Seeking Greater U.S. Presence, Barclays Joins Crowded Online Lending Market

British giant Barclays is the latest bank to join the crowded online lending arena.

As part of a larger effort to grow its consumer business in the United States, London-based Barclays now offers unsecured personal loans online, targeting prime and super-prime borrowers. It has been testing its online lending platform with select US customers since late last year and plans to fully deploy it in 2018, said Curt Hess, CEO of Barclaycard US.

Barclays has $ 33.1 billion in assets in the United States, the bulk of which are credit card loans to consumers with exceptional credit records. His personal loans typically range from $ 5,000 to $ 35,000 and can be repaid in three, four or five years. Interest rates range from 4.99% to 18.99% and the loans do not have any origination fees or prepayment penalties, Hess said.

“It’s a growing market and one that we find attractive,” Hess said of unsecured personal loans. “It’s really a natural extension of a single-line card business. ”

The bank has made around 15,000 personal loans to date. Hess said consumers that Barclays targets are interested in using the loans for things like debt consolidation and home improvement.

Barclays can expect fierce competition in the space, not only from online lenders such as Prosper, SoFi and LendingClub, but also from other banks who have stepped up their digital capabilities to try and keep pace with reached.

For example, SunTrust Banks, an Atlanta-based $ 208 billion asset, provides unsecured personal loans between $ 5,000 and $ 100,000 through its online lending platform LightStream, which it launched in 2013.

Goldman Sachs now also offers online loans through a separate branded entity called Marcus. It offers unsecured personal loans between $ 3,500 and $ 30,000, mainly for the purpose of consolidating credit card debt, and in its first year, it generated a loan volume of approximately 1.7 billion dollars through this business.

Several other banking companies, including Fifth Third Bancorp, Synovus Financial and Regions Financial, have also boosted consumer lending through a partnership with fintech company GreenSky, which offers point-of-sale loans at home improvement stores. .

“There’s a whole range of different fintechs that have entered this space, all with slightly different strategies, but generally what they’ve shown to the industry is that there’s an appetite for consumers share to access these unsecured personal loans, ”said Alex Johnson, senior director of solutions marketing and sales engagement at FICO.

Craig Schleicher, a senior executive at PricewaterhouseCoopers’ consumer finance group, said the success of fintechs in attracting clients who want quick lending decisions has forced banks to improve their game.

“We have seen this become a more central part of banks’ campaigns to retain their customers and preserve relationships with customers,” he said. “This has led to more investment in digital technologies, a better experience and price competition among traditional bank lenders. ”

Barclays has taken a page out of the fintech lender handbook by making the entire process from application to finance completely digital and giving borrowers near instant decisions on loan applications. It also adds its own features, like giving borrowers or potential borrowers access to a customer service representative if they need help during the loan process.

Johnson cautioned that banks entering this business need to have a good understanding of their target market and how borrowers will use their unsecured loans. Even prime and super prime businesses are not completely risk free.

“If you are targeting consumers who want to refinance credit card debt, you might find that some of those consumers may have good indicators of high level credit risk. When you dig, you might find that they keep paying the minimum on their credit card, but they accumulate more debt, ”he said. “Their actual risk may be a little higher than it appears on the surface.”

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David A. Albanese