The customer is king, and it is a rat race when it comes to acquiring new customers in the online lending industry. Add to that the multiple options available to the customers and it becomes even harder. So, finding different channels to lower the customer acquisition cost (CAC) is imperative for growth-focused young fintech lenders. […]
The customer is king, and it is a rat race when it comes to acquiring new customers in the online lending industry. Add to that the multiple options available to the customers and it becomes even harder. So, finding different channels to lower the customer acquisition cost (CAC) is imperative for growth-focused young fintech lenders. This has prompted an established fintech player like Lendio to venture into franchising.
Right now, Lendio’s main influx of customers comes from direct channels and partnerships. The company has partnered with some heavyweights in their respective industries, such as Staples, GoDaddy, and American Express. But with fintech becoming increasingly congested and regulations getting more stringent by the day, leveraging franchises to tap new markets while lowering the CAC can be a key differentiator for a company. Franchising lets a business expand without the risk of deploying major capital, and this makes it even more appealing for Lendio.
How the Idea of Franchising Was Born
Executing direct marketing from a centralized place can be incredibly expensive and non-effective. The idea behind franchising is to acquire clients (i.e. small business owners in underserved markets in non-urban areas that have immense potential to generate revenues but are not being effectively captured). It is imperative to create awareness as 70% of small business owners are unaware that alternative lending sources exist, representing a potentially huge untapped market. For such markets, franchising can be a great channel to spread the word about alternative lending.
According to the Small Business Administration (SBA), America has almost 28 million small businesses with approximately 40% of small business owners considering additional funding each year. Lendio recently launched its franchising program to develop a national footprint and to capture a larger share of the small business market in non-urban areas.
Franchising is the right choice as franchisees are usually small business owners in their own right and are able to leverage local relationships in the community to build trust for the company. The company rolled out its franchise in 2017, and in 45 days was able to bring five franchisees on board. The first batch of five franchisees is out after a week-long training, and another ten are expected in the month of March. The company aspires to roll out at least five to seven franchises every month. It has tapped five different markets so far including Pennsylvania, New Hampshire, Vermont, and Dallas-Fort Worth.
Brock Blake, CEO of Lendio, started his career in Utah by connecting entrepreneurs to angels and VCs through a speed-pitching event. The event usually had 50-100 applicants each month. This helped him appreciate the power of SMBs and community relationships. Additionally, Ben Davis, Lendio’s chief franchising officer, has decades of experience in franchising, which has added extra value to Lendio’s core team.
Franchising Compared to the Broker-Agent Model
Lendio opted for franchising over the broker agent model for two reasons:
Brokers do not enjoy the best of reputation in the market;
Since franchising is highly regulated, it will help enhance the reputation Lendio already enjoys in the financial services market.
Since franchise owners invest their own money, the work rate and results are much better as compared to a broker representing the company. Also, franchisees usually think for the long term versus brokers who have no major investment in the company.
Franchisees get access to an average 25,000 business owners as well as Lendio’s technology along with national advertising and partnerships. They are coached by Lendio’s franchise support team who help guide small business owners in the lending process. Franchisees send customers to the company and the rest is taken care of by Lendio. The company tracks from which franchise the customer came, but, as such, there is no exclusivity in terms of location.
The franchising business model is uniquely designed for the benefit of both franchisees and Lendio. The company charges $25,000 plus a training fee, which is paid once at the initial stage. Marketing is backed by Lendio nationally. Locally, it is driven by franchisees, who are furnished with materials for local events. Franchisees are given the major share of profits on a 70%-30% split. They are required to have $60,000 in liquid capital and a net worth of $150,000.
Local Relationships are Key
Franchising of an online funding platform is a union of online technology and the local community. It gives Lendio an opportunity to establish relationships with the local community of business owners. It also helps Lendio target borrowers who are over 50 years of age and are reluctant to execute the entire financial transaction online. They represent almost 50% of the market, and franchisees can hold their hands throughout the online transaction process. Business owners, on the other hand, get personal service and the option to choose from over 75 lenders. The franchise system truly allows Lendio access to the entire spectrum of customers.
The company is assisting numerous business owners throughout America by reducing the complexities of lending with its online technology and creating a strong local presence through franchisees who are equally passionate about their own main street. By virtue of ubiquity, Lendio will be able to leverage franchising to bolster its aim to fuel the American dream for small business owners.
Lendio is a financial service provider, founded in 2011 and headquartered at South Jordan, United States. It is the nation’s leading marketplace for small business loans.
Lendio is metamorphosing itself into a blend of what people love about banks, their local presence, and what they love about fintechs, ease in the lending and application process. Thus, Lendio is looking to give the best of both worlds to small business owners.
News Comments Today’s main news: Funding Circle raises $100M . Upstart Raises $32.5M. Lendio offers MPL franchise program. Proplend gains FCA approval. Monexo to start 1 min loan approval process. Today’s main analysis: FT Partners’ CEO Monthly Alt Lending Market Analysis. Today’s thought-provoking articles: International P2p lending statistics. China to regulate P2P lending platforms. United States FC receives extra $100M from […]
FC receives extra $100M from CIM. GP:”A small amount of cash in absolute for Funding Circle, still another confirmation that the space is healthy and growing, again.”
Lendio announces first-of-kind MPL franchise program. GP:” This is a great initiative. There are stranghts and advantages to local business. Pros: you know the area, customers, businesses, economic climate. Cons: it doesn’t scale and the fixes costs are high. Lets see what happens.” AT: “This excites me. Who better can attract small business owners than other local small business owners? This has the potential to grow Lendio’s business fast.”
SME lender Funding Circle announced on Wednesday that Community Investment Management (CIM), an investment firm focused on marketplace lending, will finance an additional $100 million in loans to businesses originated through Funding Circle in the U.S. According to the online lending platform, the multi-year agreement will allow it to provide further injection of capital into the country’s small business sector.
Since its launch in 2010, investors on Funding Circle, which includes 60,000 individuals, financial institutions, government, and the listed Funding Circle SME Income Fund, have helped more than 25,000 businesses globally access $3 billion in transparent and affordable financing.
Lendio, the nation’s leading marketplace for small business loans, today announced it is expanding the reach and availability of its small business lending options with the launch of a new franchise program.
The Lendio franchise program complements the company’s core value of helping small business owners fuel the American Dream. Through this program, franchise owners across the country can ease the financial hurdles for small businesses in their local community. Lendio franchisees get access to Lendio’s marketplace and technology, comprehensive training, branded marketing tools and national advertising, partnerships, and access to Lendio’s franchise support team to help coach small business owners through the lending process.
Lendio currently has franchisees in five territories, with significant interest in many others. Partners Kyle Bohrer and Bryan Gealy, in Erie, Pennsylvania, joined Lendio as the first franchise owners. Bohrer has been in the small/mid-sized business marketplace for over 10 years. Located in the Great Lakes region, Bohrer has been working on saving Erie small business owners money on their shipping.
Earlier this week, FT Partners announced one of the largest deals in 2017, Prosper’s $5 billion loan purchasing agreement with a consortium of investors that includes affiliates of Third Point, New Residential Investment and Soros, among others. This highly strategic transaction for Prosper aligns investor interest by including an equity structure tied to loan purchasing volumes. The transaction highlights FT Partners’ continued strong track record in advising on the most significant and complex deals across the FinTech ecosystem.
Introducing the First SaaS Lending Platform (Upstart Email), Rated: AAA
by Jeff Keltner, Head of Business Development, Upstart
Those that know my history at Google will understand why I’m excited to tell you about Powered by Upstart, a Software-as-a-Service offering derived from Upstart’s top-rated consumer lending platform. From rate requests through servicing and collections, this new service brings modern technology and data science to the entire lending lifecycle.
Anna, Paul, and I founded Upstart to bring the best of Google to consumer lending. Upstart was the first platform to leverage modern data science and technology to power credit decisions, automate verification, and deliver a superior borrower experience. In 2014, we were first to launch next-day funding . As of today, more than 20% of our loans are fully automated and we expect this percentage to increase significantly through 2017. With more than 50,000 Upstart loans originated, we have the highest consumer ratings in the industry and have delivered industry-leading returns to loan investors. With Net Promoter Scores (NPS) in excess of 80, we’re excited about the impact we’re having.
FinTech is disrupting all areas of financial services. As a leading tech platform in marketplace lending, Upstart aims to partner with financial institutions rather than compete with them. Given the pace of change in lending, technology partnerships will be critical in the years to come, and Upstart aims to be a partner the industry can rely on.
But Powered by Upstart is not just software – it’s a turnkey solution that provides all necessary document review, verification phone calls, fraud analysis, and (optionally) customer service, loan servicing and collections.
Software-as-a-Service in lending
SaaS has grown exponentially in the last decade because of its obvious virtues: rather than buying, installing, configuring, hosting, and supporting software yourself, the software is delivered over the cloud. It’s more reliable and always up to date. Delivering cloud software can be challenging in any industry. Usability, reliability, and performance are the minimum to play, and effective change management is critical to success. As the team that delivered Google’s SaaS platform before it was called cloud, we understand these challenges.
Of course, the regulatory environment in lending raises the bar even higher. We’ve long demonstrated our commitment to trustful and compliant lending, and we’re likewise committed to delivering robust and compliant lending software. We’ll be at the LendIt show in New York City next week, so please come visit our booth to learn more about Powered by Upstart!
Swedish payment processor Klarna has recently made news when it expanded the options and the channels that it makes its point of sale financing options available to.
Billingsley explained that in the case of GhostBed, the revolving credit product provided by Klarna helps turn a one-time mattress sale to its customers into a customer who comes back to purchase accessories.
According to Billingsley, that’s possible because it enables eligible consumers to make additional purchases with that same retailer without having to sign up for another loan or go through the financing process all over again for each subsequent transaction made.
Either the new purchases can be added to their existing credit account or they can simply use a different form of payment for the transaction.
Billingsley noted that the financing solution also works without any redirect to an external URL, so the consumer remains on the merchant site and within the brand experience when signing up.
Depending on the customer segment and even the merchant itself, utilizing Klarna’s full checkout solution isn’t exactly what they need. Which is why, Billingsley noted, the company is pushing its payment APIs, which allow merchants to add Klarna’s proprietary payment solutions directly into their existing checkout.
As for Klarna’s power users, the two biggest consumer populations are millennials and females in their mid-30s who are usually in charge of their family’s purchases.
Billingsley pointed out that many millennials today either don’t have a credit card or don’t like using one — their affinity for credit card brands and status is much different from previous generations. This makes millennials much more willing to use a payment option that allows them to break up payments over time for major purchases.
In the case of the young mother who manages her household’s income, also known as the Household CFO, she typically sees it as more convenient to make payments over time on a big purchase rather than putting a transaction on her debit or credit card.
Upstart Raises $ 32.5M (Upstart Email), Rated: A
It’s been three years since we launched the Upstart lending platform, and today we’re pleased to announce we’ve raised $32.5M to take our business to the next level. The funding round was lead by Rakuten, a global leader in internet services and global innovation headquartered in Japan, and by a large US-based asset manager. Existing investors Third Point Ventures, Khosla Ventures, and First Round Capital also participated. We’re particularly excited to have Oskar Mielczarek de la Miel, Oskar Miel, Managing Partner of the Rakuten FinTech Fund join Upstart’s Board of Directors.
With more than 50,000 loans originated, Upstart has the highest consumer ratings in the industry, has Net Promoter Scores (NPS) in excess of 80, and has delivered industry-leading returns to loan investors.
“I have been investing in the loans from Money 360 for my personal family office for many months. I have enjoyed the risk-adjusted returns, investment structure and liquidity options. Upon completing additional due diligence, I have decided to personally buy equity in the company and become a strategic advisor to the management team/Board of Directors.
The U.S. Labor Department has taken a first step toward possible derailment or dilution of its controversial rule on retirement advice as it begins to re-examine it at the directive of President Donald Trump, according to a notice made public on Wednesday.
The department proposed a 60-day delay of the fiduciary rule, which requires retirement advisers to put the interests of clients ahead of their own. It was slated to take effect on April 10, but Trump asked the department to review the rule one more time for its impact on investors.
The proposed delay should have a “calming” effect on the marketplace, which had been “hanging in limbo” ahead of the April 10 effective date, said Denise Valentine, a senior analyst with Aite Group, which advises the financial services industry on regulatory issues.
The California Hedge Fund Association (CHFA) announced that it has adopted CalALTs as its new brand name. The 1,200 member organization, which focuses on fostering growth and advancing the development of California’s alternative investment community, rebranded in response to the strong demand from a broader group of alternative investment managers and a new focus on bringing together and serving a wide range of alternative investment managers across the state of California and beyond.
The alternative investment community in California currently includes over 1,000 firms with approximately $1 trillion in assets under management.
Monroe Capital LLC was selected as the recipient of the 2016 Lower Mid-Market Lender of the Year Award in the Americas region by Private Debt Investor, a global independent publication based in London covering the private debt and private equity industries. This is the fourth consecutive year that Monroe has been recognized by the Private Debt Investor Awards as a leader in the Lower Mid-Market, Unitranche and Senior Lender categories.
Monroe Capital provides “one-stop” financing solutions for buyout, recapitalization, growth, and refinance transactions in the form of senior and junior loans and equity co-investments, supporting both private equity sponsored and non-sponsored transactions and privately owned businesses. The Private Debt Investor Awards recognize firms in three geographic regions: the Americas; Europe, Middle East and Africa; and Asia-Pacific. Winners were selected by eligible voters among the private debt, private equity and institutional investor communities.
COMMERCIAL property peer-to-peer lender Proplend is the latest platform to receive full authorisation from the Financial Conduct Authority (FCA).
Brian Bartaby, chief executive of Proplend, said the firm would now apply for ISA manager status from HMRC but said it was unlikely to have an Innovative Finance ISA (IFISA) ready this tax year.
The lowest risk is tranche A at zero to 50 per cent LTV, tranche B is 51 to 65 per cent LTV and tranche C is 66 to 75 per cent LTV.
Returns on the platform currently range from five to 12 per cent and borrowers can access loans of between £250,000 to £5,000,000 for up to five years on an interest-only basis. The platform has funded £11.5m of loans so far and has recorded zero defaults.
On Tuesday, 4thWay writer, Matthew Howard released his very own assessment on the top three property P2P lending platforms are in the UK. The three he selected were LandBay, Proplend, and FundingSecure.
In his selection, Howard ranked the lenders based on their features and opportunities each platform can provide. He selected LandBay as his first pick because the lender has done over £10 million in P2P loans.
Proplend was selected as Howard’s second pick. He chose the lender due to the lender’s interest rates are even in the lowest-risk “tranche A” range from 5.5% to 7%; more than £10 million has been lent through Proplend; and users may easily identify loans that are for just 50% or less of the property valuation.
FundingSecure was Howard’s third pick. His selection was based on the lender’s record of doing around £100 million in P2P lending, more than half being property loans; offers bridging and property development loans; uses the current valuation, even on development loans; interest rate lenders earn is 12% on all these loans; the minimum that may be lent on each loan is £25.
Plans to bring the risk and returns of peer-to-peer lending into one of Britain’s most popular investment products might provide some welcome relief for entrepreneurs … and some sleepless nights for those taking the plunge.
Some 23m people in the UK have ISAs, which make the return from your savings and investments completely (or mainly) tax-free. But 16m people opt to hold just the safer version, cash ISAs, which are tax-free savings accounts with banks, building societies and National Savings & Investments.
Meanwhile, UK households, who hold around 60% of their financial wealth in cash, have borne the brunt of the Bank of England’s low-interest-rate policy. Before the financial crisis, in mid-2007, you could get a return of over 6% a year from a best-buy cash ISA. Today, the best is little over 2%.
However, peer-to-peer lending is more risky than putting your savings in a bank.
This is borne out by a recent poll. peer-to-peer firm Wellesley found that 47% of people surveyed said they would increase their investment in peer-to-peer lending if it could be included in an ISA and 44% if it offered better interest rates than traditional banks.
Another survey, by Opinium in 2012, found 49% of the population would be open to peer-to-peer lending as an alternative to traditional banking.
So last week’s revelation that almost 6,000 people have used LV’s full automated financial advice service since it was launched in summer 2015, maybe shouldn’t be greeted with too much concern by advisers.
Also LV said it was “unable” to reveal how many of the 6,000 customers who paid the £199 for a full statement of advice went on to pay £499 to execute the statement of advice.
That is as maybe, but if our trip to the world of Back to the Future is anything to go by, human beings will – unless they become robotic themselves – still need face-to-face advice.
To help regulate the online P2P lending industry plagued by fraud and embezzlement, the China Banking Regulatory Commission published the Guidelines on Depositing and Managing Online Lending Capital (in Chinese, Guidelines for short) on February 24. In January this year, 1.8 million registered users were unable to withdraw their funds from platform operated by Qiyuan (short for 北京起源财富网络科技有限公司 or “Beijing Qiyuan Wealth Online Technology Limited” in English). The owner of the company, Fang Fan, embezzled the funds invested in the company’s eight different online lending platforms.
The Guidelines is the latest effort by the government to regulate the online P2P lending market which handled RMB 204 billion worth of transactions this February alone. It sets out three major basic principles regarding the safekeeping of the capital gained from P2P lending platforms. The first is that funds invested into the platforms by users must be deposited into commercial banks. The second stipulates that any transaction and reconciliation of the invested funds must be expressly approved and verified by both the debtor and creditor. Lastly, banks and online lending companies must carry out daily reconciliations and keep clear records of the transactions.
Lending marketplace Monexo has become the first peer-to-peer lending company in India to introduce a 1-minute loan approval process.
The company will leverage its proprietary, self-learning analytics platform as well as its tie-up with CRIF to access credit scores and other relevant financial data to aid in the loan disbursement decision making process, Monexo said in a release.
The borrowers can avail a loan of Rs 50,000 to Rs 5 lakh for tenure of 6 months to 60 months. There is no origination fee or prepayment fee. But the borrower must just pay a success fee of 2.5 per cent if the loan to him is approved and he decides to avail it.
The potential of blockchain technology to eliminate physical currency by ushering in virtual currencies like Bitcoin might be overstated, said Reserve Bank of India (RBI) deputy governor R. Gandhi.
While speaking about currencies, the central banker pointed out that to be effective, a currency needs to uphold concepts of confidence and anonymity at all times. However, after the initial rounds of usage, these concepts cannot be sustained in virtual currencies.
Talking about another major innovation in the financial technology space, marketplace lending or crowdfunding, the central banker noted that after the first few rounds of funding and successes, as a larger number of people get attracted to the concept, the system is likely to collapse. This makes marketplace lending unsustainable for a large number of people or amounts.
The chief of Tera Funding, a peer-to-peer (P2P) property financial service provider, said Thursday that the company’s accumulated loans have surpassed 100 billion won (US$87.6 million) since its launch two years ago.