This November, I had the opportunity to speak in a Q&A over the phone with the President at Marlette Funding, Josh Tonderys. During the interview, I had the chance to learn quite a bit about the personal lending market from an experienced industry leader.
Let’s see what he had to say about the personal loan market in general and Marlette Funding specifically. I split the questions and answers into two sections. We talked about quite a bit, so there’s plenty of information to digest.
Questions About Marlette Funding
Q: What sets Marlette Funding apart from other Fintech competitors?
A: Marlette focuses on several main points that differentiate itself from its competitors.
Every decision made by Marlette is focused on how it affects the consumer or customer. Data is built around customer performance and feedback, so as someone takes out a Best Egg loan, an infrastructure (involving the web, cell phone, etc.) is built to service customers using feedback as a basis for improvement.
This has helped Marlette improve overall customer satisfaction and reduce customer acquisition costs, so Marlette is using technology to grow our business and deliver tailored products for a better customer experience. While this is not especially differentiating in tech, the focus on the customer is a differentiating approach within the tech industry.
The approach to building data around customer performance has helped Marlette build more nimble and scalable infrastructure, so Marlette can stay on top of developing technology with quicker iteration.
Marlette stands out with our ability to manage growth as well as risk (It’s easy to lend money, but the key is to be paid back). With that being said, Marlette is focused on who we target for personal loans. Marlette attracts prime consumers who typically have $90k or more salaries, an average FICO score of ~710, and on average, 20 plus years of experience with managing credit.
Q: Can you give me a quote about Marlette and the future of Fintech lending?
A: I think we’re poised for a lot of success in 2018. 2017 was a fantastic year in terms of growth. Maintaining that growth by continuing to understand our customers and deploying smart technology to find better ways to make money accessible is the focus for us the next year. We believe lending Fintech in general will continue to evolve to find ways to serve customers in a more convenient and relevant way.
Questions About the Personal Loan Market
Q: So we know that Fintech personal loans are starting to attract more consumers and take up more of the market. How do you expect traditional banks to react to this over the next couple of years if the trend continues?
A: You’re starting to see banks wake up to this new way of lending. They’ve been impacted by a regulation-focused environment in recent years, driving them towards a compliance mindset. However, banks are starting to think of ways to grow their consumer lending businesses, and technology is a big part of this.
I think the key here is there are a bunch of these institutions that are well capitalized and situated, but they don’t have the technology, direct marketing capabilities, and customer centricity to make it happen. It’s a challenge from a human resources perspective. If you don’t have a team that has done this before, it is very difficult to replicate the orchestration to make it work across the enterprise.
For instance, most of the banks are focused on lending to customers who already have a checking or savings account with them; whereas Fintech has marketed on convenience that is becoming more and more available online. There is a gap of expertise in acquiring new customers in general, but it is even more pronounced in digital channels.
Most of these banks don’t have the capability to bridge this gap. Most of them are thinking they need to compete, but how do they compete? Do they hire someone from a Fintech competitor? Do they hire someone else to help them move forward? Do they partner with an established Fintech company? Many of them need to weigh these costs and make decisions.
Our understanding is that some of the large banks like Goldman Sachs have invested millions in bridging this gap, but that is out of reach for most banks. However, there are huge opportunities around synergies, and institutions with enough capital, who don’t have to be a bank, can benefit from a partnership or acquisition. It’s clear that there will be some acquisitions of or partnerships with fintech companies in the market. I see the attractiveness, and it makes sense.
Q: Where do you see Fintech personal loan lending in the next 5 years?
A: It’s been a rapidly growing market. In 2012, there was generally low awareness for personal loan options regarding debt consolidation and large ticket purchases, but recently, there’s an increasing awareness in the market.
Customers recognize the value of using a term loan versus paying the minimum and getting stuck with revolving credit, so there’s an increasing focus on consolidating debt. The product also works well for large ticket purchases where some consumers would rather avoid using a credit card because it’s going to cost them more over time.
Marlette sees opportunities of growth from both increasing awareness of debt consolidation as well as the driving uses for the personal loan product in the large purchase market.
Bonus Question About Blockchain
Q: What sort of future do you see for blockchain technology in the Fintech personal loan market? What sort of challenge would its implementation pose to Fintech companies?
A: I think the thing about distributed ledger technology is that it requires adoption from multiple parties for full scale implementation, so other players in the ecosystem need to adapt the technology.
One use that I could see for Fintech lending is creating a more secured identity verification process for the customer. From the recent Equifax news, you have a single source of data where all relevant info is in one location, and a breach creates both chaos as well as problems with trust. Distributed ledger tech creates an interesting opportunity to limit this concern, but it’s going to take a long time before it can be implemented fully.
About Marlette Funding
Marlette Funding is the online provider of the Best Egg loan, a personal loan product for consumer financing. Since its launch in 2014, Marlette Funding has provided over $3.6 billion in loans while working with Cross River Bank, earning itself a place in an expanding market for personal loans.
About Josh Tonderys
Before becoming President at Marlette, Josh Tonderys worked in financial services for over 16 years, establishing quite the track record with a few different industry-leading companies. At Barclaycard US, Josh was in charge of the Open Market credit card business; afterwards, he moved on to serve as the COO and CRO at Prosper, a personal loan marketplace.