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.