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Wednesday, March 21, 2018

Digital Lending More Profitable than Credit Cards for FIs


The 2017 Report to Congress on Credit Card Profitability at Depository Institutions provides interesting data to compare with digital lending technology in use now by FIs.  As shown below, digital lending allows a community bank to be more profitable, more efficient and offer a better deal to users that the largest credit card organization. 

For those carrying a balance on a credit card, the average balance is $6,000.  That means a community FI with 10,000 DDAs has current customers carrying $20 million in loans (10,000 x 33% carry a balance x $6,000) compared to an FI of that size today that has on average $1 million in "Loans to Individuals", 5% of the opportunity with current customers.  As shown below, fees paid by users for digital loans are two-thirds less than credit card fees, digital lending costs to deliver are 40% less than of credit cards, and digital lending profitability is higher!


Digital Lending Revenues, Costs and ROA vs Credit Card


Further, community and regional FIs can integrate deposit information, payment methods and loan covenants to enhance profitability, security, checking payment technologies and loan quality.  That is why more community and FIs are targeting digital lending to serve their customers and steal the $1 trillion in credit card loans their customers are holding elsewhere.  Even better, digital lending integrates with and drives relationship profitability.   For more information on MinuteLender®, which gets an application and loan offer in one minute, and completes a loan in five minutes, visit www.rcgiltner.com.




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