The goal of the credit union industry since its founding has been lending money to those who needed liquidity for life’s unexpected emergencies. When it comes to credit unions in the late 20th and early 21st centuries, these stabilizing financial health assets fell to the wayside when predatory payday lenders arose in the early 1990s.
While many credit unions offer small dollar loans payday lenders still own a healthy portion of the small dollar loan landscape, with borrowers who all-too-often get stuck in a seemingly never-ending debt trap for which they can’t escape. We believe digital small dollar loans (often costing significantly less than payday lenders) can be the answer for credit unions and their members, especially when borrowers are dealing with the COVID pandemic and social distancing. Our QCash platform’s “6 Clicks In 60 Seconds” mantra is more than talk, providing credit unions an ease of implementation and frictionless member experience that has come in handy for millions of borrowers across the country.
There is always hope for today’s consumers, even during such critical times as these. QCash Financial is proud to join Northwest Community Credit Union’s John Iglesias and USAlliance’s Kris VanBeek for Mike Larson’s valuable and informative CU Broadcast webinar, “How Small Dollar Lending Has Benefited Credit Unions.” In this webinar the group goes all in on case studies detailing members’ experience with their credit union, proven advantages for credit unions, and how a digital small dollar program can pave the way for consumers to escape the jaws of the predatory payday lending industry and nurture a financial life they can be proud of!
CU Broadcast — EDITED
Mike Lawson: On the show today, we have Northwest Community Credit Union’s very own John Iglesias and USAlliance Credit Union‘s very own Kris VanBeek and QCash Financial’s very own Ben Morales all talking about how small dollar lending has benefited credit unions, especially this year. Wonderful conversation with the gentlemen, so check it out.
Welcome to our show and we have a full house today. Gosh, we have a full house with Mr. John Iglesias. The CEO of Northwest Community Credit Union right there next to me, John, how are you, sir?
John Iglesias: Wonderful, thank you.
Mike Lawson: Here is Kris VanBeek, the CEO of USAlliance. Kris is in New York, is it? Is it New York, Kris? We’re on opposite ends of the country. Gosh, coast to coast call. Right below me is Mr. Ben Morales from QCash Financial. Ben, how you doing, sir?
Ben Morales: I’m doing fantastic, Mike. How are you doing?
Mike Lawson: Well, doing well, thank you for asking gentlemen. Thank you so much. I know you guys have busy schedules so appreciate the few minutes that you’re going to provide us today and talking about how small dollar lending has benefited credit unions, in particular yours, and we’re hoping to inspire others to do the same. Because, as we all know, this year has been quite the year, and can’t wait for 2021 to get here.
I just want to start out with you, John. First of all, what are you guys trying to accomplish here? When implementing a small dollar program at you’re creating what was kind of the spark that got you guys moving in this direction, and Kris I’ll probably pose the same question to you as well.
John Iglesias: Well, actually, as I mentioned, just before we started I have a lot of history with QCash. I used to work at Washington State Employees Credit Union where QCash was founded, and all the way back then I knew that there was this payday scourge in our country that was really taking advantage of consumers. I was really impressed with the work that was put into the development of this product from the very beginning and now as the CEO at Northwest Community in Eugene, OR, I wanted to provide (the same for) our consumers down here in Eugene. They can meet their small dollar loan needs very, very easily, seamlessly, frictionlessly, at a credit union and at a great price and with so much more of a benefit to our members and allowing them to be able to meet their short-term needs very quickly.
Mike Lawson: Indeed, yeah Kris, I’m going to pose the same question to you. What got it all started for you guys?
Kris VanBeek: We’ve been talking about small dollar loans for a number of years, and we just really saw it as a need for our members. As the credit union continued to mature and grow, we had some small mergers. We saw that demand increase even further.
You know we have some branches in the Bronx, some underserved areas, and we knew that these are existing members. We really should do this (small dollar lending) but it seemed like every year was full and we didn’t have a means of developing it. When QCash eventually reached out to us, we’re like, absolutely, we can finally get this done and jump all over it.
Mike Lawson: Right! And Ben, how is it? How is it working with these two gentlemen and getting their their program started?
Ben Morales: Yeah, it’s been fantastic in both, you know, (they’re) focused on the same thing. How do they meet a member need, and interestingly, Kris was the 3rd client to sign up with us, so we think about that. You know he was definitely on the front end of innovation and willing to take a chance. And quite frankly, I remember him saying, “’cause I’m done talking about it. We just gotta do it.”
And so I really appreciated that perspective because there was a ton of regulatory turmoil going on with the CFPB at that time, and so he was leading the charge. And, you know, when it’s gotta be done, it’s gotta be done. And so I appreciated that. And so he’s been very innovative. His team is very, very talented, so they were able to stand up on our platform like in a day, like they just work, but it allowed us to get it started and get going.
Mike Lawson: We like to see programs like this go into action and really make an impact right away. Speaking of impact, Kris, I’m gonna start with you on this question. Can you provide some examples of how your small dollar loan program is helping members? Any success measurements that you can provide us or? Just the impact that it’s made so far.
Kris VanBeek: Yeah, I mean at a high level. I mean, it’s we’ve done about 6000 loans roughly about $5,000,000. The numbers have really dramatically increased year over year, so because of regulatory concerns, because we didn’t have experience, we were cautious. You know, the first year or two and then we did a lot of experimenting, but if you look over the last three years, in particular, those numbers have increased, dramatically so.
It’s been really cool to see that utilization. On top of that, we never actually, you know, really promoted the product. I think we went live. And put in the mobile device and within an hour there was already an application. It was approved and funded. And within a few hours, there were several without letting anyone know about it. So it was like wow, you know it’s that pent up demand that we knew. But we really just couldn’t validate. So it’s been a really cool ride.
You know, we’ve tried a bunch of different parameter settings and adjustments over the years, so I see it as an ever-evolving product for our members. The impact you know. We’ve heard literally dozens and dozens of stories. The stories range from everything that you know, hey, I was coming in a little short on rent and needed it to, kind of that last few $100 to, you know, college road trips where there’s four flat tires and not enough money to cover it. And it’s there instantaneously, so it really runs the gamut.
I think, at least for USAlliance, you know, from a membership perspective we thought, hey, this is going to be really appropriate for a certain segment of membership. But the truth of the matter is it’s been universally valuable to all of our members, regardless of your income level where you live.
Related, it’s you know, cash flow and related — the idea that it’s such a quick and frictionless experience just makes it valuable to anyone, right? So it’s really cool, right?
Mike Lawson: Yeah, that’s the beauty of this product, for sure. We’re probably going to talk after the show about the college road trip and four flat tires, ’cause that just sounds like a story in itself.
Mike Lawson: John, how is it? What’s the impact been at your credit union? Maybe some numbers that you can share with us?
John Iglesias: Absolutely. We’ve had a similar experience that Kris has had. It’s been well received by our membership. We’ve had to do little to no marketing, although we do post on LinkedIn every once in a while that we’re offering this fantastic program. The best part about it to me is how many members are using it in the different levels. I was really surprised to find out that we have some members with really great credit that are using this as well as members with challenge credit. And that’s because of the convenience of it. I mean, six clicks, and you get your loan done. Your loan’s done. I mean, I’ve learned so much from this product offering to our members that we’re actually looking at ways that we can make our other products just as efficient as this one. And for me, the best stories I have to share with you.
I’ve always treated my employees as members because I think if they feel like they’re an important part of our membership that they’ll also pass that on to our members and we had an employee who, just because of circumstances, had the trifecta happen. They moved, they got married and they had a change. Their spouse, had a change in jobs before, and so they needed something to tide them over for a very short period of time. And the employee looked at this and said, you know what, I can get this done.
But this product was able to offer our very own member employee, and we’ve heard so many other stories even during this pandemic from our members. Taking advantage of this, we’ve only been doing this for a little over a year since 2019, and you know what, we’ve had over 4,000 members take advantage of it for almost $5,000,000, just like Kris in just a very short period of time. Now our membership is all over the state of Oregon, and so we cover from Portland all the way down to Medford all the way west to the coast. And all the way east to the mountains. So we’ve got a really big membership base. And our members have raved about it, and those are people who have a lot of options available to them, and many of whom have really great credit. So it’s not just you know, numbers who are most challenged with credit, although it really benefits them that way. It’s also members at every level.
Mike Lawson: Ben, when you hear John and Kris talk about the impact on these numbers, what comes to your mind about QCash and how it’s helped them and so many members out there?
Ben Morales: Yeah, I mean, talking about it as I hear them, is about the utility of the application to meet members. Life happens to everyone, regardless of economic demographic, right? It’s a cash flow situation.
And sometimes it’s a convenience, right? So you think about why would a very affluent member want to have access? Well, because they see the convenience in the opportunity and sure they pay back next week. Sure, it might not generate a whole lot of revenue, but you generated a convenience factor in loyalty, so I think it’s utility in that nature.
And as John mentioned it did for our parent company, WSECU, it inspires the rest of the product line. Like, how do we get to be that, right? How do we do that? How do we leverage data for good? To be more, provide a better experience to the member. So that’s happening for John and many other clients. Well, if it can be done, how can we replicate that in other products and services so?
Mike Lawson: And Ben, could it also be a credit builder as well to kind of up your score and when you paid back these types of loans on time or is that a whole different ball game?
Ben Morales: John shared with me some data, and I look at that year-over-year, like, what’s the category of members that start off with a small dollar loan? What’s their current credit score now? We don’t use credit score for that, but that is a measurement of success.
If you were to follow that member year-over-year, you don’t get to stability overnight, right? It takes time. Oh yeah, if you were to map their progress, you would see a migration where they begin at one level and end at a different level. That’s what we’re seeing in the data that some of what John sent us. Some of what I’ve seen from our other clients of the migration is in a positive path and that is north, upstream, if you will. So we are seeing that as a credit builder, a credit builder, for sure.
Mike Lawson: John I’ll start with you on this question. What advice do you have for other creditors who may be kind of on the fence with something like this? For both you and Kris, it just sounds like a no-brainer.
John Iglesias: Well, one of the things I can never forget is where we came from. We came from an SEG group, just like many credit unions, where a few of the employees warehousing company put their money together to help loan each other money, small dollar loans in order to help them get through life. Since then, credit unions have evolved to offer many more offerings and a much wider variety of loans.
And we’ve started doing small dollar loans in order to help handle the, you know, the little changes in life that cause stress and panic in some cases. During this pandemic, this was the perfect loan for us. We also had wildfires in Oregon, I’ve not heard something about that, but on the west coast it was all the way up and down the I-5 corridor, even in Ben’s area in Washington state all the way down to Northern California and there were wildfires everywhere just wreaking havoc on the livelihood and the financial stability of many families.
We have very specific examples of how convenient it is, it was able to help bridge the gap that occurs. And like Ben said, life happens to all of us, and to have something like this in their offering, my advice to credit unions is if you don’t have small dollar loans, and I mean really small dollar loans, like personal loans under $5000 that you’re offering your members today, then you need to figure that out. Because what we found out when Northwest Community did an analysis on our current membership, all you have to do is look at where the deposits are coming from and you’ll see that these deposits are coming from payday lenders. The members are already borrowing the money, but they’re borrowing it from someone else, and we’re giving them an alternative. It gives them dignity. It also allows them to get out from under this because we have other services that complement this very well. And so my advice to credit unions is if you’re not offering this payday lending alternative, then figure something out because your members already doing it with someone else.
Mike Lawson: Yeah, ’cause that’s a vicious cycle. It’s so hard to get out of it, Kris. I’m going to pose the same question for you, ’cause you guys are one of the early adopters here. So what advice do you have for (credit unions) out there?
Kris VanBeek: I can’t think of a better time than now to offer the product. I mean, I think whether it’s the pandemic or the economic changes that are going on, it really is the ideal time for such a product and on top of the obvious though, it’s a wild product as well. I mean, it really is, so you do it, you receive it, or you fund alone. It’s something you tell friends and family and neighbors and it’s something that our members get passionate about. And I can tell you that you know dozens and dozens of referrals happened just because someone utilized the loan for something that happened. You know, remember, life happens, and next thing you know their cousin opened up a membership and became a member and added the product. So it really is a great tool to just do the right thing for the industry, and I think now is the time to do it.
Mike Lawson: Yeah, and that segues to my last question here, and I’m going to stick with you Kris. Why QCash? How is it working with QCash to implement this program?
Kris VanBeek: As I said, we looked at doing it ourselves for a number of years before knowing about QCash, and bottom line, it’s a wild product. I said it before the instantaneous elements of it. We can’t do it better, and so is the idea of the ease of implementation. The great member experience, the frictionless member experience, and at least for us, you know, we didn’t have the experience with these types of products. So QCash brought a wealth of knowledge with them to say, hey, why don’t you try this? Why don’t you try that? And that was invaluable. Not only go live but for the first few years as we kind of learned the unique elements about our membership.
Mike Lawson: John, same question: Why QCash? What attracted you to them? I mean, there’s a history there, as well.
John Iglesias: As well, they’ve been doing this for decades, yeah? I mean, they’ve been doing this for many years and they know how to do it right. And like Kris said, we looked at doing it ourselves and we had a product similar to that. It was more like a computer back when computers were starting to come out (and) we wanted to provide small loans, but we couldn’t figure out how to do it frictionlessly. Like Kris said, not just during the pandemic, but you know, there’s other crises that people go through on a regular basis. Life changes, you know, divorces, marriages. make new babies and they need that additional support. And it’s just the right thing to do. And it just feels so good to be able to offer a great alternative, done with people that really care about our credit union movement. Like QCash. and also people who are very technically savvy in it. This is truly an innovative product, yeah?
Mike Lawson: And to me, it’s just like one more value add or one more reason to stick with your credit union. Yeah, it’s total value. Ben, I’m going to let you say the last final words for you to wrap up here, but any final words here?
Mike Lawson: So yeah, but I just wanna say, hey before Ben comes back on I wanna say thanks, you guys, for coming on. I know you guys have busy schedules so I really appreciate this.
John Iglesias: So the best part of the product, Kris pointed out and I alluded to a couple of times is it’s just too easy. I mean it’s six clicks and you’re good, right? And the members love to refer it tell other people, tell their friends that they got this great product. They just got a loan for something that they really needed help with.
Mike Lawson: Yeah, that word of mouth working for you guys is true for both. Both you guys have been tremendous.
Ben Morales: I’ll just finish off by saying that, you know, the members are on the journey with this pandemic initiated recession and we’re just beginning, right? They gotta still move from this relief to recovery and then to stability.
Small dollar loan products will help along their journey to assure that they can maintain stability and resilience. We really encourage credit unions to jump on board. Whether it’s our product or any product, it’s a need that we are seeing lots of resources lining up to encourage credit unions to get in the game.
Mike Lawson: Yeah, it definitely just benefits credit unions, for sure. Being that foundation there for members and consumers out there in general, so good stuff. Alright, gentlemen, well, I’m going to let you guys get back to work ’cause you probably have a lot to do. I appreciate the time and great stories. Great stories, and keep up the good work, okay?
Ben Morales: Thanks, and nice to see you.