Thursday, December 18, 2014

Non Bank Cost Advantage in Digital Lending is Killing Bank Revenues

A great article in the Economist Magazine this week documents why online lenders for small, unsecured consumer loans are booming at the expense of financial institutions.  The article presents a chart from analysis by McKenzie summarized below.  It shows that online the set up and delivery can be half the cost with savings in branch cost, underwriting and origination while still allowing marketing cost to be three times larger.


Source: The Economist

While financial institutions struggle with regulatory and consumer acceptance of old technology with overdraft services, non banks are booming.  Mark Andreessen, Silicon Valley venture capitalist, says liquidity services for consumers and small businesses are a major focus of venture funding.  As our earlier blog showed, over $1B was invested in 2014 alone.  The list of players grows faster than we can keep track.


Payments and liquidity are two sides of the same coin.  Consumers pay with tools that offer them liquidity options as well, like PayPal with BillMeLater, or overdraft services with checking accounts. But digital technology is changing the game for a growing segment of consumers.  It is time now for your financial institution to compete with a digital payments and liquidity strategy that drives 40% revenue growth without cannibalizing existing revenues.  Learn more about PaySound, or you will learn why your revenues continue to fall to non-bank competitors.





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