Fintechs, CUSOs and the Credit Union Movement
Fintech CUSOs can keep credit unions technologically competitive while remaining true to their people helping people mission.
Much has been written about the concern that fintech startups will steal business from traditional financial institutions. It hasn’t happened in large numbers, primarily because financial institutions have one key ingredient that fintech startups don’t: Consumers.
This has given rise to the idea that traditional financial institutions should partner with fintech startups, with financial institutions providing the bodies and startups providing the cutting-edge technology.
That may work fine for banks, but credit unions have a competitive advantage: Fintech CUSOs.
Fintech CUSOs offer two key advantages over a fintech startup:
- Most fintechs are focused on clever ways to move money. CUSOs, on the other hand, can focus on addressing the real-world financial challenges of members.
- CUSOs can help establish credit unions as leaders. In other words, each CUSO can create its own movement within the movement.
QCash Financial illustrates these ideas perfectly. Our short-term, small-dollar lending platform was designed specifically to give predatory lenders a run for their money. WSECU developed QCash in house for its own members, but that only helped a limited number of people. By forming a CUSO, we were able to expand our loans to more members, and a new credit union lending movement was born.
We knew we were breaking the mold of short-term lending for consumers in a meaningful way. Our payday loan alternative has helped people pay for emergency veterinary care for beloved pets, cover rent for those in between jobs and pay for unexpected car repairs. The loans are offered at better rates and more consumer-friendly terms than traditional payday lenders. Moreover, they are provided via the trusted relationship of a full-service financial institution that’s well-established within the community.
As I mentioned earlier, though, our idea was not just to give one credit union’s members these benefits, but to rock the predatory lending marketplace altogether.
We are clearly and deliberately on a mission to start our own movement.
Once we signed our second credit union, GESA Credit Union, we knew it was just a matter of time. The importance of these first clients validated that there was market interest in what we were trying to achieve. These credit unions took a leap of faith with QCash Financial. They saw the value proposition of helping members with fast liquidity. They embraced the philosophy and innovation infused into the product. We are grateful for these first two credit union clients. They lit the flame.
Of course, two credit unions do not make a movement. But soon we had a third (USALLIANCE Financial), then a fourth (Credit Human) and then a fifth credit union (Community Credit Union of Florida) on board. Something really was happening. We had a small crowd of QCash Financial brand advocates that validated the faith those first two credit unions placed in us.
Now in the second quarter of 2018, we have real momentum. I’m proud to report that in 2017, WSECU alone generated $31.5 million in QCash loans, resulting in $3 million in net lending income. Since our inception, QCash platforms have funded 350,000 loans that have provided more that $219 million in short-term loans to credit union members.
We’re on a path. It’s moving in the right direction, but to truly achieve our dream, we need to continue to build our movement – a movement that is focused on providing broad access to small dollar, short-term credit across all communities. After all, these loans were once the cornerstone of the credit union movement, and consumers still need them.
If this sounds like a movement that your credit union would like to join, we of course want to hear from you.
However, there’s a bigger message here.
Cooperation among cooperatives – one of the cooperative principles – can and should be used as a competitive advantage. Fintech CUSOs can keep credit unions technologically competitive while remaining true to their people helping people mission.
Ben Morales is CEO of QCash Financial. He can be reached at bmorales@wsecu.org.