Frequently Asked Questions Contents How does short-term small dollar lending help my customers and communities?... 3 What is a digital lending platform?... 3 What is Q-Cash and Q-Cash Plus? Do we offer both products?... 3 How does Q-Cash work?... 4 What makes-up the Q-Cash decision engine?... 4 Is Q-Cash available through online, mobile, branch and contact center?... 4 Is Q-Cash selling its loan decisioning platform?... 4 What steps are needed to offer Q-Cash solutions?... 4 Are there various Q-Cash participation levels?... 4 What resources are required for Q-Cash implementation?... 5 What is the architecture of Q-Cash?... 5 What core processing systems does the Q-Cash platform support?... 5 Can a credit union s other loan offers be underwritten by the Q-Cash decision engine?... 5 How long does it take to deploy Q-Cash? What is involved in the implementation process?... 5 How do I build a Q-Cash business case for short-term small dollar lending?... 5 What are the Q-Cash costs? How are client credit unions and their members charged for Q-Cash?... 5 How often does Q-Cash review and validate the decision engine?... 6 How do you market Q-Cash?... 6 What is the client case study?... 7 How did the client case study determine if customers were using payday lending?... 7 Is there a typical Q-Cash client case study member profile?... 7 What is the client case study s financial performance with the Q-Cash platform?... 7 What is the client case study s monthly loan origination volume and portfolio size?... 8 What is the client case study s approval rate?... 8 What are the client case study s Q-Cash and Q-Cash Plus delinquency and loan loss ratios?... 8 What are the client case study s member requirements for Q-Cash eligibility?... 8 What percentage of the client case study s members use Q-Cash?... 8 Q-Cash FAQs Page 1/10
What percentage of the client case study s volume is online and/or mobile?... 9 How does the client case study market Q-Cash? Are marketing support and templates provided?... 9 Does the client case study have any other easy qualifier loans in addition to Q-Cash? If so, did the Q- Cash loan affect its volume in other products?... 9 What feedback has the client case study received from its state regulator and National Credit Union Administration... 9 Has the client case study experienced any lawsuits or legal challenges to the program?... 9 Who are the client case study s Q-Cash references? What other information can they provide?... 9 What is the Consumer Financial Protection Bureau s position on small dollar lending?... 10 Does Q-Cash comply with the direction of the Consumer Financial Protection Bureau?... 10 Q-Cash FAQs Page 2/10
Short-Term Small Dollar Digital Lending How does short-term small dollar lending help my customers and communities? Short-term small dollar lending helps support consumer financial stability and health by providing needed liquidity to balance daily financial needs, weather financial ups and downs and the opportunity to build long-term financial health. By managing these loans, consumers can improve their credit scores, build upward mobility and gain access to more traditional lending products. This is part of Q- Cash s mission to develop a cash management solution to help members better manage savings, borrowing, spending and planning. By offering Q-Cash as a flexible, adaptable white-label digital lending platform, Q-Cash can help other credit unions extend these solutions to their members and promote financial stability in their communities. What is a digital lending platform? A digital lending platform is an omni-channel software-as-a-service application that uses a programming interface to integrate with your core financial, online banking, mobile banking and teller/contact center customer service platforms for automated underwriting and instant funding. Q-Cash Lending Platform What is Q-Cash and Q-Cash Plus? Do we offer both products? Q-Cash Financial offers a white-label, highly-configurable short-term small dollar lending platform. Our case study credit union features two primary offers, Q-Cash and Q-Cash Plus. Q-Cash is a fee-based short-term small dollar loan. Q-Cash Plus is an interest-based, higher-balance short-term loan. While a credit union is not required to offer both products, these can be customized to meet requirements for a majority of short-term small dollar loan member needs: Client Case Study Example: Q-Cash: Q-Cash Plus: Loan amounts: $50-$700 Loan amounts: $701-$4,000 No credit check No credit check $12 Fee Per $100 borrowed $25 application fee Loans are instantly funded 36% Annual Percentage Rate 60-day term Loans are instantly funded Automatic payment is set when the loan is Terms based on the Loan Amount booked on the due date of the loan Automatic payment is set when the loan is booked on the due date of the loan Q-Cash FAQs Page 3/10
How does Q-Cash work? The Q-Cash digital lending platform is a software-as-a-service solution. The platform connects securely through the cloud to the credit union s core banking platform to retrieve member relationship, behavioral attributes and all information required for instant underwriting, decisioning and funding. The platform does not store any personal identifiable information. When a member applies through their mobile device, online banking, contact center, branch or other customer service channel, information is sent to the Microsoft Azure Cloud, a decision is given within a minute and funds are immediately deposited into the member s account. What makes-up the Q-Cash decision engine? The Q-Cash lending decision engine is a proven, proprietary platform built on member relationships and behavior data perfected through more than 11 years of credit union lending experience, data analytics, automated underwriting, and real-time funding. Credit unions choose to configure and implement the Q-Cash decision engine to meet their unique lending and implementation needs. For more information, contact the Q-Cash team. Is Q-Cash available through online, mobile, branch and contact center? Yes, Q-Cash and Q-Cash Plus are highly-configurable, application programming interface-driven solutions available through multiple channels including the website, online banking, mobile, and branch and contact center delivery channels. Is Q-Cash selling its loan decisioning platform? No. Q-Cash is offered as a software-as-a-service solution with enhancements, upgrades, regular maintenance and support included in the monthly fee. The compensation model is based on a fee per Q-Cash and Q-Cash Plus loan underwritten. What steps are needed to offer Q-Cash solutions? Contact the Q-Cash Financial team and sign a non-disclosure agreement. Begin high-level discussions on short-term small dollar lending solutions, review the program and your objectives and see a demo. Discuss onboarding requirements with all stakeholders. Review and sign the contract. Begin predeployment planning. Implement and launch the solution. Are there various Q-Cash participation levels? Q-Cash is an all in engagement and there are no participation levels. The platform is highly configurable and adaptable to enable credit unions to define which lending solutions to offer its members. Q-Cash FAQs Page 4/10
What resources are required for Q-Cash implementation? A dedicated Project Manager is needed to ensure the timeliness of implementation and a test environment prior to going live. Once Q-Cash is implemented, it becomes a fully-automated system that requires a ½ to 1 full-time equivalent employee to oversee internal operations. Collection support is provided by the Collection department. What is the architecture of Q-Cash? Q-Cash is a short-term small dollar software-as-a-service lending platform that uses an application programming interface to integrate with core financial, online banking, mobile banking, and teller/contact center systems for automated underwriting and instant funding. An Admin Portal features a role-based solution for managing users, support, and reporting. For mobility, Q-Cash is part of the credit union s Android and Apple mobile web app which enables members to manage their Q- Cash application, payments and account services. For more information, contact the Q-Cash team. What core processing systems does the Q-Cash platform support? The Q-Cash digital lending platform is designed to integrate with any bank core processing platform that has an open and available application programming interface. Please contact the Q-Cash team to discuss your core processing system and the Q-Cash platform integration status. Can a credit union s other loan offers be underwritten by the Q-Cash decision engine? Yes. Since the Q-Cash lending platform is highly configurable and can integrate through the application programming interface to the credit union s core processing system, a credit union can define other loan offers and decisioning parameters to support online banking, mobile banking, and other teller/contact center systems. How long does it take to deploy Q-Cash? What is involved in the implementation process? Q-Cash program implementation varies based on credit union core processing, mobile and online banking systems, decisioning, project planning and other variables. A typical implementation for an existing core, online and mobile banking integration is 12 weeks, while a new core, online and mobile banking integration can be done in 5 months. To get started, please contact the Q-Cash team. How do I build a Q-Cash business case for short-term small dollar lending? Q-Cash has developed a business case template to help credit unions evaluate, plan and implement a short-term small dollar lending program. For more information, contact the Q-Cash team. What are the Q-Cash costs? How are client credit unions and their members charged for Q- Cash? There are two types of fees: Q-Cash FAQs Page 5/10
1. Business-to-business fees: Q-Cash Financial charges the client credit union for the short-term small dollar lending platform which may include implementation, monthly subscription and per loan fees based on the core processing, mobile, online banking and teller/contact center systems. For specific pricing, contact the Q-Cash team. 2. Member fees: The client credit union may decide whether or not to charge fees to their members. These fees may include application fees, fees per loan amount, annual percentage rates or other fees. Regulations govern the fees and lending depending on the credit union classification as noted below: State-Chartered Credit Unions: States have varying rules impacting fees, interest rates and terms. Ask the Q-Cash team for details. Federally-Chartered Credit Unions: The NCUA 10-RA-13, Part 701, Short-term Small Dollar Loan Regulation allows the following: Small loans of $200-to-$1,000 to borrowers who have been members for at least 1 month Short-terms of 1-to-6 months Application fee up to $20; No rollovers Interest rate up to 28% Annual Percentage Rate if Federal Credit Unions meet all of the above conditions For more information, contact the Q-Cash team. How often does Q-Cash review and validate the decision engine? The decision engine has been perfected through more than 11 years of lending experience, and has delivered consistent, reliable performance. Loan loss rates are monitored very closely each month. If results shift too far outside established standards, accounts and lending criteria are analyzed to determine corrective actions. How do you market Q-Cash? Word-of-mouth is an effective method for promoting Q-Cash. However, Q-Cash can be marketed through multiple channels including the website, online banking, mobile, and branch and contact center. A variety of marketing tools can be used including events (webinars, webcasts, symposiums, executive briefings, speaking engagements, roundtables, and workshops), newsletters, articles, case studies, white papers, research reports, email, and blogs. A white label package is available that provides essential content, yet can be customized to match the credit union company logos and style guide. Q-Cash FAQs Page 6/10
Q-Cash Client Case Study What is the client case study? The client case study is an overview of Q-Cash s short-term small dollar program implemented at the Washington State Employees Credit Union, the second-largest credit union in Washington State. It provides an overview on the value proposition for members, mission, and margin, the products, performance metrics and member and community benefits gained from over 11 years of successful operation. For more information, contact the Q-Cash team. How did the client case study determine if customers were using payday lending? Client case study tellers and accounting services noticed members obtaining cashier s checks made payable to payday lenders. A team worked with the accounting department to filter reporting to members linked to payee names. Customer relationship management research ran cross-reference reports of payday lenders against automated clearing house payments made, resulting data was analyzed and assessments were made in support of payday lending alternatives. Is there a typical Q-Cash client case study member profile? As the following numbers suggest, having ongoing needed liquidity is a concern all members have. Typically, 24% of client case study members aged 40-49 used Q-Cash, followed by 22% in the 50-59 bracket, 21% in the 30-39 group, 17% in the 60+ group, and 15% in the 18-29 group. For 2015: There were 3,007 Q-Cash households with an average of 4 services per household, average deposit balances of $1,615 and average loan balances of $12,731. There were also 4,402 Q-Cash Plus households with an average of 4 services per household, average deposit balances of $2,005 and average loan balances of $14,298. For 2014: There were 2,740 Q-Cash households with an average of 4 services per household, average deposit balances of $1,513 and average loan balances of $13,018. What is the client case study s financial performance with the Q-Cash platform? For 2015: The case study processed 34k loans, funding $28mm, generating $3.0mm net income for 2015 with a net margin of 11% and still over $4.0mm in member savings over payday loan alternatives since 2004. Q-Cash achieved a 7.7% market share and remains as the most profitable overall loan type in the portfolio. For 2014: The case study generated $3.5mm net income for 2014 (16 bps return on assets). Using an industry average payday loan amount and annual percentage rate, the Q-Cash program had a 5.6% market share and has saved members $4.1mm since 2004. Q-Cash FAQs Page 7/10
What is the client case study s monthly loan origination volume and portfolio size? The case study has more than 11 years of loan origination and portfolio history. For 2015: Q-Cash funds $982K/month with funded loans totaling $11.8mm for the year. Q-Cash Plus funds $1.3mm/month with funded loans totaling $15.7mm during the same time period. For 2014: Q-Cash funds $970K/month with funded loans totaling $11.4mm for the year. Q-Cash Plus funds $1.1mm/month with funded loans totaling $12.8mm during the same period. What is the client case study s approval rate? Q-Cash s case study approval rate is 70% or higher for both Q-Cash and Q-Cash Plus. What are the client case study s Q-Cash and Q-Cash Plus delinquency and loan loss ratios? For 2015: Even though the case study expanded its field of membership and revised processing, collections policies and underwriting management in 2015, the Q-Cash combined delinquency (3.2%) and loss rates (12.7%) continued to be significantly lower than most payday lending services (which are typically 20-25%). For 2014: The Q-Cash delinquency (2%) and loss rates (6%) were significantly lower than most payday lending services (which are typically 20%-25%). Further, loan losses through 2014 have been consistently in the 6%-8% range. The parameters of the decision engine are highly configurable and can be modified to achieve the unique needs and objectives of each credit union. Using client case study insights gained from over 11 years as guidance, the Q-Cash team can help you with implementation to promote the success of your program. What are the client case study s member requirements for Q-Cash eligibility? To join Q-Cash, the client case study required a member relationship with a deposit account (savings, checking, or a money market account). Direct deposit and length of relationship are not requirements, but are variables considered as part of the decision engine and are scored and weighted differently. Once a member/customer applies and is underwritten through the Q-Cash decision engine, the result is a number in a scoring matrix that ultimately determines the approval or denial, product loan type eligibility, loan amount and/or term. What percentage of the client case study s members use Q-Cash? Q-Cash is a niche solution targeted to the underserved, younger members with no or thin credit files, wealthy-cash-to-mouth members, and those in-between who live check-to-check and have cash flow liquidity needs. Roughly 5% of members use Q-Cash, but this number can be significantly higher with additional education and communications. Q-Cash FAQs Page 8/10
What percentage of the client case study s volume is online and/or mobile? Members appreciate the ease and speed of the mobile app as the primary way to apply for the loan. The client case study s online/mobile channel volume is 71% for Q-Cash loans and 74% for Q-Cash Plus. 18% of applications come through the contact center and 11% come through the branch network. How does the client case study market Q-Cash? Are marketing support and templates provided? The client case study primarily relied on word-of-mouth with minimal marketing support to promote Q- Cash. However, Q-Cash can be marketed through multiple channels including the website, online banking, mobile, branch, and contact center. A variety of marketing tools can be used including events (webinars, webcasts, symposiums, executive briefings, speaking engagements, roundtables, and workshops), newsletters, articles, case studies, white papers, research reports, email, and blogs. A white label package is available that provides essential content, yet can be customized to match the credit union s company logos and style guide. Does the client case study have any other easy qualifier loans in addition to Q-Cash? If so, did the Q-Cash loan affect its volume in other products? No, Q-Cash is the client case study s primary short-term small dollar lending platform solution. Omnichannel availability, ease of application and use, independence from traditional credit score underwriting, instant funding, cost savings and processing efficiency make it a leading solution to replace similar but less effective and efficient, more labor intensive programs. What feedback has the client case study received from its state regulator and National Credit Union Administration The client case study s chief executive officer, Kevin Foster-Keddie, is on the Credit Union Advisory Council to the Consumer Financial Protection Bureau and its Director, Richard Cordray. The Q-Cash solution aligns well with Consumer Financial Protection Bureau recommendations. The system was designed with flexibility to adapt to and satisfy regulatory requirements. Has the client case study experienced any lawsuits or legal challenges to the program? Neither the client case study nor Q-Cash have faced any legal challenges or lawsuits regarding its shortterm small dollar lending program. Who are the client case study s Q-Cash references? What other information can they provide? The client case study references include: 1. Ben Morales, Q-Cash Chief Executive Officer and the case study s Chief Information Officer 2. Mark Allen, the case study s Chief Credit Officer 3. Kevin Foster Keddie, the case study s Chief Executive Officer Q-Cash FAQs Page 9/10
Additional information, references or a product demo are available upon request. Please contact the Q- Cash team. Regulations What is the Consumer Financial Protection Bureau s position on small dollar lending? The Consumer Financial Protection Bureau recognizes the consumer s need for affordable short-term small dollar credit. However, the Bureau is considering rules to end payday debt traps like failure to underwrite for affordable payments, loan refinancing and rollovers, collateralizing vehicles, accessing consumer deposit accounts for repayment and performing costly, fee-based withdrawal attempts from consumer bank accounts. Strong consumer protection against payday loans, vehicle title loans, deposit advance, high-cost installment and open-end loans is being considered. For short-term loans, the Consumer Financial Protection Bureau finds that many consumers live checkto-check and can t gather the funds needed to payoff principal and fees before the due date. They often must choose among re-borrowing, defaulting, slipping behind on other debts, paying costly deposit account fees, account closures, vehicle repos, and turning short-term loans into unaffordable, long term obligations. For longer-term loans, many consumers can t make their payments, resulting in costly refinances, and falling behind on other bills. The Consumer Financial Protection Bureau is pursuing two approaches prevention and protection, both of which target the lender. Prevention requires that lenders determine up-front if the consumer is taking-on unaffordable debt. Protection requires that lenders comply with requirements to ensure that consumers can affordably repay their debt. For more information, visit www.consumerfinance.gov. Does Q-Cash comply with the direction of the Consumer Financial Protection Bureau? Q-Cash consistently monitors and aligns with the direction of the Consumer Financial Protection Bureau. The center of the Q-Cash mission comes from our credit union roots to meet the credit and savings needs of consumers, especially persons of modest means. This means putting members first, people helping people, and people before profits. Our focus is to help members create liquidity and financial stability through balancing and stabilizing daily financial needs, helping members weather financial ups and downs, and plan for long-term financial success by using the right financial products. Our proprietary underwriting engine, more than 11 years of credit union lending experience, and data analytics help members avoid undertaking debt they cannot afford. Further, our terms, policies and procedures, automated decisioning, and instant funding at rates and fees substantially below existing payday lending standards work to help consumers meet liquidity needs while affordably repaying their debt. Q-Cash FAQs Page 10/10