Using technology to increase the bottom line – whether it's through fees or new revenue streams – is at the top of many credit unions' business strategies.

In addition to providing revenue for credit unions, services such as identity protection and payday loan alternatives lead to better member value and greater loyalty.

“We are shifting more and more from a traditional portfolio builder, and a financial institution relying on interest income and margin, to a financial institution that is relying on fee income generation,” Ray Shams, EVP and COO for the $943 million, El Segundo, Calif.-based Xceed Financial Credit Union. Shams is also president/CEO for the credit union's CUSO, Global Enterprise Resource Group.

“Noninterest income is very important to us,” Shams added. “We have made the effort to make sure we increase our noninterest income without negatively impacting our members.”

He explained a variety of methods can be used to boost noninterest income.

“One of the main ways, based on our business model, is to improve our core competencies, such as the talent base we have, our efficiencies and our accuracy,” Shams said.

He also explained that working with the right vendors and partners helps as well. To that end, Xceed Financial works very closely with Fiserv as a user of its DNA core system.

“Assisting other credit unions on an ongoing basis truly creates a noninterest stream of income for the credit union that lasts for years to come,” Shams noted. “When it comes to increasing core competencies, efficiencies and accuracy, working with partners such as Fiserv provides us with future safety and security.”

Core systems from the Monett, Mo.-based Symitar, a Jack Henry company, provide the foundation for two credit unions that offer members payday lending alternatives.

The $2.5 billion, Olympia, Wash.-based Washington State Employees Credit Union created a loan platform, QCash, in 2004 to meet the short-term lending needs of members who were requesting large money orders to pay off payday lenders.

“We decided we could do something better that would leave more money in their pocket and move them upstream to more financial services,” Ben Morales, CEO of QCash Financial and chief technology and operations officer at WSECU, said.

WSECU also discovered that offering members small-dollar, short-term lending options at very competitive rates provided a consistent revenue stream in return. WSECU's QCash program books more than 30,000 loans annually, maintains loan loss rates in the 6% to 8% range, provides financial education for members and generates an annual net income of $4 million.

“It's about instant liquidity,” Morales explained. “Typically, when [members] need the funds it is an emergency. Automating the loan process, the funding process and the payment process was critical.”

WSECU leverages SymConnect, which allows for integration with any third-party product or credit union-written ancillary application. The credit union commercialized the solution in 2015 by forming QCash Financial, which operates as a CUSO and offers automated, cloud-based, omnichannel, small dollar lending platforms for financial institutions.

The $2.8 billion San Antonio Federal Credit Union used Symitar's PowerOn to find members who were borrowing $1.2 million a month from payday lenders at an average interest rate of 313% after modifying its core processing system with user-defined inquiries.

“We researched ACH warehouse items and noticed some obvious transactions involving payday lenders,” Adele Glenn, emerging channels innovation architect at SACU, recalled. “It did not identify all of them, but what shocked us the first time we ran the report is we pulled 90 days of history and saw a little under $2 million going out in payment.”

The credit union set out to get these members out of the payday lending loop with a soon-to-be-launched alternative called MobileFirst. SACU plans to charge a nominal interest rate and one-time application fee for this service, which together would fall under the 28% APR cap required by its federal charter for short-term loans.

Glenn described MobileFirst, which is offered via mobile and online channels, as a super-fast solution that includes a “six question and done” loan application.

“We'll offer small dollar loans to the entire membership,” she said. “It is not just people who use payday lenders who need quick access to cash.”

She added, “Keeping it in the self-service channel helps reduce the cost [to the credit union] and offers members a much lower rate than the 313%. We're not looking to make a ton of money off of this, but there will be revenue income.”

The loan solution interfaces with the Episys core processing system. Symitar maintains the loans and manages the payments automatically.

Another new revenue stream relates to the risk of fraud associated with the increased use of mobile banking and digital payments, Matt Cullina, CEO of the Scottsdale, Ariz.-based cybersecurity firm IDT911, said.

He said in addition to being trusted financial advisors, credit unions should also be known as protectors of member identities.

“I think credit unions really have an opportunity to take the loyalty they engender and use technology to enhance those relationships,” he said.

Cullina explained that IDT911 partners with credit unions to manage their membership-based fraud issues, and helps them deal with the growing nature of identity theft and fraud. IDT911's FraudScout, he said, scours public and private databases, social media channels and the Internet's black market for the presence and possible misuse of customer identities and credit data.

For example, the $48.3 million, Mohegan Lake, N.Y.-based Hudson River Financial Federal Credit Union offers members IDT911's FraudScout. If the service detects potentially unscrupulous activity, members receive an alert from IDT911 fraud specialists. Members can choose from three different bundle options, plus additional services such as credit and non-credit information monitoring, and identity and theft reimbursement insurance.

“It is a risk-free, revenue-generating stream for credit unions,” Cullina said. “The credit union gets tangential benefits. It provides an extra layer of protection for the member. The credit union becomes the protector. It is a whole new avenue to communicate with the member.”

The Austin, Texas-based fintech and marketing services provider Kasasa, formerly BancVue, recently announced the availability of an intuitive, in-branch selling technology called Builder, which it claims maximizes the account opening experience and drives consumer-friendly noninterest income for credit unions.

Kasasa also launched an identity fraud protection add-on to Builder, called Kasasa Protect, which enables credit unions to offer fraud services from identity protection service provider CSID. The protection service covers accountholders' credit and non-credit identity and enables institutions to earn revenue for each enrollee.

“A common problem institutions face when it comes to generating additional income is that its employees are either not comfortable selling or simply lack the training and resources to do so successfully,” Gabe Krajicek, CEO of Kasasa, said. “With Builder, staff can provide new accountholders with an interactive experience that lets them choose the additional services they want.”

Krajicek said this enables institutions to cross-sell secondary products and increase wallet share with each new account opened. On average, 20% of the consumers leveraging Builder chose to attach a noninterest income product or service to their accounts, according to Kasasa.

Instant Insights /

Technology Aids New Credit Union Revenue Streams

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