Digital Marketing in the Fintech World

digital marketing

In last few years, with the advent of digitization, the dynamics of lending have evolved and changed quite drastically. Historically, lending has always been a one-on-one experience, but the emergence of online lenders has led to a paradigm shift. Nowadays, borrowers prefer online lenders as compared to their brick-and-mortar contemporaries because of the comfort and […]

digital marketing

In last few years, with the advent of digitization, the dynamics of lending have evolved and changed quite drastically. Historically, lending has always been a one-on-one experience, but the emergence of online lenders has led to a paradigm shift. Nowadays, borrowers prefer online lenders as compared to their brick-and-mortar contemporaries because of the comfort and ease it offers. This is the reason why traditional banks have witnessed declining growth in these segments as compared to online lenders who are going from strength to strength.

Marketplace lenders (MPL) have disrupted the traditional lending practices and created their own niche in the lending sector. MPL extensively uses data-driven analysis, online marketing channels, and customer-oriented technology platforms to attract and fulfill the financial needs of their customers. With the emergence of technology-driven marketplace lenders, traditional lenders have had to engage with the borrowers on multiple platforms to ensure they do not lose a big chunk of their customer base.

Pain point

The intense competition in the Fintech world is one of the most important reasons behind the high cost of customer acquisition (CAC) and has become an Achilles heel for most of the companies. Google Ads has usually been the first port of call for startups looking to generate traction. Though such ads help you generate immediate results, the efficacy of such efforts is generally extremely low. The below list illustrates the cost of advertising based on a keyword strategy. The most important thing to understand is that these are cost per clicks and not conversion rates.

So if you have a 1% conversion rate, you are looking at a CAC of $1100, which is unsustainable.

Source: Mondovo

In order to bring down their customer acquisition cost, players are toying with a lot of different options to increase their customer base. Fintech companies are engaged in targeting their customers through social media platforms, improving online presence by using multiple digital marketing channels to attract a wider audience at a much lower per user cost. Along with reducing their cost of acquisition; companies are recognizing the opportunities through digital channels to target Low FICO customers who are mostly neglected by traditional banks.

Well-established online lending platforms like Lending Club have to spend almost 2% of the loan ticket size on sales and marketing to attract borrowers; thus, for a $15,000 loan, that translates to roughly around $300. Younger startups have been known to pay out almost $500-$750 for a similar ticket size. Thus, one of the biggest differentiators between startups is the ability to create cheaper sales funnels for attracting borrowers. VCs have moved past the initial euphoria and massive cash burns for borrower acquisition is history. How you size up on CAC versus your peers is now one of the most important metrics in whether you will get that next round of funding.

Social Media Changing the Fintech Landscape

Social media is changing the overall dynamics of fintech. With a focus on real-time responses to customers, lending startups are integrating Facebook and Twitter pages into Customer Relationship Management. Just like customer service, social media cannot be isolated from marketing and run in silos. Companies are even using social media in their algorithms to evaluate borrowers and their credit worthiness. For instance, companies like FriendlyScore have created an alternative credit technology focused on social media and big data. This creates an opportunity for lenders to evaluate millennials with little or no credit history.

Mobile, Mobile, and More Mobile

Nowadays, the nerve center of any marketing plan is mobile marketing. As per the Federal Reserve survey in 2015, 87 percent of the US population above 18 years of age owned or had regular access to a mobile phone. In another survey by ICBA, 74 percent of millennials feel mobile banking is very essential, and 53% of smartphone owners with a bank account have used mobile banking in the last year. All the mentioned statistics go to show that not only millennials but even older generations are starting to rely more and more on mobile for their financial needs.

As per Pew Research, there are approximately 75.4 million millennials in the US, and they are expected to earn 46% of all income by 2025. Thus, having a mobile strategy is a no-brainer. According to CUNA Mutual Group Statistics, 550 credit unions on the back of the company’s online lending platform receive $2.4 million worth in mobile loan requests every day, and have applied for 6 billion dollars in loans. This highlights that players have already started catching onto this trend.

Following are a few techniques used by fintech companies to lure borrowers via mobile marketing;

  • Mobile apps and web portals are developed in a way to provide two-way communication, meaning any queries or doubts borrowers have is sorted out right away by 24/7 available online help. Considering most of the borrowers are young with limited financial knowledge, this feature is a real clincher.
  • Another new trend used by financial marketers these days is in-app marketing, in which product- or service-related content and messages customized for every individual are sent directly to the prospective borrower’s smartphone.

Introducing a special offer or trial offer exclusively for mobile users and eferrring a lender’s services to your social media circle or friends is now just a click away. Word-of-mouth advertising goes on steroids when used in conjunction with mobile.

Direct Mail Still a Force to Reckon With

All is not lost for direct mail, once the backbone of traditional marketing. Many of the biggest players in the fintech industry (Lending Club, Prosper, and On Deck) still rely on direct mail to capture new customers.

As per a Mintel Comperemedia survey, Lending Club mailed 33.9 million personal mail offers in July 2015, which is more than double the amount it sent in the same month in 2014. Prosper’s mail volume also increased to 20.2 million offers. The average monthly volume of personal loan offers sent through direct mail is 156 million YOY (July 2015).

More important is how direct mail is being married with big data analytics to ensure higher conversion rates. So you might have logged online to check out a loan offer, but you are still receiving physical mail. This dual platform strategy is ensuring the best of both worlds and allows for targeting a prospective borrower on multiple levels. Thus, digital marketing in the fintech industry has graduated to the next level, and it is also incorporating traditional methods for a more comprehensive marketing campaign.

Author:

Written by Heena Dhir.

Picking the Right Channels For Your Marketing Mix

marketing mix

West Cary Group (WCG) is a full-service marketing and advertising agency that specializes in creating marketing and communication campaigns that are focused on quantifiable results and ROI. Its ability to merge data analytics with the creative process is its USP. WCG specializes in a variety of industries like financial services, pharma, healthcare, and retail. The […]

marketing mix

West Cary Group (WCG) is a full-service marketing and advertising agency that specializes in creating marketing and communication campaigns that are focused on quantifiable results and ROI. Its ability to merge data analytics with the creative process is its USP. WCG specializes in a variety of industries like financial services, pharma, healthcare, and retail. The Richmond, Virginia-headquartered minority-owned agency was founded in 2007 by founder and CEO Moses Foster.

Prior to founding WCG, Foster was a senior director at Capital One where he led a team of over 40 associates who created over $750 million in marketing communication annually. He also serves on the board of directors for Direct Marketing Association and Greater Richmond Chamber of Commerce and Venture Richmond.

Key Success Factor

WCG, from the very beginning, had realized the power of data and analysis and how important it is to give equal standing to both the analytical and the creative team. Most companies of their size in the industry do not have any group specifically dedicated to data science, and that gives them the edge over its other rivals. Being able to execute data driven marketing is a huge positive, especially for a client group like Fintech, which understands the power of data. Having data scientists on board to ensure that decisions are empirical versus intuitive.

Clients

WCG usually works with companies having a budget of $250,000 and upwards. WCG clients may not be Fortune 500, but they are usually VC-backed companies looking to break into the big league. Its capabilities around performance marketing are as good as any larger player in the market, but West Cary Group is able to provide these services on a more competitive budget. This is made possible because it does not have huge overheads like the larger firms.

Marketing Channels

WCG has always prided itself on being channel agnostic. Its decision of picking a marketing channel is based on a lot of variables like what the customer wants, the kind of product, and what is the client business model. After considering all these variables, it comes with an economic model targeting appropriate channels that are best suited and has maximum potential to succeed. Success or failure of a channel depends on three things: gross response, net response, and conversion. So it lets the data speak on which channel to use rather than taking a gut decision.

Collaborating with Insurtech and Fintech

The company has worked with multiple fintech and insurtech companies including leaders like SoFi. It collaborated with SoFi on direct mail. It has been leveraging both online mediums like Facebook and offline channels like direct mail for customer acquisition. According to the founder, many leading fintech lenders acquire a major chunk of their customers through direct mail. Working with fintechs is exciting and challenging as they are extremely ROI driven and aggressive in their approach.

Testing

In order to evaluate the feasibility of a channel, a test design is developed to see the results of invested amount with the help of statistically significant tests. Usually, these tests are carried to see whether it will be useful or not, and all these tests are primarily ROI oriented. The reasons why this strategy works is because instead of pre-committing to one particular channel, WCG waits for the market reaction. Based on that, WCG decides whether to do a full roll-out with that particular channel or not.

A typical sample test involves a sampling of 10,000 customers. The agency likes to go ahead with results that are in the 95% confidence interval. This investment is prudent so that results are strategically significant and actionable for the client. A direct mail campaign typically costs $0.50 to 0.75 per package.

Looking Beyond Direct Mail

The company has also analyzed satellite radio and television as an advertising medium for its clients. Foster believes that radio provides for an extremely targetable audience, and TV can be a great investment for a client that can work on scale. He has always wanted to execute a performance marketing campaign on TV but hasn’t had any client engage with them for TV because the roll out costs are too high. Most clients believe TV is for branding but leveraging data analytics for TV can also be used for performance marketing. With cord cutting now a major trend among millennials, TV might be declining in viewership, but it’s still a multi-billion dollar channel. It might not be as dominant as before, but TV is not dead as a medium to target potential customers.

The Perfect Client

The company loves working with entrepreneurs and teams who come to it with a good product in a competitive market. They want to work in the niche market where a “spray money on advertisement” approach would not work. What is most important is to solve the problem of the channel mix. Which channels should the client use, in which order and in what quantum. The power of combining multiple channels to work together will always be better in maximum circumstances than relying only on one channel. Being able to calculate that synergy is what will make or break a campaign. For this, the agency needs to test individual mediums in silos and then in conjunctions. Only then can they decide on that perfect spending matrix.

Conclusion

The company has grown steadily over the years and now has a 35 member team. Data-driven advertising has changed the marketing landscape, and all companies ranging from tech startups to century-old community banks are looking to capitalize on data for achieving quantifiable results on their marketing spend. That is a boon for agencies like WCG, which have always been ROI-driven from the start and have incorporated data science as a part of the service offering from day one.

Author:

Written by Heena Dhir.

Common Direct Mail Marketing Mistakes

direct mail marketing mistakes

Direct mail marketing requires expertise; otherwise, you can be making mistakes and not even know it. Too many lenders are oversimplifying the process, which is causing them to make preventable errors. To help you improve your direct mail marketing process, the following paragraphs will show you the mistakes that we have seen lenders make throughout […]

direct mail marketing mistakes

Direct mail marketing requires expertise; otherwise, you can be making mistakes and not even know it. Too many lenders are oversimplifying the process, which is causing them to make preventable errors. To help you improve your direct mail marketing process, the following paragraphs will show you the mistakes that we have seen lenders make throughout the steps of their campaigns.

Determining Offer Goals, Analyzing Product Offers, and Building and Customizing Marketing Lists

The first step of the direct mail process is where you need to match the product offer with a compatible mailing list. It’s during this process that we see the most common mistake get made. The error occurs when you do not know your audience, have a loose idea of who your target demographic is, or when you have an outdated mailing list. This misjudgment can be catastrophic because not knowing your ideal audience means that you are unable to align your products properly, which then makes your products un-relatable to the prospects that you’re mailing to, thus causing a low response rate, poor customer acquisition, and a high cost per acquisition.

If your mailing list contains outdated information like addresses, phone numbers, etc., then you could be mailing offers to prospects who are unqualified or unlikely to respond. Mis-aligning your product and audience can also cause legal issues such as legal-in-compliance and legal-in-risk problems. To avoid these dilemmas, you need to be able to find the balance between the responsiveness and risk of a client, because we often see lenders who have a high response and low origination rates due to this critical component of the campaign.

Developing Mail Pieces

This leads us to a misconception that we see all the time, which is the “one size fits all” ideology. This mistake happens when a company believes that all prospects will respond similarly to the same mail piece and offer.

When developing a mail piece, lenders need to realize that almost every person will respond differently. All prospects will have a different reaction to things like images, examples, testimonials, and phrases. Your prospects will each have their own prejudices and opinions. Some will believe a guarantee and others will believe a testimonial. To avoid this problem, you will want to use all of these tactics, and more, to convince them to call you.

Another common mistake we see is when a lender expects that all potential borrowers will have the same level of education. This misconception can cause your company to have a low response rate because your prospects may not understand the offer due to the language you are using in your letter. You must write for reading comprehension! To prevent the possible confusion of your prospects, we suggest writing at a 7th-grade level. Each copy and campaign type should be customized for the prospect, which means going beyond just putting their name on the letter. Don’t just stop at the basics when you can further improve customization by including things such as a personalized URL and personalized offer.

Personalization will make it so your letters are less focused on sales, allowing you to focus on the prospect and their needs, thus providing you with a better opportunity to convert a potential borrower into a customer.

Getting the message wrong in your letter is another way you may be killing your ROI. Your message needs to make a logical and emotional argument in order to get a prospect to convert. Humans are controlled by their emotions, and although a logical argument seems the most reasonable tactic when trying to sell, lenders need to remember that the letter should not be focused on selling. Instead focus on the potential client, and communicating value.

The key is to come off as relatable. You want the reader to feel comfortable and attracted to the offer. This means that you need to target their emotions by showing them a problem they are facing and offering them a solution. Remember, without a problem, there is no reason to respond to the solution. This “problem-answer” format allows you to make an emotional connection with your clientele while also improving your chances of them responding to your offer.

Not testing your letters before mailing a large campaign can lead to an ineffective campaign. You want to be able to get money out on the street as fast as possible, but this can occasionally lead to a failed campaign. Testing your letters beforehand will lead to higher response rates and a low cost per acquisition. This is because you now know what type of letter works for your target demographic. Not testing your letters before mailing a massive campaign can cause you to fall into the cycle of mailing letters that do not function as they should. Don’t assume that something will work because you can never predict the results of a campaign. You need to constantly test campaigns next to each other, and proper tracking is imperative to this process because if you can’t accurately measure campaign performance, how are you going to manage subsequent campaigns?

Executing and Fulfilling Mail Campaigns

Improper planning is another massive mistake that lenders make when it comes to getting campaigns out the door. You are focused on lending, which means your internal teams may get bogged down with interferences that cause campaigns to go out late or not at all. This problem can represent millions of dollars to the bottom line. You need to ensure that you have a timely process so that important marketing drop dates are not missed.

Execution is a key step because if your execution is off, then it doesn’t matter if you’ve made any of the previously-mentioned mistakes. You are in the business of getting money on the street, so the faster and more efficient you can do that, the better.

Tracking Responders, Analyzing Campaign Results, and Determining ROI

Lenders need to be able to track their campaigns’ results because if your response tracking and reporting is unreliable or slow, you’ll be making important decisions using inaccurate information and likely killing your ROI. This is critical to the success of your campaigns because the success of your subsequent campaigns relies on this information. Being unable to track your campaigns’ progress means that you are funneling money into the unknown, which is never a good business tactic. This can lead to poor re-targeting, unclear campaign results, and a negative ROI. Tracking responders, analyzing campaign results, and determining ROI will allow you to learn what is working, and what is not, so you can optimize all future direct mail marketing campaigns.

Each step of the direct mail marketing process has room for errors, and these small errors can create big problems for lenders. It is possible to optimize each step so you can avoid these common mistakes, and a strong suggestion is to outsource your direct mail marketing to experts who know how to identify and change what is not working. A successful direct mail campaign depends on each step of the process being properly aligned and executed. Now make a list of these mistakes and go over each one of them outlining how your operations are reacting to each one. Are you making the mistake? How are you planning to solve it? Are you not making mistakes? How can you improve?

Author:

Written by Pablo Gonzalez
Marketing Coordinator / Acct. Manager
Lending Science DM

Why Online Lenders Should Consider Direct Mail Marketing

mailbox

It is amazing how neglected direct marketing is in the lending space. Many lenders are ignoring a unique opportunity to maximize revenue and operations. The Cost and Advantage of Direct Mail to Online Lenders Direct mail has a long and successful past, beginning with an Egyptian landowner in 1,000 B.C. Many people still wonder, “Why send direct […]

mailbox

It is amazing how neglected direct marketing is in the lending space. Many lenders are ignoring a unique opportunity to maximize revenue and operations.

The Cost and Advantage of Direct Mail to Online Lenders

Direct mail has a long and successful past, beginning with an Egyptian landowner in 1,000 B.C. Many people still wonder, “Why send direct mail when we have the advantage of the internet with online advertising, social media, and such?”

While this is an applicable marketing strategy for many industries, it is not true in the lending space. The advantages of a lending company adding a direct mail component to their advertising campaign are beyond what most can imagine, and it can truly take a company’s operations to the next level.

Although adding a direct mail component to your business can take it to the next level, it is a huge upfront investment for many lenders. The cost to implement direct mail marketing can fluctuate based on your company’s mailing quantity and the services you are receiving, but the results you’ll generate will be far superior to your online marketing results.

Recent monthly response data results show direct marketing deliver response rates of up to 1.16% in the lending industry. While this number might not seem sensational, it is a powerful number for lenders. When targeting and mailing up to 120,000 people, 1.16% means 1,392 have responded. Then consider that 75% applied and 50% converted. Do the calculations and consider; how much revenue would 522 funded loans mean to a business? What about mailing to 1,000,000 people? A positive ROI is an immediate reality. More on this later…

Direct Marketing and Traditional Direct Mail Differences

After making the significant investment to implement direct marketing, a company will naturally desire immediate results, but with direct mail marketing you need to have patience. It could (in some cases) take more time to see results than it does with online marketing. Direct marketing involves a lot of trial and error, which involves a lot of testing, and time. To reap the benefits, you need to be ready to make a long-term commitment to the process.

However, businesses must consider the significant differences between traditional direct mail and direct marketing. Vast improvements have been made since the times of the Egyptians roughly 3,000 years ago. Traditional direct mail is simple. Use a specific database with addresses and send your prospects letters with your advertisement. It is a basic procedure and basic results follow. Direct “marketing” applies much more to strategical thinking, and its results directly correlate with the complexity of the program.

Starting with the advertisement portion of the equation; generic advertising attempts to sell but fails to communicate value according to the reader’s needs. How are a reader’s needs determined? THE DATABASE! Having a clean, well segmented, well-targeted database will do wonders. Creating a database of this caliber takes time, plenty of deliberate testing, and detailed analysis, but done correctly, qualified response rates will increase indicatively.

A well-tested advertisement in the form of a letter is one of the last pieces of a successful direct marketing campaign. However, if the message is off-target, it’s almost guaranteed to decrease the response rate and ROI. Creating the ideal message can be more complicated than one might think. The message must make an intellectual and emotional connection with your prospects, but it is the emotional connection that drives response. Human beings are ruled by their emotions. No logical argument will ever sway a client from their feelings. No emotional connection, no deal. You must tap into the reader’s emotions by using every method possible. How We Decide by Jonah Lehrer makes the case that rationality depends on emotion. Motivation is driven by feeling, not intellect. Lehrer points out, “Emotion and motivation share the same Latin root, movere, which means to move. The world is full of things and it is our feelings that help us choose among them.”

The Logistics of Direct Marketing Campaigns

The logistics of the whole direct marketing campaign process play an important role, as well. Mail at the wrong time, choose the wrong address, work with the wrong mail house, or lack the ability to take each separate campaign through its segmentation and analysis process on time and the investment could be a waste. That being said, it is imperative to have an excellent team of analysts to address these needs, and effective writers and marketers, as well. In direct marketing. every facet counts. Get all the pieces to align and you’ll enjoy unlimited growth.

Logistics are a critical component of the direct marketing campaign process. With direct marketing, you have a lot more rules and regulations to deal with than you would with online marketing, thus affecting the logistics process. The increased amount of legislation makes the logistics process more complicated than what you would have with online marketing, but it can be done. The complication of logistics occurs when everything needs to be in compliance and has received any and all legal approvals.

Lenders also need to be ready operationally. Once a lender implements direct marketing, they need to ensure that they can support the demand that direct mail brings in. One of the operational change lenders must be ready for is scaling up the company’s call center to be able to answer the increased amount of calls. Updating your business’s infrastructure to meet new demands depends on the quantity of mail your company wants to send out, and your current infrastructure. Although these improvements can be an additional cost, it is necessary to have the proper framework in place to obtain the full benefit of direct marketing.

While those are two of the largest pieces, there are a few more things to recognize. Tracking and reporting, for example. Less than 1 percent of lenders perform accurate analysis on their own, which can significantly impact direct marketing performance. This is a powerful tool, so a business can determine what’s working and what isn’t and improve upon the parts that are not.

Lenders are busy lending, so a strong suggestion is to outsource to experts in the direct marketing field. Preferably to those who have a long, successful track records and have shown they know how to identify and effectively change what is and isn’t working.

So, if maximized revenue, larger pipelines, and improved operations aren’t enough for a company to add direct marketing to their advertising campaigns, then there is the one final consideration of “scale.” There’s no other channel that comes even close to the scalability that an effective direct marketing campaign provides. The universe of options to choose from when targeting potentials becomes almost infinite. Improved targeting equals more relevant audiences and higher response rates. The more targeted and precise a database is, the more profitable direct mail marketing can become.

It’s important, however, to consider that results from direct marketing vary among different types of lenders. The charts on display at Lending Science show direct marketing results in business lending, consumer lending, and mortgage lending for the previous month. These results show accurate averages of each overall group’s results. Something necessary to note is that even if direct marketing proves to maximize a business’s lending game, the results on cost-per-funded loans depend on your team’s ability to execute on the highly qualified prospects that direct marketing delivers.

Author:

Pablo Gonzalez is marketing coordinator and account manager at Lending Science DM.

Why Direct Mail is More Profitable For Lending Companies Than Email

direct mail marketing

Despite the emergence of digital marketing, direct mail still has a lot of steam. In fact, it’s hard to believe any product or service can not be promoted through strategic direct mail marketing. It is still important in marketing to be personal. According to a recent study, 70 percent of Americans feel direct mail is […]

direct mail marketing

Despite the emergence of digital marketing, direct mail still has a lot of steam. In fact, it’s hard to believe any product or service can not be promoted through strategic direct mail marketing.

It is still important in marketing to be personal. According to a recent study, 70 percent of Americans feel direct mail is more personal than email, and 39 percent of customers try a business for the first time because of direct mail advertising. Another study by Epsilon shows that nearly half of U.S. consumers prefer direct mail over email. These stats suggest that, if properly targeted and planned, direct mail still holds substance in the market, and one company that specializes in direct mail is DM Analytics (DMA).

DM Analytics was founded in 2015 and is headquartered in Phoenix, Arizona. Founder and CEO Senthil Ramanath is a credit risk veteran. Before venturing into his ambitious entrepreneurial voyage, Ramanath worked as director of credit risk management for Capital One then moved to vice president at EZCORP, and then finally to Balance Credit where he was chief operating officer. The idea for DM Analytics struck Ramanath after looking at the rapid success achieved by companies like Enova, Rise Credit, Landmark, and Loan Depot in contrast to the majority of big traditional lenders who have struggled over the years. According to Ramanath, the reason so few of the online lending companies grew so fast was because they spent a reported 99 percent of their marketing budget on direct mail and not on other marketing tools like PPC and online advertisement.

The reason companies are hesitant to use direct mail is because of the costs involved. A national campaign might involve sending 500,000 to a million pieces per month. Even then, the company needs to keep sending them for at least five months to get optimum results. With each piece of mail costing 60 cents, that works out to $3 million for a direct mail campaign. It’s always easier to start a keyword pricing war on Google, pay through your nose for a lead, and still be happy because you got results in a week.

DMA comes into the picture to help small start-ups figure out a strategy for direct mail. Every customer and business gets its own customized model. The strategy is structured to the type of the product (loan installment, line of credit, etc.). This helps startups control spending. DM Analytics helps reduce upfront costs in starting a direct mail campaign. If the customer has an existing portfolio, information is extracted from the credit angle accordingly and DM Analytics builds a custom model for the future.

The reason direct mail is still prevalent in the U.S. is because:

  • The regulatory environment in the U.S. does not allow companies to access credit information about an individual until the company is ready with a concrete credit offer. An address can only be retrieved once the company decides on a firm offer. Online marketing is an add-on option. Legally, a company can only do online marketing with direct mail.
  • DM Analytics shortlists customers it wants to send mail to (on the basis of credit characteristics), and once it is pre-approved by the client, the list is submitted to the credit bureau to obtain the name and address. If the customer has specifically opted out (only 1 percent has done so), then the company would not be able to retrieve the data.

Depending on whether the company has credentials with TransUnion, the campaign launch period may vary. It usually takes 4-6 weeks for a company to get TransUnion credentialed. After that, it is a two-week process.

Customer Acquisition Cost (CAC) is directly correlated to product APR: The higher the APR, the higher the CAC. For instance, a product with 500 percent APR will cost about $200. The CAC will be lower for products with APR of 80 percent to 100 percent.

Another deciding factor is loan amount. If the loan amount is higher, so too will be the cost per funding. Ramanath predicts that for a loan amount of $13,000 at 13 percent APR, the client will have a CAC of around $40. Business loans work on a similar track with CAC at 5 cents per dollar funded.

The FinTech scene is littered with companies who could not make direct mail work. A cardinal mistake is using only demographic data, which doesn’t work. The key is to gather the credit data and fine tune the model around it. It’s surprising that old school direct mail trumps online marketing. But Think Finance, and even Lending Club and Prosper, have been able to leverage direct mail for massive growth. DM Analytics has identified a major pain point for young lending start-ups and has the right combination of credit chops and direct mail expertise to succeed in this brutally competitive market.

Authors:

Allen Taylor
Lauren Twardy