EDMONTON, Feb. 13, 2017 /CNW/ - ATB Financial has struck an innovative arrangement that allows customers of Cashco Financial to access safe and affordable banking products in a way that works for them. Under this arrangement, Cashco customers can open transaction and savings accounts, make use of ATB ABMs, use the ATB Mobile Apps and acquire lower cost short and medium term credit.
"When we really dug in and listened to these customers and what they need, we heard loud and clear that, as an industry, the problem has been us," said Dave Mowat, ATB President & CEO. "By our actions or inactions we've either said these customers' arrangements with their payday loan companies could never change, or that they had to come to us and buy some product with a fancy name, when really what they were saying is that banking doesn't really work for them."
"Today, things are changing, we've listened and instead of asking them to come to us, we're going to them."
The agreement with Cashco means it will act as an agent for ATB, taking advantage of the financial institution's agency model already well established across the province. For the first time, Cashco customers will be able to open Cashco-branded, overdraft-protected ATB deposit and transaction accounts held by ATB—and not simply take out loans. As well, ATB will provide the necessary capital to allow Cashco to reduce interest rates and provide longer-term flex loans.
This arrangement between Cashco and ATB is a new way of serving customers who have not been well served by the traditional banking industry. Research indicates that 15 per cent of working Albertans have limited access to regular banking services, overdrafts, short-term loans, and conventional credit. According to the report The Real Cost of Payday Lending, the cost of living for lower and middle income earners has outpaced employment income growth. As a result, some Albertans often do not qualify for traditional credit products.
"Until now, many of these customers had no choice but to rely on payday loans. We're changing that. With this new approach, Cashco customers will have access to a wider range of banking services from—and this is the important point—a company like Cashco that understands them and caters specifically to them," said Mowat.
Casho customers will also have access to ATB resources on financial literacy.
"We are working to be very different than a bank, more like a boutique that goes back into the communities where there is a lack of banking services," said Cashco Financial CEO Tim Latimer. "To achieve that, we need to offer meaningful banking for our clients for their real world, like no monthly fees with direct deposits, no minimum balance requirements, no funds held on cheques, no debit fees and matched savings programs. Plus, all of our customers will get overdraft protection. With ATB's help, we're offering our customers relief for today and hope for tomorrow."
Since late January, when the Cashco-empowered-by-ATB offer was rolled out to a group of Cashco customers in Edmonton, more than 200 families have signed up.
"When you walk into a Cashco, it's feels like you're coming home, like they are there to help you," said Cashco customer Desiree. "It's an environment where I feel supported. It's a complete change from what I'm used to."
The arrangement is considered a positive step to increase the financial inclusion of Albertans by Momentum, a Calgary-based organization dedicated to working with people living on low-incomes.
"Too many Albertans are essentially 'underbanked' – they are not accessing mainstream financial products and are reliant on fringe financial services like payday loans and cheque cashing," said Jeff Loomis, Momentum's Executive Director. "By working with Cashco and meeting customers where they are at, ATB is pursuing an innovative approach to increase access to safe and affordable financial products so that Albertans can build savings and achieve longer-term financial stability."
About ATB Financial
With assets of $46.8 billion, ATB Financial is Alberta's largest home-grown financial institution. Established in 1938, ATB is made up of a network of 173 branches, 136 agencies, a Customer Care Centre and two Entrepreneur Centres. ATB's 5,065 team members help more than 730,000 customers in 244 Alberta communities.
Cashco is a leader in the Canadian alternative finance industry. Established in 2007 and headquartered in Edmonton, Alberta, Cashco offers a full suite of financial services. This includes: chequing and savings accounts, small dollar loans, cheque cashing, and money transfer services.
Cashco operates both online and through a network of 65 branches located throughout BC, Alberta, Saskatchewan, and Ontario. Cashco's team of 200 members help provide relief today and hope for tomorrow to over 50,000 valued clients.
- The report The Real Cost of Payday Lending states that the fringe lending business has emerged and expanded as the cost of living for lower and middle income earners has outpaced employment income growth. As a result, these individuals often do not qualify for traditional credit products. This has resulted in a two-tiered banking system with these individuals seeking alternative financing options as the banks and credit unions are not accessible. With limited options available, these individuals gravitate to short-term relief solutions: payday lenders. The cost of this type of borrowing is substantial, often exceeding 600% Annual Percentage Rate (APR). As a comparison, the APR for a credit card is around 20%, a department store card is 30% and 6% for a car loan. The industry's profitability is hinged on repeat customers; however, this repeat business can prove to be harmful for the customer, perpetuating poverty and reliance on this service.
- While payday loans may be effective to meet short-term cash needs, they're not appropriate for longer term use. The federal government reports 52% of people using payday lenders used the service more than once per year, 22% using the service monthly. Qualification for a payday loan is relatively simple: applicants are required to present a personal cheque or direct deposit/debit information and verification of employment. The maximum loan amount is $1,500 with an average around $400. Additional options for alternative financing include pawnbrokers and loan sharks.
- Cashco Financial is a privately owned, Alberta-based payday lending institution. The Cashco brand was established in 2014 with the consolidation of four payday lenders. Differentiating themselves from traditional payday competitors, Cashco offers a boutique, bank-like feel in their stores and has established a purpose of social return: "to provide relief today and hope for tomorrow." Their mission is "to be globally recognized as another kind of bank by 2025." Similarly, the brand promise "Cashco Cares" illustrates the strong emphasis on social welfare. This strong corporate culture and values establish Cashco as a unique alternative to payday lenders.
- Cashco recognizes that the majority of their customers have a longer term financial problem and, while requiring immediate access to cash, have needs that are not adequately addressed with payday loans. As such, Cashco introduced flex loans (these loans have a higher principal limit, and offer installment payments over a longer period of time at a lower rate than payday loans and within limits set by the federal criminal code). Providing the immediate relief the customer needs, these loans are reportable so they also help the customer build or rebuild their beacon score and credit story towards a stronger financial future. Significant investment has been focused on overcoming technological challenges in offering flex loans. Cashco has secured advanced Fintech software and analytics to launch Cashco Flex loans on and offline. Without any intervention, it is anticipated that they will have an $8M loan balance in flex loans by the end of 2016. Additional capital is required to fund the proposed changes and conversion of existing payday loans to flex loans and the resulting increase in the book over the short and longer term.
For more on the topic, please read: Fair Financing: Expanding Small-Dollar Short-Term Credit for Albertans
SOURCE ATB Financial
For further information: For more information or to arrange interviews, please contact: Barry Strader, Corporate Reporter, ATB Financial, 780-495-1343 (office), 780-886-4398 (mobile), [email protected]