AI helps lenders develop fair, consistent, accurate and compliant lending decision models, and Open Lending provides advanced loan decisions and loss insurance for non-premium cars. ready. The implementation of these two fintechs allows VyStar to be a full spectrum lender with primary lender risk.

VyStar is also partnering with 2020 Analytics, which provides predictive modeling and business scenario analysis, to further assess VyStar’s portfolio through a fair lending lens to identify opportunities to implement lending practices. more inclusive for its members.

The goal, said Vipperman, “is to collaborate to create a more inclusive financial services environment where all consumers have access to products and services that meet their needs, providing dignity and positioning consumers for the well-being and long-term financial success “.

From the start, Vipperman decided that the results of their efforts would be fully shareable, not only with the members of VyStar, but with the entire credit union community. “For many credit unions, there is more at stake if they get it wrong, if they do artificial intelligence and machine learning and it doesn’t work,” she said. “It’s something that can keep them from moving forward.”

This lack of opacity required solid results worth sharing, and VyStar kept its promises. Vipperman shared all of their findings to help other credit unions make decisions about the technology with confidence. Their openness has also shown how nimble credit unions can be when making technological change. “I think the credit union industry can evolve faster than the banking industry, which is bigger and requires a lot more to implement and is not as willing to share the results with each other as they are really in competition. with each other, ”she said.

VyStar’s credit scoring models are both regional and product-based, allowing for a higher degree of accuracy compared to the ‘one size fits all’ scoring methodology used by FICO, which contains an inherent bias based on age, race and income, and whose decisions are based on only 10 to 25 factors captured at a single point in time.

“Our models actually calculate the risk of a loan based on our credit footprint, for each individual product, taking into account the loan structure and other loan-specific criteria. This allows us to better serve our communities and our members by saying yes to more people, by being more inclusive in our loans and by more precisely assessing the risks to ensure safety and soundness as well as equity and growth ”, Vipperman explained.

Zest AI’s processes connect credit scoring with game theory and the basic premise that whenever one factor changes, it changes the outcome of the whole game, so players should consider all of these factors together. to make the best decisions.

While AI models can contain and even increase bias, the Vystar model actually reduces bias by collecting hundreds of factors to create a score and testing each factor over a year of applications to ensure accuracy. They also examine outcomes for consumers in the protected and unprotected classes.

“In every case and in every model, we find that we are increasing the approvals for consumers who are in protected classes to higher levels than consumers in unprotected classes,” she said. “This does not mean that we are giving less loans to people in the unprotected classes; in fact, we are increasing those loans as well.

Increasing protected class loans at a higher rate bridges the human bias gap to make models fairer and more consistent, providing an accurate representation of risk. The accuracy of AI also impacts the approval process, allowing borrowers who were initially approved for a loan but turned out to be riskier than initially determined, and vice versa.

Auto loan applications are executed through Zest AI, then through Open Lending – a process that only takes seconds – and gives VyStar the ability to closely review loans. If there is a subset of members whose risk is slightly above the credit union’s tolerance but who can be insured, the potential rejections can be converted to approvals. “It’s really kind of a stunt to bring in as many people as possible for the best rate and approval while keeping our organization safe and sound,” she said.

Increasing the accuracy and inclusiveness of their lending decisions is only part of VyStar’s formula for creating a new movement within the industry. “Over time, over generations, we have created a scenario where people who try to apply expect to be refused and therefore do not apply,” said Vipperman, who is deeply concerned about the painful experience. to be refused. “It’s like your character, you as a person, is being rejected. It’s a terrible feeling, and I want to take that feeling completely out of everyone’s life when it comes to credit. It is a question of dignity and respect.

A recent partnership with CuneXus will give VyStar members an instant and reliable understanding of their purchasing power through direct offers and later in presentation form through the mobile app and online banking. Since member loans are pre-approved, the solution eliminates the need for an application or stressful branch visits to determine creditworthiness. “Members can see what their balance is and what they can afford for that week or month, immediately see what they are entitled to, what the rate is, what the payment is, and they can accept it. and move on, ”Vipperman said. “And instead of them saying, ‘Please consider me worthy of a loan,’ we get to say, ‘Please allow Vystar to win your business. “”

As of press time, a member with a credit card with an APR over 20% has stopped by a VyStar branch, unsure if he would be eligible to consolidate that debt. “He was going to try to get $ 5,000 in credit to see if we could approve it. Our Zest model gave him a limit of $ 27,000 and he was able to consolidate his debt at 0% for 12 months. It changes his life.

He returned to VyStar to refinance his mortgage and family cars, and brought in his son, who thought he couldn’t get a credit card but was approved for a $ 7,000 rewards card. Vipperman added, “We are having a real impact on the average American who struggles to pay off their credit card debt. We have a real impact in people’s lives, and we open up their relationship with us, and that’s just one from today. Results like this are powerful enough to reshape an industry, and VyStar does just that.

VyStar Credit Union is a non-profit, member-owned cooperative.

This means that we are working to improve the lives of our members as well as the places where we live.

We offer a range of better banking products and superior service to help members achieve their financial goals.

Just as we believe in the importance of being a trusted financial institution, we take responsibility for being a community leader.

We’re leading by example, making the places we live stronger by giving back – from revitalizing urban neighborhoods to supporting our military.

In 2020, we donated over $ 3 million to over 200 nonprofits.

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