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Wednesday, August 30, 2017

The New Business Case for Community FI Personal Lending!

Most community financial institutions gave up on smaller consumer credit years ago, ceding the space to credit cards.  The profitability on such loans was low because of lack of efficiencies, compliance risks and costs, and the cost of adverse action denials.

However, as Trans Union studies and the American Banker in the article, “The Personal Loan is Back!, document, many financial institutions ranging from large banks like Suntrust, TD Bank, WSFS and Fifth Third to community banks like Pinnacle Bank in Georgia, The Fauquier Bank in Virginia and FMB Bank in Florida are targeting success with personal loans on their websites.

Why?  For three key reasons:

1.      Digital technology makes this lending efficient, profitable and a highly appealing customer experience, particularly for mobile-focused millennials.  Loan offers can be made in less than a minute and completed in less than five minutes on a smart device.

2.      The growth of the debit card and personal loans attached to a checking account make the preferred method of transacting today at community FIs easy to access personal loan credit.  As the chart below shows, debit card transactions66 grew 52 billion from 2000 to 2015, while credit card transactions grew only 18 billion.

3.      Financial institutions have the low cost of funds and the customers, they just need the technology to win.  At the average FI, over 70% of their checking base has no non-real estate loan with the FI, and yet hold nearly $10k in unsecured credit elsewhere.  With digital technology community and regional FIs have a large, profitable and efficient business opportunity for personal lending specifically with their existing customers.

That is why our MinuteLender® provides such a great opportunity for community and regional FIs to make consumer (and small business) lending more efficient, drive new revenues, deliver a superior customer experience and win needed millennial customer relationships.

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