Online lending – a market worth £23bn in 2016 – is a key challenge for credit unions in the UK.
As well as having to provide a seamless user experience, they must compete against payday lenders, who set the benchmark on frictionless loan applications.
But credit unions can be limited by their common bond – based on living or working links, or on membership of an association. This means that only people meeting the common bond criteria can become members and gain access to their financial services.
In an online, universal, world this common bond can act as a barrier when it comes to attracting new members.
At the annual conference of the Association of British Credit Unions Limited (ABCUL), delegates learnt about two online lending models developed to serve credit unions.
Fiach Maguire from Culoans.co.uk talked about the online lending platform, which is open to all credit unions and currently covers 75% of the country. Participating credit unions are charged for completed loan applications, the charge reflecting the economic value of the loan. Funding credit union members do not have to pay a joining fee but future credit unions may have to.
Through Moneysupermarket, the CULoans site can instantly process loan applications. Since launching, the platform has had 15,000 visits, with an application rate of 47%. Around 73% of these were completed on mobile devices. While the rejection rate is 96%, the total volume of new loans reached £850,000, with an average loan of £5,600 for 45 months. CULoans is currently negotiating with other price comparison websites.
Also speaking at the conference, Keith Rivers from Affordable Loans provided another example of a collaborative model that can help credit unions reach a national, online audience.
Designed by credit unions, Affordable Loans includes credit unions, CDFIs and charities, aiming to create full user service and coverage. To join, they must pay a £7,000 fee for the cost of technical changes to the portal, as well as legal, marketing and insurance expenses. In addition, credit unions pay a £5,000 annual running cost.
The group teamed up with Asda to build their own version of a comparison website. Asda is hosting the portal, enabling customers to go directly to the Affordable Loans website to get a quote via Asda Money.
“Affordable loans went to Asda because customers tended to shop there – Asda was a trusted brand,” said Mr Rivers. The website has over 1,000 views per week growing at 10% per week. One in four customers accessing the Asda Money website make contact with their recommended community lender.
Both platforms are continually being improved to respond to users’ needs, a particular emphasis being placed on being mobile-friendly.
“If it’s not mobile, it’s not online. If it’s not simple and instant, it won’t deliver,” added Mr Maguire.