Innovative product offers new competitive tool for community banking

Collins Community Credit Union, based in Cedar Rapids, announced that it has become the first financial institution in Iowa to partner with fintech provider Kasasa Ltd. to offer an innovative new type of loan product with a “Take-Back” feature.  

The Kasasa Loan product enables borrowers to pay ahead on their consumer loan balances, with the option to pull funds from the amount that they’ve paid ahead if they find they need that money for any reason. For smaller financial institutions, the product offers a different way to compete other than interest rates.

Borrowers can withdraw from their Take-Back balance using a mobile-friendly dashboard on the app, with the ability to see the impact of those changes before making them. Withdrawals deposit into the borrower’s checking account and the loan balance adjusts accordingly — but never exceeds the original amortization schedule.

Kasasa, based in Austin, Texas, was a pioneer of reward checking accounts in the early 2000s. The Take-Back option tested very highly with consumers in surveys before its rollout, said Keith Brannan, Kasasa’s chief marketing officer.

“Really, in my mind, this is probably one of the more egalitarian products you can offer, because  everyone is winning with it,” he said. “It removes the fear that all of us have about paying down debt, because we’re afraid that we can’t get that money back.”  

According to the loan disclaimer in fine print on Kasasa’s website: “A Kasasa Loan is an innovative fixed rate, fixed term loan that provides consumers with an opportunity to lower their overall interest expense or create an open-end, revolving line of credit, by making payments that are in excess of the loan’s scheduled monthly payments. Unlike traditional personal loans, consumers who have met each of their required schedule payments, can borrow against these excess funds – at the same interest rate as their initial Kasasa Loan – to address unexpected needs (i.e. car repairs, health issues) or take advantage of opportunities (i.e. college acceptance) that may arise. The loan’s available credit limit will be specified in each periodic statement issued by our institution.”

Iowa is one of 40 states in which partnering community banks and credit unions are or will be offering Kasasa Loans, the company said. Collectively, some 50% of Kasasa Loan borrowers have paid ahead on their loans and have a Take-Back balance they could draw from, according to Kasasa, and some 15% of Kasasa Loan borrowers have used a Take-Back, meaning they have pulled funds from their Take-Back balance.

Stefanie Rupert, president and CEO of Collins Community Credit Union, said her organization chose to partner with Kasasa because they are both progressive companies. The credit union, which expanded into Greater Des Moines in 2016, is the fourth-largest credit union in Iowa, with assets totaling $1.3 billion and serving more than 89,000 members.

“People don’t stop to think about what products they need,” she said. “They really depend on others to create these problem-solving instruments. If we can remove barriers and reach the underserved with loan resources, I think we’ve really done our job. … I don’t have the time, the technology or the smarts that these [Kasasa] folks have. It’s been a good marriage so far.”

In line with its mission of empowering community banking, Kasasa only works with community banks or credit unions that are under $10 million in assets, Brannan said.  

“We believe it is important that consumers hear these two messages,” he said. “No. 1, it’s a better [loan] product, and No. 2, I can only get it by [borrowing with] a local institution. Part of the way we’re doing that is that we’re putting it up on our website, and anybody who comes to our website can buy it the way they want to buy it [online or through a brick-and-mortar branch].

The product offers a higher degree of financial inclusion for potential customers, Rupert said.

“That’s so important right now, because so many people are being left behind,” she said. “This is a way to reach people in a unique way. … People want to know that they are aligning themselves with companies that are making an impact, but keeping that consumer-centric through all decision points.”