Filene Research Institute said it has entered into a new collaboration with QCash Financial to pilot a program designed to provide a low-cost alternative to payday loans.
Based in Olympia, Wash., QCash is a digital lending platform that offers "relationship-based" underwriting, without credit check, to members in search of small, short-term unsecured loans.
The Madison-based CU think tank said QCash CEO Ben Morales, who is also an original Filene i3 innovator and chief technology and operations officer at Washington State Employees Credit Union (WSECU), has been "meticulously refining" payday loan alternatives at the credit union over the past decade.
WSECU is a $2.3-billion institution based in Olympia, Wash. QCash began as a "short-term loan solution" for WSECU members in 2004.
WSECU's "QCash" program generates more than 30,000 loans annually, maintains loan loss rates in the 6% to 8% range, provides financial education for members using this product, and generates annual net income of $4 million.
The collaboration between Filene and QCash will allow CUs to offer a lower-cost, multi-channel loan experience to their members while also participating in the evolution of this product by sharing data with Filene researchers.
"We wanted to find a way to offer a better alternative to payday loans," said Morales.
Tansley Stearns, chief impact officer at Filene, noted that with more than 100 million payday loans issued annually in the U.S. at exorbitant rates between 300% and 500%, the need for a lower-cost alternative is "obvious."
"Through Filene pilots, credit unions are able to bring new ideas to their members that have real impact," she added.
Results from the QCash pilot program will be collected over the next several months and will include data regarding user demographics, loan growth, repeat usage, and response to the digital experience.
