LAS VEGAS—RateReset was voted the winner of NACUSO’s fourth annual Next Big Idea competition.
RateReset was selected from six companies that pitched ideas to the NACUSO members, who then voted via an app for the winner.
Each company was given a few minutes to pitch their idea/product, and then took questions from a four-person panel.
Keith Kelly, the founder and CEO of RateReset, which is already in use by a number of credit unions, said the goal is to retain the auto loans credit unions already have and help to increase auto loan market share. The object is to strike preemptively, Kelly said, pointing to Rocket Mortgage’s six-minute mortgage approval offering and that company’s plans to now move into auto loans.
RateReset allows a member who may be tempted to refi a loan elsewhere to reset the terms of their loan by using a solution intentionally designed to look like an automobile dashboard to extend the term and lower the payment. While that offers convenience for the member, it offers the credit union to not just the opportunity to retain the loan but to add additional yield.
Kelly noted that on average an auto loan that prepays at the 28-month point in the term costs a credit union $747 in lost interest income, in addition to the cost of a member lost to a competitor.
The whole process of resetting the loan can be done in two minutes, with the member inputting information about their current loan and payment, said Kelly, including e-signature. The software is linked to the loan origination software and does not require a CU’s IT department to be involved.
“The credit union can CU choose which members gets the benefit,” said Kelly. “What if instead of losing a loan in the 28th month, the member instead reset it?
Kelly said there is typically a 40 BP increase in yield on an average 20-month extension. The first credit union to go live on the system has had 1,348 loans reset for an average 45 basis point increase in yield and an average 18-month duration increase. That CU has seen $1.3 million in new revenue.
“The yield for the credit union always goes up, unless the credit union chooses and wants to give the member the option of a lower rate,” Kelly said. “It’s all about not letting the member push a button and go elsewhere.”
Also competing for the Next Big Idea prize were:
- One, from Ciright, a reprogrammable microprocessor in the form of a plastic card that can store all of a member’s plastic payments and reward cards. It also offers geo-location functionality, allowing the CU to partner with merchants (and gain revenue) and push targeted offers at members. Revenue is also gained from interchange.
- LoanStreet, a standardized and automated loan marketplace for loan participations, for both sellers and buyers. “There are about 4,500 credit unions that do not have great loan growth. This allows smaller credit unions to put loans on their balance sheets that are higher yielding, allowing them to survive and serve their members,” a spokesperson said. LoanStreet offers standardized infrastructure with uniform reporting and agreements throughout, with administration over the life of the loan. Nine corporate credit unions are currently partnering in the effort, the spokesperson said.
- LaunchPad. This idea was pitched by Paul Ablack, CEO of OnApproach, who described it as a “Kickstarter for credit unions.” The idea is to connect credit unions that have an idea or even a pilot product in place, but lack the resources to roll it out. A larger credit union can search through the marketplace and make an investment if interested.
- Mirador, a small business lending and underwriting solution. The goal is to address the $11 billion in small business loans at risk of being disintermediated by non-traditional lenders. While banks and CUs can take 33 hours on average for a decision on a small business loan, plus another four to six weeks for funding, non-traditional lenders can do that in 15 minutes or less and one to two days, respectively. Mirador offers a white label, turnkey, online borrower app that delivers complete loan files to the cred
it union on par with the non-traditional lenders.
- TruVantage, from Saggezza, is a sophisticated analytics solution that helps identify the “next product to buy” for members. It has been able to predict consumer need, pushing up to 60% the sales rate on certain products, according to a spokesperson. With big banks spending hundreds of millions of dollars on such analytics, credit unions can have the same functionality and insights at affordable prices, with all the information delivered to a 360-degree dashboard, according to the company. It also provides opportunities to test different messages to members, while staff can be provided daily feedback on incented sales.
Acting as panelists for the Next Big Idea were Sarah Canepa Bang of CO-OP Financial Services; Ned May, a venture capitalist; Ray Crouse, CEO of Pasadena, Calif.-based Parsons FCU, and Matt Davis, founder of GameFI and 6th Story.
Also at the NACUSO meeting, Allegacy Business Solutions, a CUSO of Allegacy FCU in Winston-Salem, N.C., was named the 2016 winner of the Credit Union Collaboration and Innovation Award. The award was accepted by its president, R.C. Leander, Jr.