Lessons From A Fintech's First Year

Nearly 12 months after the launch of Dora, a credit union-backed fintech, one executive looks back at lessons learned and what comes next.

 
 

The number of fintechs and neobanks is constantly on the rise, with new players entering the market seemingly every week. August 2021, however, saw the launch of a truly different offering: Dora, a fintech created by credit unions.

Dora – named for credit union pioneer Dora Maxwell – provides banking services for un- and underbanked consumers via mobile app, along with a bilingual option to make the service more appealing for Hispanic consumers. Organizers estimate as many as 50 million people across the country could be served by the offering.

Initially launched by USALLIANCE Financial FCU ($2.4B, Rye, NY) – which holds all funds as non-member deposits – the project evolved into a CUSO, now backed by DCU ($9.9B, Marlborough, MA), Service Credit Union ($5.4B, Portsmouth, NH), and Affinity Plus FCU ($3.9B, St. Paul, MN) and Inclusiv, a trade group serving community development credit unions.

In this Q&A, Kristi Kenworthy, Dora’s managing director, looks back at the fintech’s first year, lessons for the industry in how to reach consumers in need, what’s next for the fintech, and more.

Kristi Kenworthy, managing director, Dora

You’re almost exactly a year out from launch, though obviously this process started long before Aug 2021. What has the last year been like?

Kristi Kenworthy: Dora was launched at the Inclusiv annual meeting in September [2021]. Dora received lots of positive press and lots of interest from credit unions across the country, both from the sense of wanting to know how to be an investor, and how to be part of the CUSO and participate in this. So that was exciting. There was interest from the credit union industry – from NACUSO, NAFCU, and the NCUA – and we were guest speakers at several conferences. We’re now focused on our go-to-market marketing direct to the consumer, and making relationships to get to the end user.

So the idea behind this is to reach low- to moderate-income consumers, roughly 50 million of whom don’t participate in mainstream banking. What are current Dora user numbers?

KK: We have about 4,500 accounts to date and we haven’t even started our big marketing push yet – we’re still creating our marketing collateral for that. We did a great field study with Prudential, who helped us look at target-market messaging and preferred channels, and we got a lot of data that was really cool. We learned some new things but also got affirmation of some things we were already planning on doing. Having a bilingual app will be key to penetrating into the Hispanic market, where trust is a big barrier to entry.

Lots of credit unions have a mandate to serve low- and moderate-income consumers. What have you learned about that market?

KK: The Prudential study was really interesting for us. While it’s easy to think just about minorities in big cities [when considering low-income and underbanked consumers], the Prudential study revealed there’s a big portion of white Americans who are un- or underbanked, and a lot of them live in very rural areas. That was surprising to us – we just conceptualized that populations were more dense in city environments, but obviously there’s a big impact with banking deserts and a lack of access to financial institutions in rural areas. I would imagine that’s been further exacerbated by COVID. So many FIs closed branches during COVID and maybe just didn’t reopen them, so that created more of a banking desert in some areas.

What has been the key to reaching those consumers?

KK: One thing we’re seeing is that they probably wouldn’t have qualified for a checking account with a traditional FI. Dora doesn’t require a credit check and we don’t do ChexSystems, so if a person has poor credit or a blemish on ChexSystems, they would have a negative ChexSystems report and wouldn’t be able to open an account at most credit unions and banks.

That’s exactly what we were hoping for – that was the basis for this account: Can we build a BankOn-certified account that meets national BankOn standards, and target this segment of Americans who probably don’t qualify for an account for a myriad of reasons.

I know the focus here is on checking accounts, but how does this make money? Are there ways to transition these folks into deeper relationships with the credit union?

KK: That’s the model – getting them their first transactional account, letting them get their direct deposit, or be depositing their checks and managing their funds within the account and using the debit card. Hopefully when they need their next product – whether it’s a personal loan, car loan, or first mortgage – we’ll then matriculate them into a participating credit union who will have to be in their field of membership, and then they’ll have the benefit of full credit union membership.

Is there a timeline for that?

KK: Some of this is still being built out, and we have some other functionalities being built into the app through the end of the year. We envision part of it will be user-driven. We’ll be integrating event-based financial coaching into the app in the third quarter of this year. With that partnership of financial coaching in the Dora app, we feel like we’ll have the data and they’ll have the relationship building, so when [users] express the need for the next product, that partnership will help us know when the person is ready or the person will express interest themselves.

What has been the biggest challenge since you launched?

KK: We have a small team and working in a very agile methodology, where things are moving fast. One thing that was a little different for us was we built the product, then built the app, and then built the CUSO. The model is usually the exact opposite – you form the CUSO and then figure out how you’re going to build your product and take it to market. But I feel like maybe that gave us an advantage to make it easier to talk to potential investors.

I don’t want to say things have been going swimmingly and there haven’t been any huge hurdles, but it’s been well received. We have a great bunch of partners as investors and things are going well.

There are an awful lot of neobanks out there, how do you make Dora stand out?

KK: Part of our tagline is ‘Better Than A Bank, Powered By Credit Unions,” so having that association with credit unions is a big differentiator. When you think about the core philosophy of credit unions and their core mission, it aligns with what credit unions do best: people helping people. What’s really cool about the credit union industry is collaboration among credit unions, and we have credit union investors and we’re going to create a network of credit unions, leveraging what’s already so excellent about our industry.

What’s the biggest lesson you’ve learned in the last year?

KK: We built Dora from scratch on a whole new technology stack. We didn’t leverage any of our legacy systems. Having the liberty of doing it that way gave us an advantage because we weren’t encumbered by old systems or processes or policies. That enabled us to move a lot faster and use newer technology and gave us a distinct advantage.

This has obviously been a collaborative process with multiple credit unions, have you learned lessons about collaboration, or reconsidered any ideas you had about collaboration strategies?

KK: Collaboration is one of the coolest things about the credit union industry – you certainly wouldn't find that culture among banks. We talked to a lot of people about Dora and some people got it, some didn’t, and some were really excited and wanted to participate. We were fortunate in the partners we had – they’re very like-minded and committed to serving this market. The social impact Dora will have means a lot to them. It’s not about the balance sheet, it’s about making a difference. A lot of credit unions are excited to see where this is going to go. Maybe they’re on the sidelines now, but maybe they won’t be later when they see the success it has.

What lessons are there here for other credit unions that want to do a better job of serving this market?

KK: You have to always think about what you’re doing and how can you constantly be improving. Dora definitely has a culture of that. Just because it’s always been the way you did it doesn’t mean it’s the way you should still be doing it.

Are there takeaways here for smaller shops that may not have the resources to launch this type of digital solution?

KK: Well, USALLIANCE is the smallest credit union in the CUSO – DCU, Service and the others are all bigger. But I’d say looking for opportunities where you can, and looking at your processes and procedures, and continually striving and doubling down on your commitment to service markets. If you can’t do it, then look for partnership opportunities where you can have someone help you. That’s a big part of it.

What’s next?

KK: We’re still working on core functionalities in the app – we’re adding event-based coaching, and we’ll be joining a deposit and cash-out network to give people more access so they don’t have to rely on ATMs or in-app services. That’s going to be a nice value add. We are actively doing marketing in specific geographic areas where we know there’s a large population of un- and underbanked Americans. We’ll have to assess our success with that marketing and refine, refine, refine.

We’re trying to build a network of partnership groups that are also trying to serve people in low-income, modest-means communities, folks like Habitat for Humanity and First Step Alliance, trying to help formerly incarcerated people. We’re trying to create that network of partnerships to help partners service this group, and looking for participating credit unions so that when Dora account holders are ready for that next product, they’ll have a network of credit unions to turn to.

This conversation has been condensed and edited for clarity.