Credit Union’s mobile app approves loans in six clicks


A credit union in Olympia, Wash., Has started offering quick, short-term loans on its mobile app to consumers who need cash to, say, fix a car they use to pay for it. job.

In doing so, she is poised to solve two puzzles that many banks struggle with: how to make the lending process logical and acceptable on a smartphone, and how to make mobile banking apps profitable.

Six taps can get WSECU members a Q-Cash loan ($ 50 to $ 700 with a term of 60 days) or a Q-Cash Plus loan, ($ 701 to $ 4,000 with repayment terms of nine to 36 months). The funds are deposited into the linked accounts of the applicants once they are approved for Q-Cash loans.

Loan products have also been available on WSECU’s online banking site since 2008 and at its branches for even longer.

Members react quickly to the mobile alternative: less than a month after the May 15 launch, the credit union is already receiving 20% ​​of its applications for Q-Cash and 16% of its applications for Q-Cash Plus via mobile . Speed, ease of use and access are all good things about using the channel.

“The cell phone is within easy reach of most people,” says Kevin Foster-Keddie, president and CEO of WSECU. “Mobile is how we get [something] ended.”

Already, a few financial institutions have added funding capabilities to their mobile apps to try and capture more lending activity.

America First Credit Union in Utah updated its app to include auto loan applications as it observed that its members were using their mobile devices to apply for loans. Technology provider RC Giltner Services is working with smaller banks to create a credit and checking service called PaySound that allows customers to take loans under $ 5,000 through digital channels.

WSECU doesn’t aggressively market its Q-Cash loans, but Foster-Keddie says that, like all financial institutions, it has clients who sometimes need short-term loans and small dollars. The mobile app speeds up the application process in that it is easier to access than a branch or desktop app. Someone applying for a small dollar loan may need these funds quickly to pay for emergency dental care.

Daniel J. Van Dyke, research specialist at Javelin Strategy & Research, says more and more people are opening lines of credit via mobile.

Indeed, Javelin data from May 2014 shows that among consumers who opened a student loan in the past two years, 13% did so with a smartphone and 11% used a tablet, for example, while 14% did so with a smartphone and 11% used a tablet, for example. % used a smartphone and 9% a tablet. when opening a home equity loan or line of credit for the same term.

“Consumers want them pretty quickly,” says Craig Focardi, senior research director at CEB TowerGroup.

Of course, there is a cost for the high risk loan.

WSECU charges $ 10 to $ 12 per $ 100 for the smaller Q-Cash loan, and it charges a rate of 36% on its Q-Cash Plus line of credit up to $ 4,000.

To determine creditworthiness, Q-Cash products use proprietary algorithms that Foster-Keddie would not discuss. Yet there is a clear source of data: Checking accounts are tied to digital applications, and software can analyze the data to determine approvals.

Focardi points out how financial institutions could extract a client’s income and payment history to determine their creditworthiness, for example.

One of the downsides of payday loans is that they trap consumers in a cycle of debt. And Foster-Keddie readily admits that there are some who abuse the product but the financial institution is watching out for that ?? especially for people who play. This is because the credit union monitors the use of ATMs near casinos and will advise these people to budget and stick to it.

But this was more of the exception.

“We are helping members who would otherwise get loans elsewhere,” Foster-Keddie said, noting that the credit union has always been open with regulators, including the Consumer Financial Protection Bureau. “The product is really good for us. It is efficient, fast and everyone loves it and it makes us money.”

WSECU plans to sell its lending decision platform to financial institutions.

The business partners of the credit union would be responsible for their loans and the development of their own algorithms with input from WSECU. Partners could also use the software to approve and fund other types of loans (some banks may want to avoid the reputational risk associated with the product).

Foster-Keddie’s own mobile ambitions include adding more loan products in the WSECU app ?? an initiative that points to his biggest dream of consumer credit: when he’s buying a house and he spots the place of his dreams, he launches a banking app, clicks a few buttons and deposits funds in that account immediately. He realizes that some may think the vision is far-fetched.

“We’ll see if I’m crazy in three years,” he said.

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