Lynn Korsman
American University of Paris
American University of Paris
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Sunrise Banks is a family owned community bank largely serving the inner city communities of Minneapolis and Saint Paul, Minnesota. With a mission focused on bringing innovative and affordable financial products to all, Sunrise has recently developed a product called TrueConnect, which enables users to meet short-term cash needs at much more affordable rates than typical payday loan servicers.
One of the innovative financial products Sunrise has implemented is called TrueConnect. TrueConnect is a loan program offered as part of an employee benefit package. An employee can borrow up to $3,000 (but no more than 8% of their total wages) and the loan is paid back through payroll deductions over 12 months.
The loans can be used for any purpose such as assisting employees with mortgages, medical bills and other one-time expenses. For example, an employee who borrows a $1,000 loan would pay the loan back in 24 increments (twice a month) or approximately $47.58 per paycheck, which amounts to, on average, $11.82 a month in finance charges. In comparison, a similar payday loan may end up costing $300 per month in fees before being fully paid back.
The innovation emerged as Sunrise saw the very real need for short-term loans in the communities the bank serves. Sunrise Bank realized the need for access to small-dollar loans is incredibly important to help people navigate their financial health. As such, Sunrise sought to discover safer alternatives to payday and auto title loans. Sunrise researched small-dollar loan models to find the right balance between access, convenience, ease of use, and consumer price, in addition to appropriate credit loss expectations, regulatory risks, financial education, savings opportunities and overall financial sustainability.
Sunrise wasn’t alone in the emergence of TrueConnect. The organization’s innovation process led to an amazing partnership with Employee Loan Solutions. The process also involved listening directly to users of small dollar credit - who taught Sunrise about themselves, the bias in the market and what is valued in a small dollar loan product. TrueConnect is and continues to be a co-creation process.
Sunrise Banks was founded by the Reiling Family, who have carried their strong community and value based beliefs into the banking business. Sunrise Banks’ mission, to be the most innovative bank empowering the underserved to achieve, originated from the economic and cultural background of the bank's first location.
The first location of the bank was in an underserved area of Saint Paul, Minnesota called Frogtown, which is known for its high immigrant population and low economic status. Operating in this location, father and son Bill and David Reiling saw the both the dependence and very real need of the community for the use of alternative financial services, including check cashers and payday loans. They saw that the check cashing business was very successful and felt they could take a part of that market share by offering a more affordable product.
More recently, David was inspired to find an alternative to payday lending and thus, TrueConnect was born though significant evaluation, research, listening, and discussion with underserved individuals, regulators, and community leaders.
The numbers are evidence of the impact that TrueConnect has had on the communities in which Sunrise Banks serves. TrueConnect is currently available to 2,500 individuals in the state of Minnesota giving them access to small loans for immediate cash needs (medical expense, car repairs, etc.) at an affordable interest rate. One by one, people are getting access to immediate cash needs while building up their credit score.
A couple of “customer” quotes demonstrate the positive impact the product is having. An H.R. professional in a company offering TrueConnect stated, "my email and voice mail lit up with notes of thanks from employees for providing TrueConnect.” An employee wrote, “This program made the stress level go down because I could now pay an unexpected medical bill.” Another TrueConnect user stated, “I’ve used payday loans, but many times I didn’t have the money to pay it back in two weeks. I’m thankful my employer has this program.”
The long term impact is that TrueConnect can scale nationally and offer a safe loan alternative to the 26 millions of Americans who do not have a credit score. Around 12 million Americans use payday loans annually, and on average spend $520 on interest and fees to repeatedly borrow $375 in credit. Millions turn to payday loans for help, but find it only results in the continuous cycle of financial stress.
Offering TrueConnect as part of an employee’s benefit plan, is demonstrating that there are ways to make a program like TrueConnect sustainable because “if the program is not sustainable, you can’t grow and make an impact.” Long-term, TrueConnect will help people get of the cycle of debt and gain back their financial health. As TrueConnect grows, it will help “take a bite out of the payday loan market” and show organizations that you can fight back against payday lenders.
TrueConnect’s benefit to Sunrise, is that it is just one of many financial products utilized at Sunrise to achieve the bank’s mission of empowering the underserved through financial inclusion. The product has successfully shown how companies like Sunrise Banks can adopt innovative business models to develop products that address the needs of the unbanked population and design delivery channels that are cost effective and viable in the long run. The success achieved to date with the TrueConnect product has and will continue to set a standard within the industry as Sunrise Banks leads the way.
The TrueConnect product benefits society as it is an affordable way for one to manage unexpected expenses. Going one step further, Sunrise Bank’s entire financial inclusion based business model and mission benefits society as it helps provide access to financial resources to all, which not only enables economic independence but supports the overall wellbeing of society.
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CALLIE KOENIGER, Impact Multiplier Manager
