What are the Pros and Cons of Partnering with QCash Small Dollar Lending?

Introducing any new technology to a tried-and-true sector is a recipe for radical change. Generally, the change is for the positive, but that doesn’t mean that there aren’t any drawbacks to innovation. The question is when partnering with financial technology companies, what do you give, and what do you get?

When you’re on the front lines of innovation—the cutting edge, if you will—adaptability is key. At QCash, we understand that strategy, technology, and evolution are primary concerns for staying alive and viable. Imagine our surprise, then, when we heard about the new battlefront technology: the double-edged sword. A blade that drastically increases versatility, but that also cuts both ways. It was a game changer, to be sure; however, it presented ways to hurt us as well, if we weren’t careful.

Fortunately, with respect to financial technology, we’ve had time to understand a little about double-edged swords. We realize that we can’t continue to provide bleeding-edge, innovative technology and services without disrupting elements of standard banking and credit union operations. With that said, let’s take a look at the drawbacks of partnering with an experienced fintech company.

The Cons of Partnering with QCash

Part of the digital transformation package means embracing new technology. Before we talk about how that benefits you, we should consider the full impact that it might have.

Whereas most credit unions may be accustomed to learning new processes and practices every so often, fintech companies focus only on providing value through the specific services that they provide. As a result, they learn to reimagine, fine tune, and change gears quickly. New developments come faster than regulations do. Often, a fintech company will implement new technology or protocols every 45 or 90 days; many credit unions are used to adapting to new things only every six months or so. This can present a significant increase to changes to workload or style for credit unions.

Essentially, the downside to partnering with a fintech like QCash is that we tend to push forward rapidly with innovation, which can require testing, education, and fine-tuning. Consistently reevaluating best practices isn’t easy. The pace can be rather fast.

The Pros of Partnering with QCash 

The pros of partnering with a fintech largely speak for themselves. Fintechs provide access to data, services, protection, planning, and more, all that wouldn’t be available or feasible otherwise. With QCash, we offer small-dollar loans at reasonable rates to help protect your members from predatory payday lenders who charge exorbitant interest rates. We also do it with a high degree of demonstrable protection and moderate benefit to your credit union.

Beyond that, fintechs like QCash offer something a little less tangible, but no less important. First, we can help you get to market to serve your members faster than you could do yourself. Developing and testing new technology takes time when you have so many other things to consider, so fintechs are able to focus intensely on perfecting the service or product at hand.

Fintechs also ensure that their products and services are highly integrated so that credit unions are able to focus on daily operations rather than worrying too much about the development and integration of new technologies. They package their offerings so that they have a minimal net impact on day-to-day minutiae, but a maximal positive impact on productivity and member services.

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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 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.

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 occurring 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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The Four Elements of Financial Well-Being According to the CFPB.

Four Elements of Financial Well-Being CFPBThe CFPB or the Consumer Financial Protection Bureau recently published a report titled “Financial Well-Being in America” that discusses the four elements of financial well-being, and how Americans of different income levels display varying levels of financial wellness. Two of the CFPB’s most important conclusions from the study are that “savings and financial cushions provide the greatest differentiation between people with different levels of financial well-being” and that “certain experiences with debt and credit seem to be strongly—and negatively—associated with financial well-being.” Credit unions must understand the four elements of financial well-being and how to help improve the borrowing and saving experience for members to help boost their financial wellness.

The CFPB report “Financial Well-Being in America” defines financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.” It further describes the four characteristics as the following:

  • – Present Security: Control over day-to-day and month-to-month finances
  • – Present Freedom of Choice: The freedom to make choices to enjoy life
  • – Future Security: The capacity to absorb financial shock
  • – Future Freedom of Choice: The state of being on track to meet financial goals

These four elements address present stability in two categories, which directly impact future financial stability. Members must first be able to keep their daily or monthly expenses in line with their income, in order to save for unexpected expenses in the future and meet financial goals that improve quality of life, such as saving for a home or investing in a more reliable form of transportation.

To help members improve their financial well-being, credit unions can provide members access to tools to control day-to-day and month-to-month finances by borrowing and saving more effectively. Members often need access to the ability to borrow to manage daily and monthly expenses. According to the CFPB, inexpensive, small-dollar loan products can help stabilize members in the short-term. Without these alternative loan options, many members risk falling into a cycle of debt through high-interest payday loans or by accruing large credit card balances with high interest rates. Credit unions are uniquely positioned to offer these small-dollar loan solutions to members because they are invested in the long-term financial stability of members, instead of looking for a quick profit.

In order to improve a member’s financial stability enough to start saving, credit unions need to build support for savings. Integrating financial coaching and debt-management counseling services into small-dollar loan products can help members make good decisions throughout the borrowing process. The ability to borrow strategically can directly lead into the ability to save, especially with the guidance of trusted credit union financial coaching professionals.

When members turn to a small-dollar loan product offered by a credit union to solve a short-term cash management crisis, the credit union has the opportunity to offer help to build a savings plan once the member’s income has stabilized.

The CFPB’s report on financial well-being indicates that access to savings and financial cushions is one of the primary indicators of financial wellness and stability. Credit unions should work with their members who struggle with their day-to-day and month-to-month expenses to build a plan to stabilize their income and expenditures. By offering access to small-dollar loan products, paired with financial coaching and savings tools, credit unions can help members improve their financial well-being.

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By Ben Morales, CEO of QCash Financial [12.11.2017]

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.

As published by:

CUNA Councils
P.O. Box 431
Madison, WI 53701-0431
Phone: (800) 356-9655

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