Why a Marketplace Bank Provides a Better Path to Financial Health

5 min read
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Our mission at LendingClub is to empower our members on their path to financial health. As one of the original fintech innovators with a 14-year track record of improving customers’ financial health, we have helped millions of members save money by reducing their high-interest credit card debt through a lower interest personal loan. Today, we are taking the next step in LendingClub’s journey and are poised to reimagine banking with the acquisition of Radius Bank.

Together we’ll create the first digitally native marketplace bank at scale with the power to deliver an integrated customer experience that enables consumers to both pay less when borrowing and earn more when saving.

It’s not often that an entity which generates more than $12 billion in loans a year seeks to become a bank. Every day, around 50,000 people visit us primarily seeking to use credit to find savings. Each one has a unique story to tell. Their collective experiences and feedback serve as the foundation for our services for both the borrower and investor sides of our marketplace. LendingClub innovations have allowed members to do more with their money. And they love us for it—our average NPS score is 80, compared to most banks that range in NPS from -8 to 561.

But the road to financial health doesn’t stop there. Our customers tell us that even after they’ve started to find savings through our platform, they still struggle to effectively manage their cashflow and as a result they end up paying hundreds of dollars in fees, most notably overdraft and monthly fees, to the banking providers available to them. That makes it challenging for them to save.

Being able to pay off debt and manage cash flow in order to save are the two most important behaviors that can help advance consumers’ financial health. We think empowering customers to make better financial decisions that result in improved money management and savings is the next logical step. Our customers think so too. When asked if they would consider switching if LendingClub were to offer access to a no-fee/rewards based bank account, 90 percent would consider and nearly 40 percent would switch. That is a big deal considering Americans are holding an estimated deposit balance of $4 trillion at traditional financial institutions, with traditional bank branches, getting charged traditional fees.

It’s high time we empower consumers to have full control of what is rightfully theirs.

Generally, the traditional financial system has paid customers almost $0 on their deposits and charged high teens or more on their loans, meaning many Americans are falling behind in building wealth as their savings continue to diminish.

That is why, today, we are beginning our transformation, building on our core strengths, to create a seamless platform at scale for financial health. To do this, we are bringing the country’s best online bank (Radius Bank) together with the largest online marketplace lender to create a financial health platform that delivers an integrated customer experience at scale to help members both pay less when borrowing and earn more when saving.

The combined company will engage customers with actionable solutions that empower them to make better financial decisions. These will be personalized to each individuals needs and will help them keep more of their money, earn higher returns on their savings, reduce their debt faster, and provide an opportunity to invest in others in a seamless and simple way.

Essentially, it will be the first bank designed to find savings.

Why are we taking this leap?

We believe that financial services need to be reimagined in a way that champions consumers’ financial health. When our members win, we win.

We think there is a disconnect between claiming to improve the financial health of customers, while also promoting a high interest, variable rate credit card—which is the antithesis of promoting financial health. But that’s not how the existing system is set up.

New challenger banks have emerged in the marketplace with the promise of upending the financial system. They deliver better mobile experiences and freedom from fees. However, they lack the ability to manage their customers volatility in cash flow and expenses and they lack scale.

This has left Americans with no choice but to engage with a system that makes it difficult for them to get money from the same place that keeps it. And, in the age of digital information, people are increasingly waking up to the fact that they could do more with their money. They could get higher savings yields, better investing returns, or lower fees for financial products.

That is why we’re offering a much-needed alternative to the system that has favored traditional providers.

Over the past 14 years, we have used technology, our marketplace model and our focus on the customer experience to achieve our market leadership position in personal lending. While other financial services providers have pulled back on offering personal loans in favor of promoting credit cards, we’ve leveraged our investor base to get instant feedback on loan quality, thus growing responsibly and facilitating more than $55 billion in loans.

We believe that the time is now right for checking and savings to be reimagined in a way that is free from legacy practices and systems, one where the success of the institution aligns with the success of the customer.

We plan to be at the forefront of that re-imagining, with a company that champions our members’ financial success with fairness, simplicity and heart. By developing a business model that enables consumers to both pay less when borrowing and earn more when saving—with a clear and seamless path to doing so—we will become the first digitally native bank designed to improve financial health. This is the difference between marketing financial health and building a business model around it.

We are compelled to restore balance to this industry, and look forward to expanding our existing efforts to become a true partner in service of all consumers. As we evolve, we will create a support network that is entirely focused on helping members not only to simplify their financial life, but to finally win the money game.

Scott Sanborn, CEO
LendingClub


Safe Harbor Statement
Some of the statements above, including statements regarding expected synergies, cost savings and other financial or other benefits of the acquisition of Radius, the ability and timing to satisfy the closing conditions for the Radius acquisition (including obtaining regulatory approval), customer preferences, product initiatives and future strategy are "forward-looking statements." The words "anticipate," "believe," "estimate," "expect," "intend," "may," "outlook," "plan," "predict," "project," "will," "would" and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. Factors that could cause actual results to differ materially from those contemplated by these forward-looking statements include those factors set forth in the section titled "Risk Factors" in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K, each as filed with the Securities and Exchange Commission, as well as our subsequent reports on Form 10-Q and 10-K. We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements.

Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.Information in this blog post is not an offer to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.1. Cornerstone Advisors survey of 2,506 US consumers, Q2 2019

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Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.

A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,584 for a term of 36 months, with an interest rate of 10.29% and a 6.00% origination fee of $1,190 for an APR of 14.60%. In this example, the borrower will receive $18,663 and will make 36 monthly payments of $643. Loan amounts range from $1,000 to $40,000 and loan term lengths range from 24 months to 60 months. Some amounts, rates, and term lengths may be unavailable in certain states.

For Personal Loans, APR ranges from 9.57% to 35.99% and origination fee ranges from 3.00% to 8.00% of the loan amount. APRs and origination fees are determined at the time of application. Lowest APR is available to borrowers with excellent credit. Advertised rates and fees are valid as of July 11, 2024 and are subject to change without notice.

Checking a rate through us generates a soft credit inquiry on a person’s credit report, which is visible only to that person. A hard credit inquiry, which is visible to that person and others, and which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person. Credit eligibility is not guaranteed. APR and other credit terms depend upon credit score and other key financing characteristics, including but not limited to the amount financed, loan term length, and credit usage and history.  

Unless otherwise specified, all credit and deposit products are provided by LendingClub Bank, N.A., Member FDIC, Equal Housing Lender (“LendingClub Bank”), a wholly-owned subsidiary of LendingClub Corporation, NMLS ID 167439. Credit products are subject to credit approval and may be subject to sufficient investor commitment. ​Deposit accounts are subject to approval. Only deposit products are FDIC insured.

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