One of online lending’s pioneers is back, upgraded for a new digital era.
Banco Popular is relaunching E-loan (it dropped the hyphen from the name) to serve as its “fintech arm,” a stand-alone brand offering solely digital products.
Launched in 1997, Eloan re-enters a market where fintechs now account for over 30% of personal loan originations, according to TransUnion. The brand will compete for clients alongside well-financed upstarts like LendingClub as well as new offerings from banks such as Marcus from Goldman Sachs.
Banco Popular is repositioning Eloan to target digitally savvy consumers by offering greater accessibility, competitive rates, and a fully digital customer experience, said Mariel Arraiza, senior vice president of Eloan.
“We identified a strong need for Eloan’s digital offering and, after extensive research and trials, we have created a simpler, smarter platform that balances technology, data and customer profiling while delivering a unique and effective banking experience,” she said.
The first product the new Eloan is offering is a personal loan — available in all U.S. states except Massachusetts — without an origination fee that puts money in the customer’s bank account as soon as the next business day, Arraiza said.
Eloan was acquired for $300 million by Banco Popular in 2005. Subsequently, it shifted away from lending and began offering CDs and savings products, as Banco Popular sought to increase its deposit base. Current Eloan deposit products now will be managed by Popular Direct, the direct online channel owned and operated by Banco Popular North America.
Eloan will set the terms and pricing of the loans, and power its digital lending platform with technology from Chicago-based Avant. Though Avant is itself an online lender, and potential competitor, the arrangement isn’t entirely unheard of; Regions Financial in 2016 began using Avant's digital-lending platform to approve and fund consumer loans.
“We evaluated and thought they were the best option,” Arraiza said. “They host the platform, but it will be customized for the Eloan brand, and we will use our pricing structure.”
The move should allow Popular to target both customers it normally would not attract as well as provide credit to existing customers who previously weren’t considered creditworthy because of the cost of underwriting and processing an application, said Ian Benton, a digital banking and payments analyst at Javelin Strategy & Research.
“In a commoditized market like the one for unsecured consumer loans, customers tend to not care much where they source their credit, as long as the terms are right for them,” he explained. “The whole ‘primary financial institution' concept goes out the window. You might hold your checking account at a particular bank, but how valuable is that if you’re going elsewhere for your credit products? The bank becomes primary in name only.”
Benton added it is increasingly important for banks to be able to make short-term credit available to their customers as a retention play. “Of course they want to make money on loans, but they also want to prevent the erosion of the rest of the banking relationship, which can happen if customers are turned down for a loan,” he said.
The personal loan product is just the first of many offerings to come from the new Eloan; a credit card product is likely later in 2018, said Arraiza.
“We are going step by step,” she said, regarding determining new digital products Eloan will offer in the future. “We’re going to evaluate every case and see what makes the most sense.”
Like other recently launched digital arms of traditional banks, financial management and budgeting tools are a key aspect of Eloan. Currently on the Eloan website is an adjustable tool consumers can use to see different amounts of loans, how long they want to pay it off and what monthly payment and terms would be. There’s also informational content uploaded weekly, providing guidance on home projects, for example. With this feature, visitors can also access additional tools that assist with renovation and remodeling projects.
If it’s successful enough, Eloan could eventually be spun off by Banco Popular, but it’s early to say whether that will happen, Arraiza said.
“Our vision is for Eloan to be a self-funding operation,” she said. “It could remain a separate brand within Banco Popular or an independent organization.”