What are the Benefits of Credit Union Payday Lending?

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.  If you think your members have a need for small dollar loans – this blog covers the benefits of credit union 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.

Benefits of Credit Union Payday Lending: For the Member

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.

Benefits of Credit Union Payday Lending: For the CEO

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 youPayday Lending 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.

By Kevin Foster-Keddie, CEO of WSECU
April 26, 2018

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Why did WSECU start offering small dollar loans?

Why did WSECU start offering small dollar loans? 

How did QCash begin? It’s an excellent story about a front line employee living the motto of people helping people.

Our story begins when a teller at Washington State Employees Credit Union, the credit union that owns our CUSO, that members were coming into the branch repeatedly for money orders. Money orders aren’t anything to be concerned about, but our teller noticed one very important thing: those money orders were then used to write other money orders to payday lenders.

 We didn’t know anything about payday lending at the time, but thanks to WSECU’s empowered culture, the teller told the credit union CEO about what she observed. Our CEO then put together a small group of big, bright minds to figure out what was occuring and how WSECU could help.small dollar loans

What the credit union discovered was its members were using predatory payday lenders to meet their short-term, small-dollar needs. WSECU decided they not only needed to help their members, but short-term lending was something credit unions could and should do.

And, not only can WSECU short-term, small-dollar loans save members money, they can simultaneously create a new, revenue stream for the credit union.

And so, 14 years ago, QCash was created to provide short-term, small dollar loans to WSECU members.

As QCash began to gain local market share, the credit union began to wonder, “if we are changing the payday lending landscape in the state of Washington, where else could we go? How might we be able to share this with the credit union community and change the landscape across the country?”

WSECU didn’t know the answer to that question, but decided to give it a shot. And so, in April 2015, QCash Financial was born and began delivering short-term, small dollar loans to other credit unions and banks, in hopes of meeting the needs of other consumers the same way WSECU has helped its members.

And that’s the story of how QCash has grown from one teller’s thoughtful observation to a CUSO that has sparked a short-term, small dollar lending movement.

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By Ben Morales, CEO of QCash Financial [April 2018]

Ben Morales is the CEO of QCash Financial. QCash Financial is a CUSO providing automated, cloud-based, omni-channel small-dollar lending technology that enables financial institutions to provide short-term loans quickly to the people they serve. QCash Financial, a wholly owned subsidiary of WSECU in Olympia, Wash., started as a short-term loan solution for the credit union’s members in 2004.

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