The online consumer lender MoneyLion plans to start offering checking accounts, part of its strategy to become a financial hub for U.S. households stung by bank fees.
The checking account will not carry overdraft fees or a minimum balance requirement, and customers will have access to a large network of ATMs.
But in order to open an account, consumers will have to pay a $29 monthly fee to join MoneyLion's membership program. Members of the program also have access to investment products, loans with annual percentage rates of 5.99% and the opportunity to earn $1 per day in rewards by logging into the company’s mobile app.
MoneyLion’s goal is to become the key financial provider in its customers’ lives.
“We are core believers in the rebundling of the bank,” Tim Hong, the New York-based company’s chief marketing officer, said in a recent interview.
Other digital lenders are also trying to build broader relationships with their customers, in large part because it is much less expensive to sign up borrowers who have an existing account than it is to acquire new customers.
Social Finance, the San Francisco-based online consumer lender, offers investment products and is rolling out a checking account this spring. SoFi’s customers tend to be well-heeled professionals who have used the company’s student loans to refinance existing education debt at a lower interest rate.
MoneyLion is targeting a less affluent demographic. The 5-year-old company sees an opportunity to offer a consistently priced checking account.
“Subscription pricing models provide consumers with simplicity and predictability and have changed the way Americans consume content, order groceries and select their wardrobe,” MoneyLion CEO Diwakar Choubey said in a press release.
MoneyLion said that it is partnering with an undisclosed bank to offer checking accounts, which will become available sometime in the coming months.
The company, which started its membership program in December, declined to provide enrollment numbers. The addition of a low-cost checking account figures to make the firm’s membership offer more compelling.
Consumers who enroll in the membership program set aside $50 per month to invest in exchange-traded funds. Those savings are then used as collateral for the company’s $500, 12-month loans, which are billed as a tool for managing unexpected expenses.
MoneyLion is able to offer a 5.99% APR on its loans, which is a lower rate than most digital lenders, because its loans are secured by the customer’s savings.
The company uses its daily cashback bonus offer to drive customers to its mobile app on a regular basis. The idea is to establish daily habits that make its customers think of MoneyLion as their one-stop financial provider.
MoneyLion has raised more than $67 million in equity funding since it was founded in 2013. In January, the company raised $42 million in a funding round led by Edison Partners, a venture capital and private equity firm based in Princeton, N.J.