Credit union liquidity fears give CUSOs the stage to shine
Whether it was the leftover effects of the COVID pandemic, inflation-related factors, or liquidity fears in the economy, small-dollar lending found itself in the limelight once again in 2022.
New data from the National Credit Union Administration (NCUA) revealed cooperatives issued $227 million in small-dollar loans through the Payday Alternative Loan (PAL) program in 2022, overtaking the previous record of $174 million set in 2019 by 30 percent. In fact, reports by CUNA in February showed unsecured consumer loans grew 21.2 percent to $66.5 billion from a year earlier.
This rise in digital small-dollar lending benefits credit unions and their members alike as those loans represent hundreds to thousands of dollars in savings in relation to abusive rates from predatory payday lending or rent-to-own outfits. That means you’re drawing underserved members back to the financial mainstream and the economic stability they will remember you and learn from. Such growth also means more borrowers with limited credit can borrow funds quickly to cover recent expenses and avoid those payday lenders in the future.
Expanded small-dollar automation like credit union service organizations (CUSOs) can assist in driving recent increases for consumers during these uncertain times. But what if those same credit unions believe they’re inhibited by liquidity fears and issues that prevent them from investing in affordable, flexible, and accessible CUSO fintech like QCash?
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