SAN DIEGO — When credit union executives talk about online and mobile lending, they typically think of their most demographically favorable members.

 Kevin Foster-Keddie, president/CEO of the $2.1 billion WSECU in Olympia, Wash., told the audience at NetFinance Interactive 2014 this week that one of his credit union’s biggest successes came when it offered an online replacement to payday loans called Q-Cash.

The 216,000-member WSECU offers a standard Q-Cash loan that can range from $50 to $700, as well as a Q-Cash Plus loan that can range from $701 to $4,000.

Foster-Keddie told conference attendees that the idea for Q-Cash started when he was approached by a teller who was concerned that money order buyers were slowing down the teller line. During the discussion, the teller noted that a large number of them were being written to payday lenders.

Foster-Keddie charged the teller with determining what dollar volume was at stake.

He said he was surprised when the teller came back to report that nearly $1 million per year in money orders were being written to payday lenders.

“I said, ‘wow, we’re a financial institution and we have members in the lobby writing money orders to another financial provider to the tune of a million dollars a year,’” Foster-Keddie said. “I think I want to get into that business.”

The credit union started out exploring partnerships with other established payday lenders, but none of them panned out.

That was when WSECU decided to build its own program, including computer algorithms to support the credit union’s unique risk model, according to Foster-Keddie. Since no credit check is required for these loans, the algorithms analyze and assign risk based on checking account activity.

“These are the highest risk loans we make,” Foster-Keddie said. “We have 10% losses. People who get these loans are not high-quality borrowers. They’re people who can’t get loans anywhere else.”

According to Foster-Keddie, the credit union is able to keep costs low by driving these loans through the online and mobile channels. He said that the entire program, which generates $3.5 million in annual revenue is run by only two employees.

Foster-Keddie told the NetFinance Interactive audience that WSECU is now marketing the Q-Cash product to other credit unions.