“Online Lender Cultivates Campuses” Asset-Backed Alert, Dec 16, 2016

Online Lender Cultivates Campuses

Asset-Backed Alert,  Dec 16, 2016

A  startup  microlender  is  employing  an  unusual  business  tactic that could position it as an issuer of asset-backed bonds.

Mobilend, led by financial-technology entrepreneur Timothy Li, plans to build an initial client base through a project called Fluid through which  it  will  offer  college  students  no-interest  loans of up to $500 starting next month.

Through Fluid, individuals with “.edu”  e-mail  addresses  will be able to use their mobile telephones to both to apply for the  loans  and  make  payments  at  fluidfi.com.  Loan terms will be 3-6  months.  The next step for  Mobilend  would  be  to  write  and  service  personal  loans  to  the  same  individuals  through  a  mobile-phone  application  after  they  graduate,  eventually  tap-ping securitization as a funding source.

“Through fluidfi.com, we can capture a ton  of  data  on  the  phone,  see  how  [students]  spend  their  money,  know  their  behavior, and at the same time can report this installment loan to  the  credit  bureaus,”  said  Li,  whose  earlier  projects  include  Kuber  Financial  and  MaxDecisions.  “They are building credit at zero percent interest and then we can graduate  them  into  mobilend.com.” The business model generated a buzz at Opal Group’s “Marketplace Lending and Alternative Financing Summit,” held Dec. 2-6 in Dana Point, Calif., where Li presented  the  idea.  Fluid aims to take advantage of the fact that U.S. college students are off-limits to credit-card companies under the Credit Card Act of 2009. The law prohibits card lenders from marketing on college campuses and requires a co-signer for any customer under age 21. Those restrictions don’t apply to Fluid, Li said.

While it won’t charge interest or origination fees, Fluid will cover its costs in part by assessing “swipe” fees any  time  students use the app. It also is lining up advertising sponsors.

Li, based in Orange, Calif., expects Fluid’s origination volume  will  reach  $100  million  to  $150  million  in  2018.  At that point, he would begin pitching loans to the first class of college grads via Mobilend. An initial securitization of Mobilend credits could materialize in late 2018 or 2019.

Li so far has won approvals to market Fluid loans in several states including California and Florida, both with large populations of college students.

Fluid and  Mobilend  are  capitalized  by  a  group  of  private  investors  including  Li.  He is now talking  to  Citigroup,  Wells Fargo and other banks about setting up a warehouse line credit to fund the lending programs.


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