On the heels of a closing of a $250 million credit facility, LendingPoint’s Tom Burnside joins us on the show today. The consumer lender has originated $1.4 billion in loans to individuals, targeting an underserved population of people with FICO scores in the range of 580-680.
Tom talks about the growth potential in servicing this population. We also discuss the firm’s point of sale loan product and how that’s expanded their reach and broadened the definition of LendingPoint’s target borrower.
LendingPoint is an unsecured consumer lender. We target customers deserving of credit but that are typically underserved. 80 percent of all consumers have never defaulted on a loan, yet only 50 percent of them would be able to get a loan from a bank.
We saw a huge opportunity assisting those customers in the 580-680 FICO range. That’s been our mission.
The genesis story
My background is taking technology and data and bringing them together to tell big stories. From my experience at First Data to running CAN Capital, I’ve used non-traditional data to lend to customers and businesses that couldn’t access credit from banks. Data and technology to understand credit and risk — that’s what we do.
In 2014, there was a lot of P2P lending, but the people getting approved were the people a traditional bank would approve. We saw that if we could give a voice to the underserved customer, we could do something unique and different. We started looking at up to 700 FICO — it’s half the population.
Building a fintech firm in Atlanta
Atlanta has been very friendly to us. I think there are a few of pieces to this. First, the tech and analytics is very important. We team up with a couple of the local colleges to make sure that we get the analytics talent we need. 80 percent of all processing comes through Atlanta, too. We’re a hotbed for that. Lastly, we chose to be on the outskirts of Atlanta because we were able to pull talent from the suburban areas for all the service aspects of the business. Atlanta is a very friendly city so we’re able to pull talent from other places looking for a good quality of life.
The marketing funnel
As a result of focusing on the 580-680 customer, our cost of funds was very high. There’s not much scale and leverage ratios need to be low. It was a great place for us to start and understand the market.
About a year ago, we were seeing a customer profile pop up that was looking for help at the point of sale. It started with fertility clinics. They were looking for a ticket of $25,000. We bought a POS platform. Now, as the predictability of our business has improved, our cost of funds has gone down. As a result, we can go all the way up to 850. This has been a journey for us.
Managing multiple products
Now, you can find us online, whether we solicit you or whether you go through one of the big aggregators. You can also find us at a point of sale when you have a need for a specific product. They’re different populations, too. At POS, it tends to be a Millennial who appreciates fixed terms and direct to consumer targets older customers with different needs. They’re also different amounts: Millennial transactions are typically $3,500 and baby boomers are at $15,000.
We service these populations differently. We have a group of people in the business who deal with POS customers — there’s also a merchant involved in the transaction. The merchant is trying to solve an issue with a customer standing in front of him — they need to speak to someone immediately. With DTC, that transaction generally takes 5.5 seconds with a firm offer. If they have any questions, they can chat with us or call a service center. So, absolutely, we service them differently with different groups. Even with collections, they’re different.
On our direct to consumer business, we see about 400,000 to 450,000 applications a month. On point of sale, it’s growing very quickly. We think we can double the business from where we are today just by getting the right product in front of the right customer at the right time. POS can be another $100M per month in the next 2 years. We’ve been doubling the business year over year. We’ve grown very quickly — over 9200 percent in three years.
There is a lot of room here. When you look at the nearest competition — someone like a OneMain has a $17 billion balance sheet. We have a lot of opportunity in front of us.