Growing expectations and nontraditional competitors requirescredit unions to think creatively. The Filene Research Institutetries to spur innovation to help credit unions generate loans,mobilize savings and reinforce membership.

Since 1989, the Madison, Wis.-based Filene – which describesitself as a nonprofit, independent, think and do tank – has engagedleading scholars and thinkers to delve into the managerialproblems, public policy questions and needs affecting the creditunion industry. “Everything we do is designed to help credit unionsunderstand how they can better meet the needs of members and how tobe more competitive,” Andrew Downin, managing director of researchat Filene, said.

“Filene is definitely trying to bring the right people to thetable to support innovation and startups in order to get newcapabilities to credit unions,” Ben Morales, CEO of QCash Financialand chief technology and operations officer at the $2.5 billion,Olympia, Wash.-based Washington State Employees Credit Union,said.

“Our work can only be as good as the input and involvement fromcredit unions,” Downin asserted.

Filene and the Institute for Money, Technology & FinancialInclusion at the University of California, Irvine recently launcheda research hub at UCI focused on how emerging technologiesinfluences credit union business practices and clients. “They'vedone a lot of work around how financial services organizations canreally tap into technology and sort through the hype,” Downinsaid.

“We are delighted to partner with Filene to explore how creditunions can leverage trends in mobile banking and othertechnological interventions,” IMTFI Director Bill Maurer, dean ofUCI's School of Social Sciences, said. “The IMTFI has establisheditself as the premier research center on the impact of financialtechnology and fintech on people's personal and commercial bankingpractices, and we look forward to helping credit unions continue tocreate opportunities that meet the demands of changing consumerbehavior.”

A report coming out of the IMTFI center later this year detailsdrivers of financial technology change, as well as consumeradoption. It will include recommendations to help credit unionleaders make wiser decisions.

Another way Filene encourages credit union technological changeis through its i3 innovation program. More than 200 credit unionleaders from the U.S. and Canada participate through virtualdiscussions, collaborative fieldwork and self-study to createpossible solutions. The innovation program then identifies severalconcepts with the most promise and moves them into the Fileneincubator.

“The i3 program continues to move forward with strength and alot of participation across the credit union industry,” Downinemphasized. Currently, Filene has a catalogue of 200-plus ideasthat came out of i3 over the last dozen years. However, only a fewof these ideas are in use at credit unions or commerciallysuccessful.

“A big part of i3 is centered on design process and reallyteaching credit union executives to put themselves in theirmembers' perspectives,” Ryan Foss, managing director, innovation,at Filene said.

Two products, which developed from the i3 program, are currentlyin two different stages of availability to credit unions.

The first is Boost Savings, which helps members handle unplannedexpenses while still encouraging them to build long-term savings.Members enrolled in the program receive access to a line of credit.Boost is ready for credit union utilization. “There are versions ofboost savings out there in the marketplace today at credit unions,”Downin pointed out.

The second, Centsus, uses a web-based tool and allows consumersto use emoticons to rank how they feel after spending, making themaware of how financial decisions impact emotions. Centsus hasn'tseen the same success as Boost Savings.

“A big part of innovation is nine out of 10 darts aimed at thedartboard aren't going to hit a bullseye,” Downin noted.

In May, another seven teams will pitch i3 on new concepts. Fossstated, “We talk a lot about i3 and credit unions trying toinnovate and one thing we are trying to get better is that kind ofelasticity and connection to the fintech world. We've had a lot ofstarts and stops and were trying to get better at that.”

I3 also has a couple of products in the development hopper rightnow.

Debt Dragon guides students through relatable, interactivescenarios that show real-time financial implications andalternatives about their investment options with clear actionitems, next steps and checklists.

Bank on Family taps into the awkwardness of peer-to-peer lendingdefaults. Foss said the reality is only 37% of informal loans arepaid back. This is not only unhelpful to the borrower but puts astrain on the relationship. Bank on Family makes the credit unionthe facilitator of a streamlined P2P lending process.

One of the i3's successful alumni is WSECU, which created a loanplatform, QCash, in 2004 to meet the short-term lending needs ofmembers who were requesting large money orders to pay off paydaylenders.

QCash Financial, a CUSO and wholly-owned subsidiary of WSECU,provides automated, cloud-based, small-dollar lending technologyfor financial institutions seeking to serve some of the nearly 68million financially underserved adults in the U.S.

WSECU also discovered that offering members small-dollarshort-term lending options at very competitive rates provided aconsistent revenue stream in return. WSECU's QCash program booksmore than 30,000 loans annually, maintains loan loss rates in the6% to 8% range, provides financial education for members andgenerates an annual net income of $4 million.

QCash Financial's technology was also used to launchedsmall-dollar lending programs by the recently renamed $2.9 billionSan Antonio (Texas) Federal Credit Union, now Credit Human, the$1.2 billion Rye, N.Y.-based USALLIANCE Financial Federal CreditUnion and the $1.7 billion, Richland, Wash.-based Gesa CreditUnion.

The QCash platform originated 34,907 loans by WSECU in 2016,amounting to more than $28 million loan dollars funded. Last year,Gesa used the QCash platform to originate 1,157 loans, amounting to$1,126,591 loan dollars funded in the six months.

Also in 2016, Filene and QCash Financial launched acollaboration that offers credit unions the opportunity to bringthis lower cost, multi-channel loan experience to their memberswhile also participating sharing data with the researchers atFilene. QCash Financial's new relationship with USALLIANCE resultedfrom the company's partnership with Filene.

Morales spoke of Filene, its support for startups and theincubator process, and really trying to bring innovation to thecredit union industry. “They've been one of those organizationsthat has continually evolved and adapted to current situations,current thinking and current needs.”

QCash soon plans to incorporate data analytics and predictivemodeling into its platform. Beginning in the fall, credit unionscan integrate their own risk model or buy one from FICO and host iton the QCash platform as a way to manage risk. It is also buildingin financial coaching capabilities.

“We're a cautious, conservative industry,” Morales explained.“When you do have a startup and you're asking someone to take aleap of faith, the cycle from awareness to actually making thedecision to implementation is long for credit unions.”

He added part of the opportunity as an industry is building roomin a strategic plan to be innovative, to take a little more risk,to just say 'yes' and try it.

“The challenge you have with incubators and startups is how wemake it comfortable for credit unions to take a little bit morerisk,” the QCash CEO suggested. “If I had a wish for the industry,it is build a little bit of risk-taking into your strategicplan.”