Lee Kolquist wasn't supposed to be around to even talk to me. But then neither was his employer, Lending Solutions, which 10 years ago any "expert" would have told you would soon be out of business, its name just another in a long line of otherwise forgotten headstones moldering away forever next to the likes of Blockbuster and your local record store, all slain by the world's most prolific serial killer, the Internet.
And yet its grave was never dug. Indeed, the Internet threat has had just the opposite effect on Lending Solutions, better known as LSI, which is thriving not despite the explosion of e-services but because of it. Interestingly, the company is an example of the counter-intuitive, in its case having found that the more people go online, the more they want to talk.
The Internet is the mother of "disruptive technologies," so woven into our everyday existence that it only seems to make sense that a company that specializes in talking to people via the telephone should have been disrupted right into shutting its doors. And yet now the Elgin, Ill.-based LSI is marking its 20th birthday, founded in the days when "dial-up" had a different definition.
The Initial Plan
"Initially, when the doors were opened, the interest was twofold: expand hours of operation and approve more loans," said LSI CEO Lee Kolquist. The idea was CUs could use it to make loans using their own standards and pricing while not having to build-out internal capacity. "It was built all around a loan event. If there is no application, there is no charge," said Kolquist. "When we expanded hours to 24/7 that was pretty much unheard of. That was when you heard of 'bankers' hours.'"
Over the following decade its model expanded into taking loan apps anytime CU staff was too busy, then morphed into LSI becoming the loan center for some CUs, and eventually into it also becoming a CU's disaster recovery center. "Over time it's become about the member service side."
Ah, member service. It's easy to forget that while outsourcing is common now, it wasn't that long ago that non-CU employees serving members was heresy. "In the early days what helped immensely was that Rex Johnson was among the founders," said Kolquist of the former CEO of Baxter CU in Illinois who was also a well-known lending consultant. The second key was the other founders of LSI were principals in Stewart Associates, which had more than 500 CUs as clients of its insurance business, all of whom became a natural target market.
But shouldn't that Internet thing have thrown water on the hot start?
"When the Internet started to take off and when online apps become prevalent there were people saying, 'Oh my gosh, members are going to want to be online and aren't going to want to talk and we're going to go out of business,'" recalled Kolquist.
But just as branches haven't disappeared, people still use phone — and why wouldn't they, as everyone is carrying one — and people now apply for loans 24/7. "The online app is just the front end. But the back-end remains the decision. People do not want to wait until the next morning or Monday morning." He acknowledged a growth in clients has helped keep phone volume steady.
"We have seen both sides [of lending criteria], from the risk-based to the conservative," continued Kolquist. "As underwriting has gotten more sophisticated, we find most credit unions fall into the middle. But there's no question that credit unions want to know what their peers are doing and about best practices. There is also no question that those out there with narrow underwriting criteria are being challenged by that everyday."
LSI's latest product is a line of credit analysis that began with a request from Minnesota's Wings Financial CU, which provided its file of current lines of credit and asked LSI to review by asking, "Would you OK this line today? Or should it be closed or lowered?" It's the kind of review that also makes examiners happy. It's taken that concept and expanded it to all CUs.
LSI has also seen its 18-year-old collections business — which represents about 21% of its revenue — continue to grow.
Back To The Future
But in the end, it keeps coming back to technology—just not technology leading to the end. "The percentage of members who are submitting apps in the off-hours has increased tremendously. It's become all about convenience; people want to talk to a rep now, when it's convenient for them." Even online chat is up 18%.
"The old thought process was that people go online in order not to talk to someone. Now we're seeing people picking up the phone. As they complete the app online or on a mobile app we ask, 'Would you like to be contacted in the next eight to 10 minutes to talk about the status of your loan?', and 63% say yes. Two thirds do want to talk to you. If you talk to them you can build a loan approval for loans that are denied. Twenty-one percent of the people we talk to who are not approved initially we are able to convert to approval."
Frank J. Diekmann can be reached at
