o Credit union partners with nearly 50 local merchants for automated POS lending solution.
o Retail portfolio grows from $50,000 a month to more than $400,000 a month.
Indirect lending solution cuts process from days to minutes.
o Credit union said it's picking up business banks left behind.
A central Ohio credit union said it has increased its retail lending eightfold by automating the process of financing everything from new roofs to Oriental rugs.
KEMBA Financial Credit Union, based in the Columbus suburb of Gahanna, said it has partnered with nearly 50 local merchants in its 60-square-mile charter region siance it began selling the salespeople on using the credit union's services to cut the approval time from days to minutes.
Those businesses include fencers, roofers, window installers, pool and hot tub suppliers and rug dealers, among others, according to Derica VanScoy, retail lending manager at $582 million KEMBA Financial.
They're all using Teres Merchant Lending, a Web-based automated lending solution designed to help financial institutions and retailers automate retail loan applications and financing. Its parent company, Atlanta-based CRIF Lending Solution, said the process allows retailers to complete consumer loan applications and have them approved in seconds.
"Merchant lending, similar to automotive indirect lending, gives credit unions the opportunity to serve local merchants," said Tim Kelly, president of Teres Merchant Lending provider CRIF Lending Solutions. "From financing their customers' point-of-sale purchases to a deposit relationship and possible business loan, the opportunities to grow your portfolios are a boon for credit unions."
VanScoy said that has been her experience at 58,000-member KEMBA Financial. "When I first started, my goal was to build a retail lending practice that generated $300,000 a month. But we still used manual processes, such as faxing loan applications back and forth with merchants. That made it hard for us to get above even $50,000 a month in retail loan volume."
Indirect lending solutions already had taken hold in the automotive retail market and KEMBA decided to go with a player in that space who had also designed a Web-based solution specifically for other retail and service outlets.
"Turnaround time on loan applications is a lot faster," VanScoy said. "We went from a two-three day loan approval process to just 30 minutes. When merchants realized they could get approvals while customers waited, word spread like wildfire."
Of course, they still have to adhere to underwriting guidelines and knock on doors, too. "Similar to managing an auto loan program, we spend a lot of time out of the office visiting merchants," VanScoy said. "It's still a high-touch business that requires a lot of education, and we also have top-notch risk managers in place."
She said KEMBA Financial's retail lending grew by 50% in its first month and is now hitting about $5 million a year, driven by both its convenience and the fact that it's available at all. "Banks have all but vacated the market, so our program is helping both consumers and retailers," she said. "Consumers have new ways to access the goods and services they need from local merchants. Retailers have new ways to serve consumers in this tough credit market."
VanScoy said the credit union's bottom line also has been bolstered in another key measure.
"The ROA of our retail lending portfolio is over 5%. It's our highest performing portfolio next to credit cards, and it's very profitable for the credit union," the KEMBA Financial lending manager said.
"Credit union ROA is being assaulted from all sides. Merchant Lending gives credit unions the opportunity to enter into a new, profitable lending segment," added Kelly at Atlanta-based CRIF Lending Solutions, which also has recently acquired the Magnum, FLS Services, APPRO CRIF and Aimbridge operations.
VanScoy said she also now is hearing from other credit unions around the country to "find out how we made it work."