El espacio autobiográfico 60

This section will highlight the three areas of strategic uncertainty that the data revealed: maintaining traditional credit union values; complexity of payday loan alternatives; and the relationship between impact investing and marketplace lending. Table 6, below, outlines these three areas.

Table 6: The Areas of Strategic Uncertainty for Canadian Credit Unions

Area Exemplary Quotes Number of Credit Unions

Showing Strong Evidence

Maintaining traditional credit union values

There’s significant benefit for traditional financial institutions to get more involved in the payday loan space because of the education piece that could be provided where the intent is to help break the cycle

1 Manitoba 2 Ontario 1 Alberta 1 Nova Scotia 1 Saskatchewan 1 British Columbia

that these individuals that rely on payday loans get into. (Interviewee, Ontario)

In the larger scheme, I think we have to be concerned about indebting other people with more than they need. When we are talking about online lending, I do like the efficiency, I do like the ease, but I think in the back of our heads we need to be concerned about that. (Susan Henry, Alterna Savings, Ontario)

Complexity of payday loan alternatives

We have done an assessment of a payday loan product . . . and our conclusion, based on being a small credit union – and that’s an important element – the cost would outweigh the benefit relative to financial operation, service delivery impact on the company, and our existing members. (Marie Mullally, Credit Union Atlantic, Nova Scotia)

For the community need we will then engage people that we never have before and we don’t know who they are. We don’t know how their credit histories are. It’s a bigger risk. Is there a need for it? Absolutely. Are we the financial institution to do it? I don’t know. (Ben Janzen, Kindred Credit Union, Ontario)

3 Ontario 1 Manitoba 1 Alberta 1 Nova Scotia

Relationship between impact investing and marketplace lending

So, in my view, I think peer-to-peer lending is just another form of lending. So, in other words, it doesn’t create a particular platform for impact investing. I don’t see the correlation any different than the correlation if you were to use it for our regular financing. (Marie Mullally, Credit Union Atlantic, Nova Scotia)

I guess I see a connection, it may not necessarily in this particular time be a direct connection, but it’s maybe more of an indirect connection. (Jim Rediger, Westoba

1 Nova Scotia 1 Manitoba 1 Ontario

Overall, the interviews revealed that the credit union sector recognizes the value in offering alternatives to payday loan services; many individual credit unions are already offering such services or are in the process of developing them. However, the complexity of ‘small dollar programs’ (i.e., short period of time and involving smaller loans), and how it can be a major initiative and cost prohibitive to institute in an in-branch environment was discussed. There is also a perception of that payday-loan users are high-risk borrowers who may not have previously considered banking with a credit union. For many, this translated into a tension between the members’ needs and community needs. In other words, would a payday loan alternative product primarily benefit the credit union’s members, or the broader community in which the credit union operates?

In addition to developing alternative products to traditional payday loan outlets, a few interviewees mentioned that these should be accompanied by a financial literacy strategy to mitigate the need for short-term payday loan services (i.e., break the cycle). In fact, this was identified as a gap in the current Canadian marketplace lending market, and interviewees believed there is a greater role that financial institutions such as credit unions can play to address this gap.

Since credit unions are member driven, the interviewees identified some issues that could be inconsistent with their respective values. For one, the overall level of indebtedness of borrowers who use online lending services was raised. For instance, one interviewee revealed that their credit union did not pursue a partnership with a marketplace lender because of the risk associated with “pushing debt onto populations that maybe don’t need it.” Secondly, to reiterate, some credit unions are wary of digitalizing the entire business lending process because they value the offline personal connection developed with members. And last, for the credit unions that are focused on improving the financial wellness of their members, the added value of marketplace lending remains unclear.

Moreover, the relationship between marketplace lending and impact investing is unclear at the moment, with interviewees stating that marketplace lending may or may not have the potential to

support the development of impact investing. Despite this, a few interviewees believe there is an increasing demand for investment opportunities in socially or environmentally motivated initiatives within their community.

5.5 Chapter Summary

This chapter presented the findings of this study, including the three areas of business explored: the use of marketplace lending for SME financing; impact investing; and the use of marketplace lending in providing alternatives to payday loan services. Some of the perceived and/or identified opportunities are using marketplace lending processes to enhance member retention and attraction, and access to a new set of SMEs. Yet, the credit unions interviewed also discussed the risks and barriers like regulations and difficulty attracting capital (i.e., deposits).

Further, the findings revealed that uncertainties (and sometimes tensions) remain about the relationship between impact investing and marketplace lending, introducing payday loan alternative products, and maintaining credit unions’ values. As an emerging trend that has disruptive potential, credit unions keep following the development of marketplace lending, but so far various risks and areas of uncertainty are clouding the market, and many credit unions appear to be waiting until the case for engagement becomes clearer. In the next chapter, a discussion of the findings is provided by looking through the literature of strategic alliance, and more specifically the RBV.