SAN DIEGO — When credit union executives talk about online andmobile lending, they typically think of their most demographicallyfavorable members.

KevinFoster-Keddie, president/CEO of the $2.1 billion WSECU inOlympia, Wash., told the audience at NetFinance Interactive 2014this week that one of his credit union’s biggest successes camewhen it offered an online replacement to payday loans called Q-Cash.

The 216,000-member WSECU offers a standard Q-Cash loan that canrange from $50 to $700, as well as a Q-Cash Plus loan that canrange from $701 to $4,000.

Foster-Keddie told conference attendees that the idea for Q-Cashstarted when he was approached by a teller who was concerned thatmoney order buyers were slowing down the teller line. During thediscussion, the teller noted that a large number of them were beingwritten to payday lenders.

Foster-Keddie charged the teller with determining what dollarvolume was at stake.

He said he was surprised when the teller came back to reportthat nearly $1 million per year in money orders were being writtento payday lenders.

“I said, ‘wow, we’re a financial institution and we have membersin the lobby writing money orders to another financial provider tothe tune of a million dollars a year,’” Foster-Keddie said. “Ithink I want to get into that business.”

The credit union started out exploring partnerships with otherestablished payday lenders, but none of them panned out.

That was when WSECU decided to build its own program, includingcomputer algorithms to support the credit union’s unique riskmodel, according to Foster-Keddie. Since no creditcheck is required for these loans, the algorithms analyze andassign risk based on checking account activity.

“These are the highest risk loans we make,” Foster-Keddie said.“We have 10% losses. People who get these loans are nothigh-quality borrowers. They’re people who can’t get loans anywhereelse.”

According to Foster-Keddie, the credit union is able to keepcosts low by driving these loans through the online and mobilechannels. He said that the entire program, which generates $3.5million in annual revenue is run by only two employees.

Foster-Keddie told the NetFinance Interactive audience thatWSECU is now marketing the Q-Cash product to other creditunions.