Loans & Credit

Congestion at the Starting Gate? Three New U.S. P2P Lenders Set to Launch: Zopa, GlobeFunder, and Loanio

By Jim Bruene Posted on
Categories: GlobeFunder, Loanio, Loans & Credit, P2P Lending, Zopa

Less that two years after the first P2P launched in the U.S., it looks like we'll soon have at least five companies chasing this new market, six if you include Virgin Money.

The most well known is Zopa, the person-to-person lending pioneer which opened in the UK in 2005 and now has nearly 200,000 members. Its long-awaited U.S. launch is scheduled for next week. I'll be speaking with marketing director Wade Lagrone tomorrow, but Jane Kim broke the news in today's Wall Street Journal (here). The market forecast in the article, predicting as much as $9 billion in P2P originations by 2017, is from our upcoming Online Banking Report on P2P lending (note 1). 

Zopa is working with six credit unions, including FORUM Credit Union, to match lenders with borrowers. And unlike other P2P lenders, Zopa's is guaranteeing the lender's principal. That will reduce potential returns, but make participation more like buying a CD from a bank. So, it will be interesting to see how the company differentiates its offering from traditional bank/credit union fare. We'll have more when the site opens to the public next week.

        

We also hear that GlobeFunder and Loanio are about to launch, possibly yet this year. Loanio has not revealed its strategy, but GlobeFunder is positioning itself as a microlender in the same vein as the Nobel prize-winning approach of Grameen Bank. For more info, read the GlobeFunder blog.  

All three will be included in our upcoming Online Banking Report (note 1). We'll also look at Prosper, Lending Club, LoanBack, and Virgin Money (formerly Circle Lending).

Note:

1. Online Banking Report subscribers will have access to the report as soon as it is published on Dec. 8. Nonsubscribers can put their name on the announcement list here and receive a prepublication discount code to save 10%. Please mention "P2P report" in the subject line.

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Virgin Money P2P Lending on the Cover of Fortune Small Business

By Jim Bruene Posted on
Categories: Loans & Credit, P2P Lending, Small Business, Virgin Money

Jeff Bezos may have grabbed the cover of Newsweek for the latest high-tech gadget, the Amazon Kindle, but that's old hat for him. The bigger news in online banking circles is Richard Branson gracing the cover of the December/January issue of Fortune Small Business (click on the inset to read the magazine online). His smiling mug is shown tossing hundred-dollar bills out of a teller cage. 

The reason: Virgin Money USA (previously Circle Lending) is one of six new products/services the magazine included in its annual "The Next Little Thing for 2008" series. To be part of the article, the innovation must be coming from a "small business," although I'm not sure Virgin qualifies as small anymore.

The 1.5 page story discusses the Business Builder "friends and family" loans that Virgin will administer for a one-time cost of $199 to $299 plus $9 per payment. The company says it plans to offer a business loan product later in 2008 or 2009 that will match outside money to the original friends and family loan, provided it's been paid on time. 

Could 2008 be the year of person-to-person lending? Given Branson's track record, there's a good chance the relatively unknown service will take off next year.   

Note:

1. According to my recollection. 

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Blog Sighting: Carolina Postal Credit Union’s Irreverent "I Love My Hoopty"

By Jim Bruene Posted on
Categories: Advertising & Promotion, Blogs, Credit Unions, Loans & Credit, Website Usability & Design

Finally, we have someone using a blog to have a little fun (note 1). Carolina Postal Credit Union's blog, I Love My Hoopty, is using humor and user-generated content to drum up car loan business. Through its website and blog, the CU asks users to write about and post pictures of their first cars, and the more rickety the better. I wasn't familiar with the term, but apparently in this context "hoopty" means an old rickety car. 

The hoopty theme is also used on the CU's homepage to promote vehicle loans (see second screenshot below). 

Analysis
Since I'm twice the age of the target market here, it doesn't matter that the blog's content doesn't resonate with me. I LOVE the creativity and I'll bet the younger, Colbert-Report-watching crowd thinks it's pretty cool that a bank/credit union would do something this irreverent. 

Unfortunately, the follow-through doesn't look nearly as good as the creative. I first noticed this blog a few months ago, and until last week, it hadn't been updated since July. It doesn't really make sense to have a blog that's only updated a few times per year. If the CU doesn't have the resources to add something at least once per month, it should pull the blog down and incorporate the content into its main website.

Also, I question the prominence of the campaign on the CPCU homepage. Is that really the main message you want displayed to your members for several months? Even if does fit the overall brand strategy, the CU should change the banner ad's hyperlink. Currently, it goes to the hoopty blog (after a short detour to acknowledge that they are leaving the CU's website), which is not an effective landing page. The CU should first take users to a dedicated lending page that explains loan options and prices and invites members to apply.

Carolina Postal Credit Union blog (20 Nov 2007) 

I love my hoopty blog


CPCU homepage (20 Nov 2007) 

Note:

1. UMB used a similar approach in its My Ugly Room contest a year ago. 

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Virgin Money USA Launches in Boston/NYC Today

By Jim Bruene Posted on
Categories: Loans & Credit, P2P Lending, Virgin Money

Link to Virgin Money USA Ever since Virgin bought CircleLending for $50 million earlier this year (previous coverage here), I've been looking forward to its launch. We hoped they might launch at our FINOVATE conference two weeks ago, but we lost out to the Mortgage Banker's Association's 94th Annual Conference in Boston, where Sir Richard Branson delivered the opening keynote a few hours ago. 

According to today's NY Times, Sir Richard himself will hand out red "dollars" today in Boston's Copley Square while mere mortals will be doing the same in Manhattan. 

We now have answers to several questions about the new venture:

  1. Will Circle Lending's product, person-to-person loan administration and servicing, live on?
    Answer: Yes, in fact it looks identical, but with much more marketing pizzazz.
  2. Will the Circle Lending product be extended into a person-to-person loan marketplace like Prosper and LendingClub?
    Answer: Not yet, but I still expect that to happen.
  3. Will Virgin Money use person-to-person lending as an entry point for a full line of financial services?
    Answer: Not yet, but there has to be more coming.  
  4. Will Virgin Money bring the hip U.K. direct-banking vibe to the United States?
    Answer: Yes, the website is very progressive by U.S. banking standards (see screenshot below). I haven't seen any other media efforts yet. However, the current homepage design is marred by an annoying Flash display that is a real turnoff even on a broadband connection. Once you get off the homepage, the rest of the website is excellent.

According to today's Boston Globe, the company currently employs 30 in Waltham, Mass., a headcount that will double the over the next year as it introduces more services. The only new service disclosed so far is student loans, an obvious fit with the friends and family real estate, business, and personal loans offered today. We'll be following Virgin Money USA closely and will include an in-depth analysis in an upcoming Online Banking Report on person-to-person lending (2006 report is here).

Virgin Money USA homepage (15 Oct 2007)

Virgin Money US homepage

 Goodbye page at CircleLending.com (15 Oct 2007)

Circle Lending referral page to Virgin Money USA

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Mortgagebot Launches New Mortgage Exchange, Mortgage Marvel

By Jim Bruene Posted on
Categories: Loans & Credit, Mortgage, Refi & Home Equity, Mortgagebot

One of the great promises of the Internet is a better shopping experience. While most retail products have indeed become easier to shop for—think automobiles or vintage postcards—the financial services experience is still a mixed bag.

It's certainly much easier to compare savings rates online, a capability that has fueled growth at ING Direct and others. But loans are still much harder to shop for. The lead-generation sites, such as BankRate, GetSmart, LendingTree and Interest.com, have made it easier to contact multiple lenders, but in most cases, the customers still has to select a single lender, complete an application, and hope that there are no nasty surprises at closing in the form of extra fees or higher rates.

However, Mortgagebot is about to change all that and hopefully usher in a new era of transparency in mortgage pricing, with the launch of Mortgage Marvel, making its debut at our FINOVATE conference tomorrow.

How it works
Mortgage Marvel is a destination site where mortgage shoppers can search and find actual rate and fee information for participating lenders, usually at a nearby bank or credit union. And there is no personal info required, just the loan amount, property value, and zipcode. If the shopper finds what they want, a simple click on the APPLY button sends them directly to the lender's application to lock in the rate and fees listed (see screenshot below).

The key to making the marketplace work is having a wide variety of participating lenders with recognizable brand names at the local level. Normally, that's extremely difficult. But Mortgagebot, with more than 700 bank and credit union clients on its mortgage platform, can plug its existing client base into the exchange with ZERO systems integration (note 1). Currently, there are 250 lenders on the system.

And Mortgagebot clients have little to lose by placing themselves into the exchange which for the most part, only charges fees when mortgages are originated through the marketplace.

Right now, all mortgage lenders are displayed equally in order of lowest APR. But in the future, the company may offer preferred placement for additional fees.

Summary
For the first time, U.S. consumers can easily shop and compare the total price for mortgages from competing lenders. And thanks to the Internet, they can complete an application in less time than it takes to drive to the nearest loan office.

Note:

1. Currently, only Mortgagebot mortgage-platform customers are allowed to participate in the network.

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Online Banking & Lending Tools at FINOVATE

By Jim Bruene Posted on
Categories: Andera, Collections, Finovate, Loans & Credit, Online Resources (ORCC)

Much of what we cover at NetBanker falls under the traditional "marketing 4 Ps": product, place, price and package. But, there are also hundreds of important things going on behind the scenes that can make or break a company's Web presence. We are lucky to feature two important tools at our upcoming FINOVATE conference Oct. 2 in NYC.

Online Account Opening from Andera
During the past two years, few areas have received more attention within banks and credit unions than the tricky business of online account opening. It's an absolutely critical element of turning a profit online but also an area rife with risk, error, and the potential for turning away potential new business. We are pleased to have Andera on stage, a company we are seeing more and more of as we drill down through the offerings of major credit unions. The company is a major force in online account opening with more than 125 clients including: Alliant Credit Union, Associated Banc-Corp, General Mills FCU, American First FCU, Toyota Federal Credit Union, First Mid-Illinois Bank & Trust, Energy First Credit Union, CSCEFCU, Service Credit Union, and Bank Rhode Island. Its recent alliance with Yodlee (press release here) opens up even more opportunities. We look forward to seeing its account-opening process in action at FINOVATE.

Web-based Collections from Online Resources
I first met Online Resources in 1992, when its national sales rep visited Seattle to show us their cool smartphone-based banking service. I was new in my R&D assignment looking at alternative delivery methods for US Bancorp, and I really thought there would be a market for this hybrid call center/online banking solution. Of course, that was before the Web burst on the scene three years later. Luckily, Online Resources didn't have all its eggs in the telephony-based basket and adapted quickly to become a leader in Internet banking and electronic payments. The company is a two-time OBR Best of the Web winner, in 2003 once for its novel MoneyHQ premium online banking service and via acquisition of InCurrent which, in 1998, took home one of our first awards for its futuristic online credit card management service. 

At FINOVATE, Online Resources will be showing its Virtual Collection Agent. I have not yet seen it in action, but from the briefing it sounds like a smart way to improve actual collection yields while maintaining the customer relationship during a very tricky time. 

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FINOVATE 2007 Lineup: The Lending Innovators

By Jim Bruene Posted on
Categories: Finovate, Lending Club, Loans & Credit, Mortgagebot, P2P Lending, Prosper

As we enter the final week of summer, we will begin showcasing the companies that will be DEMOing new products and services at our inaugural conference FINOVATE 2007. See here for the complete lineup.

Person-to-person lending
P2P lending has grabbed headlines around the world since it launched in the the United Kingdom in March 2005 by Zopa. We are pleased to have on the FINOVATE agenda the two leading U.S. providers: Prosper, the brain-child of E-Loan founder Chris Larsen, and Lending Club, which launched its exchange on the Facebook platform just three months ago.

Both companies received significant cash infusions this summer and we're looking forward to seeing what enhancements the lenders will showcase at FINOVATE 2007.

Lending Club received a significant $10.3 million first round last week (blog entry here). Since the company's launch of Facebook three months ago today, it has closed 134 loans averaging approximately $5,600 for a total of $750,000 in originations.   

In June, Prosper, the winner of an OBR Best of the Web award last year (note 1), secured a $20 million third round bringing total funding to $40 million (previous post here). The company now has more than 380,000 members and has funded nearly 14,000 loans totally $80 million. Since inception, Prosper has posted more than 168,000 loan listings from more than 75,000 borrowers.  

Mortgage lending
Here's a bit of trivia for Monday afternoon (or Tuesday morning if you read NetBanker via email): What was the first profitable banking website? And no, this is not a trick question with the answer being "none" or "no one knows" (see note 1).

The answer: Bank of America in 1994, or at least that's what an exec told the audience at the first conference on Internet banking held in the summer of 1995. Practically before anyone outside of academia or Silicon Valley had heard of the Web, BofA was using it to produce mortgage leads in the lucrative California market. I can clearly remember the woman who ran BofA's website saying, "mortgage leads are already more than covering the bank's costs (of its website)." Of course, that was in the days when a website cost less than a couple billboards.   

We've been writing about online mortgage lending since that first 1995 conference. One of our favorite lending platforms, winner of the second mortgage-related OBR Best of the Web award in 2001, is MortgageBot. The company was also named to last year's INC 500 list of the nation's fastest growing private companies producing a 560% revenue increase during the YE 2002 through YE 2005 period. 

At FINOVATE 2007, MortgageBot will take the stage to show a radical new approach to mortgage shopping that its been testing for some time now. We can't release the details yet, but we were luck enough to get a sneak peek on Friday and were very impressed!

Note:

1. Our sister publication, Online Banking Report (OBR), typically names 6 or 7 companies as "Best of the Web" during the course of each year. It is earned by launching a product or service that significantly "raises the bar" in online delivery of retail banking and lending products.

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Zopa’s International Expansion

By Jim Bruene Posted on
Categories: Loans & Credit, P2P Lending, Zopa

Link to Zopa ItalyI think I understand Zopa’s delayed U.S. launch a bit better now. Apparently, the company is looking to expand not just in the U.S. but in Asia as well (along with the previously announced Italian licensee).

Here’s a quote from a recent blog entry

“…we have had over 100 different teams in over 40 countries get in touch with with us, looking to launch a version of Zopa locally. These have ranged in distance from France to New Zealand, and included countries as diverse as Brazil, Mexico, Canada, India, Japan, Korea, Taiwan, Australia, South Africa, Ghana, Turkey, Spain, Germany, The Netherlands, Poland, Slovakia, Lithuania and Romania.”

We’ve seen that interest at Online Banking Report as well. Our Feb. 2006 report on Prosper and P2P lending was our best selling issue of all time. We’re planning an update later this year, hopefully with an analysis of Zopa’s U.S. version, which the company still says is coming this year.  

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Green (Hybrid) Auto Loans from Star One Credit Union

By Jim Bruene Posted on
Categories: Advertising & Promotion, Credit Unions, Green Marketing, Loans & Credit

In many ways, hybrid vehicles are the perfect antidote for guilt about our 21st century high-consumption lifestyle. Buy a Prius, and instantly feel better coasting around the city on self-generated battery power. Yet you still get to motor about in a relatively large, well-appointed and air-conditioned steel box (note 1).  

That's why politicians have jumped on this bandwagon in droves. And why it makes a great marketing statement to support energy-saving and/or low-emission alternatives with loan discounts. Not only does it position you as caring about the larger environment, there is a very real environmental education benefit to the efforts.

The most recent example—Star One Credit Union <starone.org>, a $3 billion (assets), 71,000 member CU based in Sunnyvale, California—has a link on its homepage to its hybrid offer. Customers financing a new or used hybrid vehicle save 0.25% on their loan rate. On a $20,000 5-year loan, $139 is saved, enough to fill the tank three, maybe four times. The offer is spelled out here (screenshot below).  

Other financial institutions offering hybrid car loans:

  • UCB Bank (Miami, FL): no payments for 3 months offer here
  • Deedham Savings (Deedham, MA): offer here
  • Sound Credit Union (Tacoma, WA): 0.50% discount offer here
  • Tech CU (San Jose, CA): 0.25% discount offer here
  • Vancity (Vancouver, BC, Canada): Prime rate for low-emission vehicles here

Note:

(1) I'm not trying to be cynical here. As a former engineer, I think hybrid technology is fantastic. Using waste energy to fuel the car is both elegant and efficient, and I look forward to driving one soon.

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Smart Car: The Next Must-Have Banking Sweeps Prize

By Jim Bruene Posted on
Categories: Advertising & Promotion, Green Marketing, Loans & Credit

Looking for an eye-catching grand prize for your fall sweepstakes? You can't beat the new Smart fortwo car hitting to hit our shores in six months. According to today's Wall Street Journal (here), more than 20,000 (make that 20,001) have already plopped down $99 for a "reservation" for the Smart fortwo (here).

Not only is this a sexy sweeps prize, it has green appeal as a less resource-intensive vehicle compared to larger gas cars. While hybrids will still be more fuel efficient for in-city driving, the $12,000 base price makes it much more affordable that the $20,000+ Prius.

With the perfect storm of higher gas prices, the rebirth of environmental awareness, and America's obsession with cars, the Smart micro is almost guaranteed to be a hit, at least in urban markets. Anyone who's been in Europe in the last 10 years knows how popular these cars already are.

Financial Institution Opportunities
There's hundreds of ways to use a coveted, and potentially rationed, consumer product in your marketing efforts. For example:

  • At $10,000 less than the Mini Cooper, this is the cost-conscious choice for a sweeps grand prize
  • Use the car to reinforce your smart banking choices such as paperless banking, auto bill pay, and so forth
  • Smart loans that include a preapproved auto loan along with a reservation for the car
  • Use the car's "CO 2 champion status" (see inset) to reinforce your green banking efforts
  • Paint the car with your brand and provide smart rides around town…include a form on your website for requesting a ride; for extra credit offer text message reservations
  • Work with Smart USA dealers in your area to offer joint promotions

And you already know we have a weakness for the car; so as an added benefit, any banking promotion involving it has a great chance of making it to the pages of Netbanker. Just give me a heads-up here. 

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New Person-to-Person Lender Loanio Readies for Launch

By Jim Bruene Posted on
Categories: Loanio, Loans & Credit, P2P Lending

Just as the dust was clearing from the latest social lending launch, Lending Club, which opened on Facebook exactly one week ago (coverage here), we received word of another P2P lending exchange Loanio. The founder is revealing little about the new company at this point, but you can see from its logo and tagline, People Lending to People, what market it has its eyes on. 

Loanio's one-page website allows you to enter your email address for future notifications. We'll be covering all six North American P2P lenders (see note) in an upcoming update to last year's Online Banking Report on the market for P2P loans. (Hint: we will publish a longer-term forecast which will show more robust opportunities past the 2006-2011 period we looked at in our last report.)  

Note:

Right now the North American market consists of five pure P2P lenders:

  • Prosper (US, launched Feb. 2006)
  • Zopa (UK, but coming to the US in 2007)
  • Lending Club (US, launched 25 May, 2007)
  • Community Lend (Canada, not launched)
  • Loanio (US, not launched)

Plus, P2P loan servicer:

  • CircleLending (now owned by Virgin USA, launched 2001)

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New Person-to-Person Lender, Lending Club, Hopes Facebook Linkage Allows it to Prosper

By Jim Bruene Posted on
Categories: Facebook, Lending Club, Loans & Credit, P2P Lending, Prosper

Link to Lending Club homepage Just as we are putting the finishing touches on our latest Online Banking Report, which looks at the intersection of personal finance and social networks, a new person-to-person lender launches. And how do they plan to gain traction? Through tight integration with Facebook, the second-largest social network. So we are holding the presses, and adding this important new development to our upcoming report.

We'll have much more on it later, but if you are curious now, login to Facebook and check out Lending Club (the easiest way is to login via the link at the top of the Lending Club homepage). Or read Colin Henderson's great analysis here.  

Last year, Facebook developers created a proof-of-concept personal finance app, originally called Facebank, then changed to MoochSpot (see previous coverage here). That effort was designed to show how third parties could leverage the Facebook API to create new services. It didn't take long for someone to take the bait. Within a few weeks, BillMonk created an interface to Facebook to support their expensing tracking service, now owned by Obopay. Buxfer also supports login via Facebook's username/password (post here), but does not link into the social network as yet.

But Lending Club is the first to leverage the Facebook interface to support actual financial transactions, in this case lending/borrowing. The company is modeled after Prosper. Lending Club timed its launch to coincide with the Facebook developer's meeting and launch of Facebook Platform.

We'll be testing it during the next few days and will report back on whether its a challenge to mainstream lending, or merely blog fodder. Given the rising power of social networks, my guess is the former. 

LendingClub homepage from outside Facebook

LendingClub homepage mockup

LendingClub homepage from inside Facebook

LendingClub page inside Facebook

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