financial health Archives

Small dollar loans can be quite profitable. Just look at the number of payday loan stores in the US, there are more than 20,000 of them. The reason they can be so profitable is that four out of five payday loans are rolled over or renewed according to the CFPB. For the most part banks have stayed away from actively promoting a small dollar loan product and the FDIC wanted to know why and what conditions might lead to them to offer them.

So, back in November the FDIC issued a Request for Information on Small Dollar Lending. They received more than 60 responses from banks, industry associations, non-profit groups, fintech companies and individuals. While each group had a slightly different perspective there was an acknowledgement of the challenge of making small dollar loans both affordable for consumers and profitable. While the FDIC did not define exactly what they meant by a small dollar loan the respondents, for the most part, took it to mean loans of less than $5,000.

There are many mainstream online lenders offering personal loans down to $1,000 and there are also many fintech companies offering loans under $1,000. Companies like Oportun, Insikt, LendUp, Elevate, Opploans and many others offer these sub-$1,000 loans using the latest technology tools to make this process more efficient. Often these companies partner with banks to facilitate these loans to underserved consumers. But there are few banks offering online sub-$1,000 loans directly with a notable exception being US Bank. Interestingly, they did not respond to the FDIC request.

Many industry associations did respond and I provide a summary of a few of these responses below.

The Marketplace Lending Association (MLA) provided a detailed 10-page response where they urged the FDIC (and other regulators) to do more to support banks and foster closer working relationships with fintech providers: [Read more…]

It has been said many times that the majority of Americans don’t have enough in savings to cover a $500 unforeseen expense. As a nation we are chronically bad at saving and while the savings rate went up for a time after the financial crisis it is back down near 2005 levels now which was the all time low.

MoneyLion is trying to do something about this. They have a somewhat unique position in fintech in that they have an online lending business but their real focus is improving the financial health of consumers. When you go to their home page they feature their app which anyone can download for free to help manage their finances. You can link bank accounts and credit cards and it can give you a good sense of your overall financial health.

I interviewed CEO Dee Choubey on the Lend Academy Podcast just over a year ago but they have made some great strides since then. I caught up with him again recently to get an update. Today, over 2.2 million people have downloaded the MoneyLion app and 1.3 million people have connected their bank account. This gives the company tremendous insight into their customer base.

In our conversation Dee pointed out that overdraft fees are a major pain point for many consumers. I did a little research and found a 2017 report on bank fees that stated the average American who has at least one overdraft pays an average of $412 annually on these kinds of fees. Dee said the average MoneyLion customer pays even more than that. He is on a mission to change this. He wants to not only eliminate overdraft fees from people’s lives he wants to help them get in the habit of saving.

[Read more…]