The Future Looks Bright in Retail Lending

Scarce financing from banks and other credit companies poses an opportunity for credit unions.


Banks and credit card providers are holding back on consumer lending, and retailers are feeling the pinch. Everyone from mom-and-pop handymen to large local furniture stores are looking for new ways to get consumers the goods and services they demand as the economy slowly recovers. But financing from banks and traditional consumer credit companies is scarce, posing a tremendous opportunity for credit unions.

KEMBA Financial Credit Union in Ohio is automating its retail loan application and underwriting process with great results. The credit union is working diligently to fill the void traditional credit providers have left in the retail lending market. Over the past several months, it has turned its charter region of just 60 square miles in central Ohio into a $5 million a year retail lending practice through partnerships with nearly 50 local merchants. (Download the complete KEMBA Financial Credit Union case study)

“When I first started at KEMBA Financial Credit Union, my goal was to build a retail lending practice that generated $300K per month,” says Derica VanScoy, retail lending manager for KEMBA Financial Credit Union. “But we still used manual processes, such as faxing loan application forms back and forth with merchants. This made it hard for us to get above even $50K per month in retail loan volume.”

Manually completing applications and faxing forms is how a lot of retail lending is done, but the process was holding the credit union back from making the most of the new retail lending market opportunity. It wanted to give retailers the ability to offer financing immediately at the point-of-sale. KEMBA Financial Credit Union came across a newly developed solution from CRIF Lending Solutions called Teres Merchant Lending that connects a local lender with a local merchant.

The Teres point-of-sale lending solution includes a web-based interface specifically designed to help financial institutions and retailers automate the retail loan application and finance process. It enables retailers to complete consumer loan applications and approve and underwrite loans in seconds.

“Shortly after we implemented Teres Merchant Lending, we had quite a few merchants sign up to use the system,” Derica says. “Our lending program grew by 50% in the first month.”

"Turn around time on loan applications is a lot faster,” she continues. “We went from a two-to-three day loan approval process to just 30 minutes. When merchants realized they could get approvals while customers waited, word spread like wildfire.”

In just a few short months, KEMBA Financial Credit Union has grown its retail loan practice into nearly a $500K per month business – all while adhering to its underwriting guidelines.

KEMBA Financial Credit Union believes there is unlimited opportunity for credit unions to grow their retail lending practices because banks have all but vacated the market. 

“The ROA of our retail lending portfolio is over 5%,” Derica says. “It’s our highest performing portfolio under credit cards, and it’s very profitable for the credit union. Thanks to help from the Teres Merchant Lending offering from CRIF Lending Solutions, we have credit unions calling us from all over the country to find out how we made it work. That’s certainly one indication you’re on to something big.”

Texas Dow Employees Credit Union has also seen strong growth in its merchant lending program. Caite Blount, director of business development - lending products, from TDECU provides her perspective on why credit unions need to provide on-the-spot financing, including:

  • Develop a new loan portfolio
  • Grow net income with efficiency
  • Capitalize on market timing
  • Build business relationships
  • Acquire new members
  • Provide additional member service and convenience

Download the complete KEMBA Financial Credit Union case study and learn how you can automate retail lending. 



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