As Washington State Employees Credit Union watched the rapid growth of its credit union service organization, QCash, it had a decision to make: It could either make the huge investment necessary to keep QCash on its trajectory or it could sell the CUSO to one of many interested buyers.
Last week it chose the latter.
"We just thought with where the market was that it was the right time to get some of our investment money back — and then also money on top of that, that allows us to reinvest," said Washington State Employees Credit Union
The $5 billion-asset WSECU in Olympia, Washington, last week announced that it sold QCash to the $6 billion-asset Alloya Corporate Federal Credit Union in Naperville, Illinois. QCash provides small-dollar loans to its clients' members in 60 seconds without the use of a credit score.
The deal closed March 31. Financial terms were not disclosed.
Swindler said QCash, which was launched in 2015, got off to a bit of a slow start but has seen "hockey-stick growth" of late. By the end of last year, WSECU had contracts signed with nearly 100 other credit unions to use the CUSO, giving more than 7 million members access to its services, he said.
"That also means you need to continue to invest in people and talent and resources and new technology," Swindler said. "And as we looked at that, we were like, 'boy, that starts being just a lot more resources from the mothership.'"
He said Alloya was the perfect buyer because it already works with 1,400 credit unions and has the resources and technology to expand QCash's loan origination system.
As with any new partnership, shared values were a top consideration in the deal for both QCash and Alloya, "and we have certainly found that alignment," Todd Adams, CEO of Alloya, said in a press release.
Chris Otey, chief revenue officer for the firm CU 2.0, a technology consulting firm for fintechs and credit unions, said that as
"So if you're a random CEO in a random town and maybe didn't even use QCash, this deal is pertinent because someday you will. And you need to know that they're a large enough organization to support you," he said.
Otey, who is also chairman of South Bay Credit Union in Redondo Beach, California, said the deal is a "great move" for QCash because Alloya Corporate has the sales, marketing, accounting and human resources staff to help QCash scale more than Washington State Employees could.
"As the smaller CUSOs become successful, they are no different than any fintech becoming successful and getting traction," Otey said. "It wants to scale and there are two ways to do that. You can either throw capital at the problem or you can merge into a larger company."
Washington State Employees earned $17.4 million in 2022, a 64% decrease compared with a year earlier, according to call report data from the National Credit Union Administration.
But Swindler said the company's falling earnings played no part in driving the deal.
"They are not related at all," he said. "Certainly we are in really good shape. And actually we're excelling."
He cited a higher
Jack Antonini, president and CEO of the National Association of Credit Union Service Organizations, said the QCash deal was somewhat unique because it involves a corporate credit union.
He added that QCash's CEO, Seth Brickman, is also a "tech guy," and is building more efficient loan origination solutions for credit unions. Having Alloya as a partner helps bring capital and added credibility to QCash, he said.
This deal may be a sign of similar CUSO sales in the pipeline, but only up to a certain point, Antonini said.
"While I do expect to see continued activity like this with CUSOs, I don't expect it to be a big wave of deals," he said.
