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How Introducing a Branch Cash Advance Can Improve a Credit Union’s Bottom Line


By Ken Lowy, NewtekOne
May 13, 2024

Due to the historical nature of finance, credit unions operate in a highly, often hyper-competitive, environment. The reality of this is just one reason why credit unions are continually forced to adapt and change to meet the needs of their members. The pressures of constant innovation, though, can have its advantages.

Case in point: one competitive differentiator that doesn't get enough attention is to launch a branch cash advance (BCA) program. A BCA program offers members immediate cash advances that can be very appealing, especially for those in an urgent cash crunch. This launch can also help bring in new members from the community. That in turn, can help diversify a credit union's lending portfolio and help increase the bottom line. Especially when there's an excellent launch strategy behind the promotion.

The Role of Branch Cash Advance Programs in Credit Union Lending

In short, BCA allows credit union members to access funds instantly from their pre-approved credit limits. This is not a typical loan in that it’s quicker, bypasses the usual lengthy approval process, and allows members to tap into their own money when they need it urgently – almost like an immediate withdrawal.

Here are three reasons why BCAs can be a win-win for both a credit union and its members:

  1. Meeting Immediate Financial Needs: A properly designed BCA program can assist and support members in times of unexpected expenses. And a credit union can help bridge a financial gap without all the red tape. That can be a tremendous relief to members who need help immediately. Reducing the bureaucracy of getting a quick loan is the goal of having BCA available. It not only helps meet the urgent financial needs of the community, it's the kind of goodwill that becomes share-worthy. Sure, members may not post their private financial troubles on social channels, but they'll almost certainly tell a family member or friend who may be facing their own financial struggle.
  2. Strengthening Member Relationships: When credit unions help meet the immediate needs of the community, they relieve a lot of stress and anxiety. They show they are “in touch” with the community and can empathize with the stress they're living in at any given moment. This makes credit unions more than just a financial institution down the block; they become the solution – a hero – to aggressive payday lenders.
  3. Increasing Market Competitiveness: One great advantage of BCAs is that it allows credit unions to distinguish themselves in a crowded marketplace. For all the reasons above and more, this is especially true when competitors may not offer similar short-term lending options. Or when payday lenders are known to charge an arm and a leg.

Best Practices in Implementing Cash Advance Programs

Kicking off a cash advance program can be an excellent strategic move. For a successful BCA program launch, consider these best practices:

  • Staff Training: It’s vital that credit union staff make informed decisions, and that means team members must be well-versed and equally prepared to discuss the advantages and terms and conditions of cash advances. Equipping teams with the knowledge and tools they need to effectively promote and manage the program is a vital step in the success of a BCA offer. Plus, well-trained staff are more confident in their roles and can better provide excellent member service.
  • Effective Marketing: To ensure members understand the value of a BCA program, make sure to clearly highlight the benefits of cash advances, such as convenience, speed, and support. Supportive marketing materials and strategies help to clearly communicate the benefits and details of the cash advance program to both staff and members.

Technological Integration and Compliance

Effective management of a cash advance program requires:

  • Technological Integration: This involves incorporating advanced digital tools to streamline operations, improve service, and improve the overall experience for both credit union management and members. Customer relationship management (CRM) systems help manage all aspects of member relationships and for potential members. Big data and analytics help uncover patterns, predict trends, and make better-informed decisions.
  • Compliance and Risk Management: It's crucial to stay in compliance with all regulatory requirements to reduce risks. Credit unions must establish clear policies and monitor these closely. Additionally, all transactions must be fair, transparent, and above board. Credit unions must also regularly conduct risk assessments to identify potential risks, including credit risks, market risk, operational risk, and compliance risks.

When credit unions focus on these areas, they ensure cash advance programs are not only effective but also secure and compliant with industry standards. It also offers peace of mind to members.

A BCA program can be a significant step forward for credit unions. That's because, in addition to building a stronger portfolio of services, BCAs play a crucial role in immediately addressing members' financial needs. This can add a welcome boost to member satisfaction and reinforce to the community that credit unions are the go-to trusted financial partner.

Connect with NewtekOne to learn more.

About NewtekOne

From lending and payments to payroll, insurance, and technology, NewtekOne provides leading business solutions to credit unions and their members.