By Financial Health Network Consulting
From Check Cashing to Credit-Building
Nix Neighborhood Lending has come a long way since it opened fifty years ago as a check cashing business inside a Los Angeles grocery store. In 2007, after the company was bought by Kinecta Federal Credit Union, Nix began shifting its business away from simply cashing checks to providing credit services to underserved communities, developing an incredible rapport and presence with its customers in South Central Los Angeles.
Nix executives knew that in order to meet the needs of historically underserved banking customers who turned to payday lenders and pawn shops rather than traditional banks, the company would have to fill the gap in terms of access to credit, says Nix Neighborhood Lending President Luis Peralta.
But Peralta was initially skeptical about the job. “When I first got approached about this new opportunity, I did my research and the only thing I could find out about Nix was that it was a check cashing business,” says Peralta.
It was this reputation which check cashers tend to have with nonprofit community organizations and public officials that seemed to be Nix’s greatest challenge. With rates significantly lower than typical payday lenders, small-dollar loan products that offer the option to repay in installments, and the use of alternative data to help determine credit worthiness and repayment ability, Nix’s focus on financial health was something Peralta knew needed better showcasing in the community, which is why he turned to the Center for Financial Services Innovation (Financial Health Network) as a key partner in this undertaking.
Increasing Access to Small-Dollar Credit through Alternative Data
After developing a new business model for a scalable small-dollar credit product that used LexisNexis (RiskView) data rather than traditional credit bureau information, Nix launched its new lending product in June 2014, offering small-dollar, short-term loans of up to $1,000. By the following May, Nix had increased its maximum loan amount to $2,500, and in two years’ time it had expanded from one to 35 branches. With an alternative way of evaluating credit risk, Nix was able to approve 50% or more of all its applicants for loans, as compared to traditional lenders that typically only approve between 10% and 15% of applicants, says Peralta.
The impact on low-income consumers has been profound — not just providing them with more liquidity and a cushion for financial emergencies, but also creating a stronger emotional foundation for consumers who’ve long struggled to take control of their finances. “A lot of these consumers have improved their credit scores by at least 100 to 200 points,” says Peralta.
Re-Positioning to Build Consumer Success
But while Nix was making an impact in the lives of consumers, it still faced the stigma of being associated with the original check cashing business it started as decades before. Changing that perception on a widespread scale would be its own undertaking altogether. “One of the biggest challenges we are facing is that a lot of community organizations don’t understand we are no longer Nix Check Cashing,” says Peralta. “We are often labeled that way even though we are Nix Neighborhood Lending.”
To take on this challenge, Nix sought out the help of the Financial Health Network, leveraging the organization’s reputation and connections in the financial wellness world to help educate others about exactly what Nix was up to and how it was different from other check cashers.
Building Communities that Thrive
This February in partnership with Financial Health Network, Nix hosted a Financial Health Community Outreach Session focused on improving communities’ financial health and sharing the importance of small-dollar credit. The event had more than 50 organizations in attendance including media outlets and community groups. “The goal was for them to understand the great value of our new small-dollar loan offerings and how those loans were helping the very same customers they work with on a daily basis,” says Peralta. “It really helped to change a lot of the misperceptions that they had about us.”
Financial Health Network prepared a dynamic and engaging event. Leveraging proprietary data and research, Financial Health Network walked participants through the daily lives of low- to moderate-income individuals, offering a more nuanced understanding of both the community and the lender. The event showcased profiles from the US Financial Diaries project and data from a nationally-representative consumer survey — the shared experiences of the group walking through the research and stories deepened rapport in a unique way.
For Nix, the half-day event was the first step in a broader community-building initiative. The organization wanted to share insights gleaned from Financial Health Network’s research and advice with the community, and to communicate that it was prepared to be a strong financial partner to its customers.
Taking Financial Health Further
Since the February event, Nix has connected with organizations on a one-on-one basis, including Compton Community College, where Nix will host a series of financial education seminars and Watts Century Latino Organization, a social services group that works with the Hispanic community in LA. “We will provide them with the tools so they can be better informed about how to manage their debt and credit profile,” says Peralta.
The community outreach has also lead to media exposure with outlets including Univision, the Los Angeles Times, Los Angeles Business Journal, Wall Street Journal, CU Times, CUNA News, and others. “They are now very aware of who we are and our new mission,” says Peralta.
This increasing awareness of what Nix does is helping grow its community base, which spans more than 10,000 families with an outstanding portfolio of about $14 million. “We have saved them millions of dollars in interest and fees and improved credit scores for these consumers,” says Peralta.
But the job of spreading the word is not done. “It’s not a one-shot effort. This is an ongoing effort that really needs to have several legs and contact points to be successful,” says Peralta. “We are very honored and grateful that Financial Health Network has been willing to help us with that process.”
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By Financial Health Network on August 10, 2016.