What are the pros and cons of payday lending for credit unions?
By Kevin Foster-Keddie, CEO of WSECU
April 26, 2018
People sometimes ask me, “Why did you get into payday lending?” In fact, I’ve had people ask me why I was crazy enough to get into payday lending.
The reason is member need. At WESCU, we noticed that members were transferring large amounts of money to payday lenders. It was over a million dollars a year, and that was 15 years ago. It’s even more today.
The more we studied it, the more we learned how expensive it was. We learned that people were being trapped in payday lending. So we said, “Hey. We’re a credit union. We’ll make small loans.”
Credit unions, philosophically, started by making small loans to average people; so, we decided this is was the direction to go. Fortunately for us, we had a board member whose brother was a pawn shop owner. He was very, very connected to the industry, knew a lot about it, and was instrumental in the organization of this project. He convinced the other board members it was a good idea.
We definitely had our share of naysayers. But I’m a persistent fellow and the more that people said, “You are crazy. You shouldn’t be doing this,” the more I said, “I’m going to show you guys.”
At first, it was a paper based and very labor intensive process. We were trying to help our members find a better and cheaper alternative, and then later mainstream them into more traditional lending. Eventually, we got better and better at it. We hired the right people and we started on the project. We made it faster. We got it onto a computer. Then, we added mobile technology. We realized, as we watched the activity of our QCash loans, that speed was everything.
If you’re a CEO who is thinking about QCash, your job is to serve your members. With QCash, you may be targeting a market that you don’t traditionally serve, and that’s going to open up a lot of possibilities for you. QCash will help your organization learn about technology, data analytics, mobile technology and product design. The kind of competencies an organization will learn go far beyond the actual business results of the payday lending.
And then there’s the bonus that Qcash accounts for 20% of WSECU’s net income. You must think about small dollar loans from a business perspective as well.
Payday lending has been a great thing for us and our staff. They feel like they’ve got another tool with which they can help members. Our dream is to put all these together in a cash management electronic product, and we’re working on that dream very hard right now. We want to put all these ideas together into one global product.
Qcash helps WSECU members with their needs today. And, it enables us to be constantly pushing the use of technology to speed up, digitally engage and lower the cost of helping our members. That’s a very convincing business proposition.
Learn more: QCash Blog