How First Tech Fed avoids being overshadowed in Silicon Valley

With branches on the campuses of Hewlett-Packard, Intel and Microsoft, First Technology Federal Credit Union in San Jose, California, has a membership with really high standards for financial technology.

To meet this demand, the credit union relies on fintech partners that use its application programming interfaces through an open banking portal that First Tech created.

The $15 billion-asset First Tech is the eighth-largest U.S. credit union, tracing its origins to two credit unions founded in the 1950s to serve tech company employees. First Tech’s members work for firms such as Amazon, Cisco, Google, HP, Intel, Intuit and Microsoft.

“Our name helps to attract people working in tech firms, as it shows we’re focused on the tech sector and understand its needs,” said Mike Upton, First Tech’s chief digital and technology officer. Upton’s background in digital banking and technology at Capital One Financial and Bank of America enabled him to become the architect of First Tech’s digital strategy.

“We are driven by our members’ demands for new services and not solely by business cases,” Upton said. “Their best customer service experience anywhere becomes their expectation everywhere, and they expect us to be at the forefront in terms of innovation."

But First Tech isn't a software firm, so it has to rely on partners to deliver on expectations. Payments and loan products are key areas where First Tech integrates with fintechs. It also uses fintechs for workflow automation, data analytics and data warehousing.

First Tech FCU signage
First Tech’s members work for firms such as Amazon, Cisco, Google, HP, Intel, Intuit and Microsoft. To meet their high standards for technology, the credit union has multiple fintech partners.

"Although reasonably large in credit union terms, First Tech would be considered small (outside the top 100 by assets) if it were a bank,” said Owen Wheatley, lead partner for banking and financial services at the technology advisory firm ISG. “This presents challenges in terms of funding technology investments. Unsurprisingly, First Tech chose fintech partnerships as the best way to achieve maximum speed to value.”

Fintech partnerships help credit unions such as First Tech improve their digital customer engagement, which has typically lagged behind the banks, and introduce more products and services, Wheatley said.

“Prepandemic, 80% of First Tech’s new account openings occurred in person through its branches or through its traditional contact center,” Wheatley said. “With the shift to digital forced by COVID-19, 80% of First Tech’s new business now comes through digital channels, with the balance coming through its retail centers. Although this trend was already in progress, it has been the catalyst for much of First Tech’s fintech initiatives.”

First Tech was the fifth U.S. financial institution and the first credit union to introduce Zelle peer-to-peer payments in 2017. It launched Apple Pay in 2015 at a time when there was little U.S. merchant acceptance of contactless payments.

First Tech's fintech partnerships also help to enlarge its membership.

“When we partner with a fintech that originates a loan product, we purchase the product and the people buying that product become our members,” Upton said. However, the loan product continues to be offered on the fintech’s platform, which is integrated with First Tech.

Fintechs that First Tech has partnered with include Splash Financial, a student loan provider based in Cleveland, ICE Mortgages in Pleasanton, California, and Happy Money, a personal lender based in Costa Mesa, California.

First Tech also works with fintechs specializing in payments.

“Fintechs have the advantage of being very focused as they specialize in one area and they don’t have legacy technology,” Upton said. “We’re currently in discussions with a crypto platform about allowing our members to buy Bitcoin through our mobile and online banking platforms. We won’t be a crypto platform or a Bitcoin custodian, but we know our members have high demand for crypto services.”

First Tech is also talking to a fintech about providing its members with low-cost international remittances, which is one of the fastest growing areas of payments, Upton said. Digital credit card issuance is also on the roadmap.

“We’ve already introduced card controls so members can turn their cards on and off within our app,” Upton said. “We want to put more self-service controls into their hands.”

Encouraged by the growth in digital account opening it saw during the pandemic, First Tech is looking to attract younger consumers who want to use digital apps and are attracted to digital-only banks such as Chime.

Before joining First Tech in 2013, Upton was vice president for digital customer experience at Capital One and, before that, senior VP for online and mobile banking at Bank of America.

“Having worked at those firms and seen their strategies, I came to First Tech with the idea that open banking and an API platform would give us the flexibility we needed for an ever more digital age,” Upton said.

To create relevant and personalized customer experiences, First Tech needed to use analytics and manage customer data across its branch and digital channels, Upton said. This was the driver for First Tech’s work in cloud technology and the development of API and enterprise data warehouse strategies. Although Fiserv DNA, First Tech’s core banking platform, isn’t cloud-enabled yet, the credit union makes extensive use of the cloud for its various services.

“First Tech decided to accelerate cloud adoption in order to create a highly secure, resilient, flexible and scalable environment in which new products and channels could be brought online faster,” Wheatley said.

First Tech uses data warehousing technology from Snowflake, a data cloud company in Bozeman, Montana, and data analytics and machine-learning technology from Dataiku in New York.

As process automation is a priority for First Tech, the credit union has implemented Pega, a workflow automation hub from Pegasystems in Cambridge, Massachusetts. “Pega lets us grow without needing to add staff to deal with legacy manual processes,” Upton said.

First Tech used Pega to help it launch a new domestic wire service. “The legacy service required 105 steps to get a domestic wire out the door," Upton said, "and using automation we reduced this to five steps.”

Correction
An earlier version of this story incorrectly characterized First Tech's size relative to other credit unions.
March 22, 2022 4:48 PM EDT
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