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Thursday, June 25, 2015

Community Banks Grow Revenue with Own Digital Loan Platform

Digital small business and consumer loans are growing fast serving customers of banks.  To compete, some community banks have partnered with non bank digital lenders as discussed in a recent Wall Street Journal article, “Lending Club and Smaller Banks in Unlikely Partnership.”  But here are the facts they report:

1.      Lending Club will get the bank’s customer list, a referral from the bank and direct mail loan offers to the customers under Lending Club’s brand.

2.      The bank will an upfront fee of about .5% of the loan value, or about $5 per $1,000.  As the Wall Street Journal put it, “a very modest revenue stream.”

But the bank in the article said they were not doing it for income.  They said they make almost no unsecured consumer and small business loans, so they are losing anything.   After, the data shows community banks have given up the small loan consumer marketplace to credit cards.


We beg to differ, and suggest a more successful strategy.  Community banks must find new revenue sources, and digital lending to consumers and small businesses is its best opportunity to serve their existing customers.  Technology today allows community banks to provide efficiently and inexpensively small business and consumer loans where they keep the loans, profits and most importantly relationships.  As the CEO of Prosper said recently at an Alt Lending conference, “once we get the loan relationship, we will look to add deposit services.”


A better option is adding on average $2,000 in revenue per client with digital lending technology owned by the bank, like our PaySound and CashFlow services for consumers and businesses.









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