This Small Bank Is Putting Its Brand on Prosper's Loan Experience
Community banking groups have recently struck referral deals with marketplace lenders that could add revenue in the short run, but they might be giving away potentially valuable data and customers in the process.
Companies like OnDeck and Lending Club are under pressure to keep finding new borrowers, but there are signs that customer acquisition costs are rising amid heavier competition.
Prosper Marketplace, an online lender for consumer loans, has found a new source of referrals: community banks.
For months, Prosper Marketplace and Lending Club have been teaming up with small banks that refer customers to their online lending platforms.
Now comes a new wrinkle in the strategy: a small Internet-focused bank plans to offer Prosper Marketplace's personal loans directly to its own customers through the bank's website. The deal provides a template that fast-growing Prosper is likely to follow with other banks.
Under the partnership, Radius Bank customers who are interested in taking out a personal loan will be guided to a website that is co-branded with Prosper, said Chris Tremont, executive vice president of virtual banking at Boston-based Radius.
From that point forward, the consumer applicants will be handled like any other Prosper borrower. The San Francisco-based marketplace lender will make a decision on the application and handle the disbursement of funds, anywhere from $2,000-$35,000.
[Coming this November: Marketplace Lending + Investing. Hear how participants in this fast-growth niche are using data and technology to propel lending into the 21st century.]
Radius, a $744-million-asset institution that does not offer its own personal loans, will receive referral fees from Prosper, according to Tremont.
Those partnerships offer a way for the marketplace lenders to bring aboard customers that is probably cheaper than most other options. For the small banks that participate, the partnerships offer a way to earn some money from customers who are looking for products the banks do not offer themselves.
What is different about Prosper's latest partnership is the degree of online integration with the referring bank.
Prosper's chief business officer, Itzik Cohen, said that the San Francisco-based company expects to announce similar deals with other banks.
Radius, which has only one branch and gathers consumer deposits online in all 50 states, specializes in commercial lending. The Prosper deal is the latest in a series of partnerships with tech-oriented companies that focus on consumers.
Radius offers a digital-only checking account in partnership with the online investing site Aspiration. The bank also teams up with the payments firm LevelUp on a mobile payments app. And it offers debit-card rewards in partnership with Boston-based SimpleTuition.
Referring to the new partnership with Prosper, Tremont said: "This is a move to provide our clients with more consumer products."