Community Banking’s Big Opportunity with Digital Lending

Where are the best opportunities for community banks to leverage new digital lending technology?  With personal loans under $30k and small business credit under $100k.  Why?  Because that is a whopping $1.3 trillion market where the speed and efficiency of digital lending can serve existing checking relationships FIs already have, but where their customers are using credit cards and other loans elsewhere.

                               The Consumer and Small Business Loan Market

Car loans are already delivered in minutes and are hotly competitive.  Education loans are the focus of national players.  Helocs are a great market, but small comparatively, and often have low use.  69% of small businesses and 43% of customers are carrying credit today under $100k, just not at community banks.  Community banks have missed this opportunity historically because they did not have an efficient and profitable way to serve this segments of loans with the related costs of compliance, operations and risk.

Digital lending changes the economics dramatically.  As consultant Charles Wendel stated in his article, Making Small Business Loans Profitably:

“…we estimate that it costs between $3,000 and $4,000 to obtain, set up, and monitor a small business loan of $100,000 or less. These are mainly fixed costs that, depending upon the bank, can apply to loans as small as $25,000. Key components include: loan origination, $1,000-1,500; underwriting, $1,000; loan review, $100; operations, $250; monitoring and collections, $500; compliance, $250-350. The total cost: between $3,100 and $3,700.”

RCGILTNER digital lending delivers with automated origination, underwriting, full compliance documentation and risk monitor these loans for about $500 a year per loan, an 85% increase in efficiency.