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HSBC USA partnered with Amount, a tech provider for financial institutions, to launch a digital lending platform that streamlines online personal loan applications. Consumers can evaluate loan options, submit applications online, and receive a credit decision within minutes.
HSBC will initially lend up to $30,000 with terms ranging from two to five years and it says funds will be available as quickly as the next day. The bank will charge fixed monthly payments starting 50 days after customers receive the loan. Amount’s platform — which has cumulatively originated $6 billion in loans to 800,000 customers — has been customized to HSBC’s preferences, including its proprietary risk models.
The competitive personal lending landscape should drive banks to follow HSBC in revisiting their loan offerings to prevent losing further share to fintechs.
- Personal loans reached a record high of $138 billion in the US in 2018, per TransUnion. And there’s increasing demand among consumers: A record high of 19.1 million consumers took out personal loans in Q4 2018 — an increase of 2 million from a year earlier in Q4 2017.
- Fintechs now comprise 38% of all unsecured personal loan balances — eclipsing banks, credit unions, and traditional financing companies. Five years ago, fintechs accounted for just 5% of outstanding balances. Consequently, banks’ share decreased from 40% in 2013 to 28% last year.
Here’s a look at how personal loan offerings stack up among some of the top fintechs in the space:
- Marcus, Goldman Sachs’ digital-only offshoot, lays out personal loan options in as little as five minutes. The firm issues loans of up to $40,000 with loan terms between 36 to 72 months, no fees, and an APR ranging from 5.99% to 28.99%.
- Social Finance (SoFi), an online personal money management startup, displays loan options in just two minutes. SoFi issues personal loans of up to $100,000 with loan terms ranging from two to seven years. It doesn’t charge fees and its APR ranges from 5.99% to 17.67%.
- Prosper, a personal finance fintech, allows borrowers to check their rates instantly. The firm issues loans of up to $40,000 throughout a 3- to 5-year repayment term. Its APR ranges from 6.95% to 35.99% for first-time borrowers and it charges origination fees.
- LendingClub, a marketplace lender, gives personalized loan options "in minutes." LendingClub offers loans of up to $40,000 with funds available in as little as seven days. Its APR ranges from 6.95% to 35.89% and charges an origination fee.
Applying for personal loans online offers several advantages for consumers like greater accessibility, transparency in comparing providers, and the ability to apply for loans quickly and remotely.
Digital-first lenders, specifically, often have less restrictive loan approval criteria than banks: They might take other factors into consideration like cash flow or employment history, whereas banks largely prioritize a prospective borrower’s credit score.
Further, to differentiate, lenders will offer concessions: SoFi, for example, offers protection if a borrower becomes unemployed, allowing them to put their loan on hold while they look for a new job. Deepening its presence in online personal lending could allow HSBC to capture a share of the fast-growing space. And its established brand and customer base, in tandem with these new offerings, could help lower its costs of customer acquisition.
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