While Iowa's executives saw first-hand the digital know-how of Ecuadorian financial cooperatives, the world's credit union technology trends are now available on any desktop or mobile device through the recent launch of the World Council of Credit Unions' Digital Transformation Lab. It's a virtual platform that features WOCCU's development projects from different nations. The website will also facilitate the sharing of experiences and ideas from members and partners from all over the world.

A delegation of leaders from the Iowa Credit Union League, and Iowa credit union executives who traveled to Ecuador in February through WOCCU's global classroom exchange, said they got a few ideas from the South American cooperatives that they are considering using at their Hawkeye State credit unions.

Straddling the earth's equator, Ecuador is about the size of Nevada and home to more than 16 million people. With more than 20% of the nation's population living below the poverty line, the income per capital is about $11,500, according to the 2019 CIA World Fact book and other sources. A workforce of more than eight million supports the nation's primary industries of agriculture, petroleum, food processing, textiles, wood products and chemicals. Ecuador's gross domestic product is nearly $200 billion.

According to the CIA, in 1999 and 2001, Ecuador's economy was hit hard by a banking crisis that led to some reforms, including the adoption of the U.S. dollar as the nation's legal tender, which stabilized the economy and returned it to growth. Other initiatives that followed included a government program that expanded lending to smaller financial cooperatives to facilitate more loans for small businesses, a main driver of economic growth. Over five years, co-op loans grew from 11% to nearly 20%, according to report from the Center for Economic and Policy Research in Washington, D.C. Other regulatory measures included placing maximum fees on various financial transactions to protect consumers.

Ecuador is home to about 600 credit unions and the Iowa delegation visited two of them: Cooperativa Jardin Azuayo in Cuenca and Cooprogreso in Quito, the nation's capital city.

Jardin Azuayo is the second largest credit union in Ecuador managing $835 million in assets and serving more than 400,000 members. Cooprogreso is the country's fourth largest cooperative managing $491 million in assets and serving 214,000 members.

Micro loans, ranging in the amounts of $1,000 to $10,000, were among the financial products most in demand by Ecuadorian members who use the small-dollar loans to open sole proprietorships.

"The way they looked at their underwriting not only created efficiencies but also created a truer picture of a member's ability to repay a loan," Erin O'Hern, director of the Iowa league's compliance services, said. "They really spent a lot of time looking at their own data analytics and developing their own algorithms to help predict repayment rates and the viability of the business itself. They really have incorporated a holistic view of how to function as lending partners to their small businesses."

For example, part of the algorithm would give points to members who took financial education classes with the credit unions. The algorithm also evaluates the type of business, its size, location and consumer traffic, and assigns scores based on the neighborhood of the borrower and the performance of loans in that neighborhood, and uses other demographic data.

With a computer tablet in hand, loan officers travel to meet with micro-loan borrowers to gather more information. Based on their algorithm, loan officers are able to quickly determine whether members are eligible for microloans. If they aren't, loan officers recommend steps members can take to improve their eligibility for microloans, O'Hern said.

Matt Dodds said Cooprogreso's utilization of data analytics provided him with great visibility into thinking about decision models differently – not necessarily to price loans differently, but to potentially help and positively impact more members.

"We're already talking about different ways to enhance our auto [loan] decision engine through the data that we have," Dodds said. "We're trying to have better discussions about what we can do more of to leverage the credit union business model to continue to differentiate ourselves in the hyper-competitive financial services marketplace."

Instead of traditional marketing, the Ecuadorian credit unions rely on grassroots, word-of-mouth advertising and investments in member financial education.

"After we had meetings in the mornings at Jardin Azuayo, we had lunch at a restaurant that is owned by a credit union member," O'Hern said. "It first opened with just a few tables with a small dollar loan from that credit union. It's now a gorgeous, good-sized restaurant. When we sat down to order our food, we noticed Jardin Azuayo's logo on the restaurant's menu."

After meeting the Iowa delegation, the owner credited Jardin Azuayo for enabling the restaurant to open for business and grow over the years.

"[Jardin Azuayo] has champions who are members in the community who spread the good word about the type of service they received from the credit union," she said. "It's more of a grassroots type of marketing."

Dodds noted the credit unions invest in financial education initiatives, which double as marketing.

"Their differentiation is really based on community involvement, and their community involvement primarily is wrapped up in member financial education," he said. "All their time, effort and energy was on member education to improve their financial position. In doing so, that was their marketing edge. That really was their primary driver of growth and membership."

What also impressed the Iowa delegation was how the Ecuadorian credit unions were engaging their members in the strategic planning process and other important matters.

Members elect members to represent them on a branch level, and some of those members would be selected to represent the branch on a regional level, Scott Zahnle, president/CEO of the $470 million Greater Iowa Credit Union in Ames, explained.

Zahnle said the elected members were given topics they would discuss from a strategic planning process and their input, ideas and recommendations would be channeled up to the credit union board for consideration.

While Zahnle doesn't think he can replicate what Ecuadorian credit unions are doing, he is thinking about the possibility of establishing advisory panels from each branch that would provide input and ideas to the board two or three times a year. He noted the advisory panels could help the credit union keep track of what is happening in its different markets and perhaps generate ideas to enhance the credit union's product and service offerings.

Generating and sharing ideas on a much broader scale is what WOCCU aims to achieve through its new website, the Digital Transformation Lab, which features its initiatives of the latest technology for digital payments, digital lending and digital identity at credit unions throughout the world.

In the Ukraine, for example, WOCCU is developing and testing digital tools to inform lending decisions and effective loan monitoring for select credit unions. The Madison, Wis.-based organization is also testing mobile apps in Kenya that allow financial cooperatives to better identify lending risks for small farmers.

And in Asia, WOCCU is leveraging support from the Bill & Melinda Gates Foundation to pursue digital financial inclusion for more than 50 million people through interoperable payment platforms that will connect credit unions across the continent – and ultimately the world –through the use of open-source software.

WOCCU also said it welcomes all credit unions, members and partners to share their own experiences with digital transformation projects.

"By interacting with our Digital Transformation Lab, our members and the credit unions they represent can learn about the latest innovations, vet them and even share their own experiences with digital transformation," WOCCU CEO Brian Branch said. "The goal is to create 21st-century credit unions across the globe."